Concept of Product

Products

Meaning
Dr M Manjunath Shettigar
& Types

Definition
Product
Anything offered
to a market for
attention,
acquisition,
consumption or
use that might
satisfy a need
or want.
9- 2

Definition
Service
Any activity or
benefit that one
party can offer to
another that is
essentially
intangible and
does not result in
the ownership of
anything.
9- 3

The Characteristics of
Services
Intangibility

Services cannot be touched,

seen, tasted, heard, or felt in the
same manner as goods.

Inseparability

A characteristic of services that

allows them to be produced and
consumed simultaneously.

Heterogeneity

A characteristic of services that

makes them less standardized
and uniform than goods.

Perishability

A characteristics of services that

prevents them from being stored,
warehoused, or inventoried.

The Characteristics of Services

The Four Is of Services

Intangibility

Inseparability

Inconsistency

Inventory

What is a Product?
Products,
Services, &
Experiences
Market
offerings,
pure
tangible
goods, pure
services,
experiences

Experiences include zoos and aquariums

9- 6

Product could be of any of

the following
A physical product Table, Car, Pen
Person- Narendra Modi, Aravind Kejriwal,
Rahul Gandhi
Place- Kerala, Kashmir, London, Jerusalem
Organization- UN, UNICEF, A company, a
bank, etc.
Idea- Freedom, democracy, Anti-Corruption,
Social Justice, Anti Drugs, MADD, Family
Planning
Services education, lawyers service, bank
service

Product Scope- Three

Aspects
1. Physical Aspect- is the physical aspect of the
product. What it is ?
E.g. It is a herbal tooth paste
2. Functional Aspect is what is does?
E.g. It cleans tooth/ prevents tooth decay
3. Symbolic Aspect- is what it means to the
users emotion?
E.g. The satisfaction of a person free from
tooth decay

The Product
Attributes
The Product

Tangible Atrributes
Design, Features,
performances, Branding
Packaging

Intangibel Attributes
Image, Value, Perception

Three Levels of Product

The 3 levels of the product
include :
Core product/ benefit level
The actual product
The augmented product
9- 10

Three Levels of Product

9- 11

9- 12

Discussion Question
Describe the core
benefit, actual
product, and
augmented product
aspects of an
automobile purchase.

9- 13

An automobile offers personal transportation

(core product), has many different features and
attributes (actual product), and may include a
manufacturer's warranty or dealer's discounted
service contract (augmented product).

9- 14

Types of products
Product classifications
fall into two broad types
based on the types of
buyers who use them:
Consumer products
Industrial products

9- 15

Product
Classification
Products
Consumer
1.Convenience
Staple
Impulse
Emergency

Industrial
1.Materials and parts
Raw Materials
Manufactured Materials
2.Capital Items

2.Shopping

Installations

3.Specialty

accessories

4.Unsought

3.Supplies & services

Supplies
Business services

Consumer products
Types of
Consumer Products
Classification based on
shopping effort involved

Convenience
Shopping
Specialty
Unsought
Eg, toothpaste, stationary,
newspaper, ice cream, etc

Frequent purchases
bought with minimal
buying effort and
little comparison
shopping
Low price
Widespread
distribution
Mass promotion
by producer
9- 17

Consumer products
Types of
Consumer Products

Convenience
Shopping
Specialty
Unsought
Eg. Clothes, shoes,
jewelry, furniture, TV etc.

Less frequent
purchases requiring
more shopping effort
and price, quality, and
style comparisons.
Higher priced than
convenience goods
Selective distribution in
fewer outlets
Advertising and
personal selling by
producer and reseller
9- 18

Consumer products
Types of
Consumer Products

Convenience
Shopping
Specialty
Unsought
Eg. Automobiles,
handsets, laptops,
designer clothes, etc.

Strong brand preference

and loyalty, requires
special purchase effort,
little brand
comparisons, and low
price sensitivity
High price
Exclusive distribution
Carefully targeted
promotion by producers
and resellers
9- 19

Consumer products
Types of
Consumer Products

Convenience
Shopping
Specialty
Unsought
Eg. insurance,
encyclopedias, reference
books, etc.

Little product
awareness and
knowledge (or if aware,
sometimes negative
interest)
Pricing varies
Distribution varies
Aggressive advertising
and personal selling by
producers and resellers
9- 20

Consumer products
Types of Consumer products
Classification based on durability
& tangibility
Durable consumer goods
Non-durable consumer goods
Services

9- 21

Industrial products
Industrial products are those
purchased for use in conducting a
business or those purchased as
ingredients or components to be used
in manufacturing.
Materials and parts
Capital items
Supplies and services

9- 22

Features of industrial products

are as below:
1. Number of Buyers
2. Channel Levels
3. Geographic Concentration
4. Derived Demand
5. Role of Technical Considerations
6. Reciprocal Buying
7. Leasing Out
9- 23

Products also include organizations,

persons, places, and ideas
Organizational

marketing makes use of

corporate image advertising
Person marketing applies to political
candidates, entertainment - sports figures,
and professionals
Place marketing relates to tourism
Social marketing campaigns promote ideas

9- 25

Social marketing
promotes ideas or
causes for the
purpose of
improving an
individuals wellbeing or the wellbeing of society.

9- 26

PRODUCT MIX
Product mix refers to the whole range
of products a company makes or
sells.
The particular assortment (mix) of
goods and services that a business
offers to meet the needs of its
market(s) and its company goals.

Product Mix and Product

Line
PRODUCT
PRODUCTMIX
MIX
The
Theset
setof
ofall
allproducts
productsoffered
offered
for
forsale
saleby
byaacompany
company

PRODUCT
PRODUCTLINE
LINE
AAbroad
broadgroup
groupof
of
products
productsfor
forsimilar
similaruses
uses
and
andwith
withsimilar
similarcharacteristics
characteristics

Product Mix
Includes all the different products that a
company makes or sells.

Product line & Product item

Product Line = group of closely
related products manufactured by a
business
Product Item = specific model, brand,
or size of a product within a line
Ex: P&G has over 250 products within 21 product lines
Dish care is a product line
Cascade, Dawn, Joy, & Ivory are product items

Product Mix
Some companies have different brands for
different markets
Coca-Cola has a range of products to cater to
different appetites, tastes, preferences and
requirements.

Product Line
A group of closely related products
manufactured and/or sold by a business.

DIMENSIONS
WIDTH = number of product lines carried by a company.
NARROW = offering a limited number of product
lines
BROAD = many different product lines carried
DEPTH = number of products and the assortment of
sizes, colors, and models offered in a product line
SHALLOW = limited variety within a product line
DEEP = extensive variety within a product line

Product Mix
PRODUCT
PRODUCTMIX
MIX

BREADTH or WIDTH
The number of product lines carried

DEPTH
Variety
of
sizes,
colors,
models
within
a
product
line

Product mix width

The number of different product lines a
business manufactures or sells.
Width of the Gillette Product Mix
Oral
Care

Blades &
Razors

Personal
Care

Batteries

Appliances

Product Mix Depth

The number of product items offered within
each product line.
Oral
Care

Blades &
Razors

Personal
Care

Batteries

Appliances

NARROW PRODUCT MIX

= Limited product lines carried, typically
very specialized. A description of the
width of a business's product mix
offering a limited number of product
lines.

Broad Product Mix

= Many different product lines carried. A
description of the width of a business's
product mix offering many product lines.

Shallow Product Mix

= Limited variety within a product line. A
description of the depth of a business's
product mix offering few items in the
product line.

Deep Product Mix

= Extensive variety within a product line.
A description of the depth of a
business's product mix offering a great
many items in the product line.

10.41

Product Line Decisions

Product line:
Group of closely related products due to similarity of
function, similar target markets, same outlets sold in,
or similar pricing

Length: number of items in the line

Line stretching: adding items to either end of
the line, can be upwards, downwards, or both

Line filling: adding items within the product line

Line Extension/ line stretching

The development of individual offerings that appeal to different

market segments but are closely related to the existing product
line

Adding on additional offerings to get more customers.

Eg. Different soap brands offered by an

existing company

Importance of Product Lines

1. Opportunity to grow/increase sales
-

firms introduce new products to grow

-also

introduce new products to sell

throughout the year - if some products
are seasonal, introduce other product that
sell in other seasons
-Sell

different products to different

categories of customers, e.g. cheaper,
moderately priced, more expensive

Importance of Product Lines

2. Optimal use of company resources
- sometimes new products are introduced
so that the company can use its resources
efficiently - therefore reduce cost per unit

Importance of Product Lines

3. Increasing company importance in the
market
- companies add product lines because of
opportunity, and to strengthen overall
position

Importance of Product Lines

4. Exploiting product life cycle
- some features added so the company used
Product Modification to extend the life
cycle

Product Life Cycle (PLC)

Theory

The Product Life Cycle (PLC) is a model of product transition over time. The model suggests that typically a products life consists of four stages, viz., 1. introduction, 2. growth, 3. maturity and 4. decline
The model is used as a tool to formulate marketing strategies appropriate to each stage.
Joel Dean the originator of the concept

Product Life Cycle (PLC)

The concept of Product Life Cycle (PLC) is based upon the analogy of
biological life cycle. For example, a seed is planted (introduction); it
begins to sprout (growth); it shoots out leaves and puts down roots as it
becomes an adult (maturity); after a long period as an adult the plant
begins to shrink and die out (decline).

 Product Life Cycle (PLC):

Each

product may have a different life cycle

PLC determines revenue earned
Contributes to strategic marketing planning
May help the firm to identify when a product
needs support, redesign, reinvigorating,
withdrawal, etc.
May help in new product development planning
May help in forecasting and managing cash
flow

Stages of the Product Life

Cycle

Introduction Stage of the PLC

Sales
Sales

Low
Low sales
sales

Costs
Costs

High
High cost
cost per
per customer
customer

Profits
Profits

Negative
Negative

Marketing
Marketing Objectives
Objectives

Create
Createproduct
productawareness
awareness
and
andtrial
trial

Product
Product

Offer
Offer aa basic
basic product
product

Price
Price

Use
Use cost-plus
cost-plus

Distribution
Distribution
Advertising
Advertising

Build
Build selective
selective distribution
distribution
Build
Buildproduct
productawareness
awarenessamong
amongearly
early
adopters
and
dealers
adopters and dealers

Growth Stage of the PLC

Sales
Sales

Rapidly
Rapidly rising
rising sales
sales

Costs
Costs

Average
Average cost
cost per
per customer
customer

Profits
Profits

Rising
Rising profits
profits

Marketing
Marketing Objectives
Objectives

Maximize
Maximize market
market share
share

Product
Product

Offer
Offer product
product extensions,
extensions, service,
service, warranty
warranty

Price
Price

Price
Price to
to penetrate
penetrate market
market

Distribution
Distribution
Advertising
Advertising

Build
Build intensive
intensive distribution
distribution
Build
Build awareness
awareness and
and interest
interest in
in the
the mass
mass
market
market

Maturity Stage of the PLC

Sales
Sales

Peak
Peak sales
sales

Costs
Costs

Low
Low cost
cost per
per customer
customer

Profits
Profits

High
High profits
profits

Marketing
Marketing Objectives
Objectives

Maximize
Maximizeprofit
profitwhile
whiledefending
defending
market
share
market share

Product
Product

Diversify
Diversify brand
brand and
and models
models

Price
Price

Price
Price to
to match
match or
or outdo
outdo competitors
competitors

Distribution
Distribution
Advertising
Advertising

Build
Build more
more intensive
intensive distribution
distribution
Stress
Stress brand
brand differences
differences and
and benefits
benefits

Decline Stage of the PLC

Sales
Sales

Declining
Declining sales
sales

Costs
Costs

Low
Low cost
cost per
per customer
customer

Profits
Profits

Declining
Declining profits
profits

Marketing
Marketing Objectives
Objectives

Reduce
Reduce expenditure
expenditure and
and milk
milk the
the brand
brand

Product
Product

Phase
Phase out
out weak
weak items
items

Price
Price

Cut
Cut price
price

Distribution
Distribution
Advertising
Advertising

Go
Go selective:
selective: phase
phase out
out unprofitable
unprofitable outlets
outlets
Reduce
Reduceto
tolevel
levelneeded
neededto
toretain
retain
hard-core
hard-coreloyal
loyalcustomers
customers

Importance of P L C to
Marketers
Important tool for forecasting and
strategic planning
It shows that products have a limited
life span
It graphically shows the trend in sales
and profitability
It shows the need to adopt different
strategies in various stages

Limitation of the PLC

Many products may not have a life cycle as
depicted by PLC
Identifying where one stage ends and the
other begins is very difficult
Traditional shape may not occur.
Ignores the application of marketing mix
activities
Strategic decisions can change the PLC eg.
repositioning

Example: New Flavor of

Pepsi
Stage 1: Market Introduction

Pepsi bottles the new flavored product and places

it on the market for consumers.
Pepsi also spends a lot of money advertising the
new flavor creating awareness.

Stage 2: Market Growth

Customers like the flavor and begin to make
routine purchases.
Coke introduces their competing flavor.

Stage 3: Market Maturity

More competitors enter the market taking
some of Pepsis profits.

Stage 4: Sales Decline

Customers have moved on to the next new
flavor.
Some loyal fans stay behind.

Product planning
Product planning refers to the process of planning
and developing products to meet the expectations/
requirements of the target customers and the
marketing/business objectives of the company.
It involves evaluating and determining the products
to be produced (product items, product lines and
product mix) including the design features,
quantities, pricing strategies and market niches to
be served.

9- 59

Planning for New Products

Planning for new products is an essential
and demanding strategic activity.
Long term survival of many firms in the
competitive world depends on launching
new products successfully and in regular
intervals.
There could be many types of new
products

Types of new
products

Innovative
Products

Replacement
products

Imitative
Products

Innovative Products
These products are new to the world and new to the
company.
They are truly new to the customers and they provide
completely different alternatives to existing products
Eg.
Vaccine

for AIDS
Products based on Nano Technology
iPod
iPads
These were totally new products when they first
appeared.

Replacement products
Although these products are new to customers
or even to the company, they are essentially
improvements or redesigns of existing
products
Shaving foam and gels have replaced the shaving
soaps

Imitative Products
These products are new to the company and not new
to the market
Many products come in this form to the market
One or few companies may come out with an
innovative or replacement products but many will copy
the technology and come out with similar products.
They are called me- too products

Reasons for introducing

new products
To suit the changes in customers
needs
To adopt new technological
advances and avoid obsolescence
To match competition
Product Life Cycle Concept
To bring down the cost

Customer need analysis

Information is required as to the expectation
of the customer and to what extent the
existing products meet that expectation.
Then the gap between the two could be
observed
Expectation
GAP

Gap analysis helps in designing new products

Level met by the product

If the gap is understood

well, one could find
opportunities to
Introduce

new products
Make improvements in existing
products
Make improvements in production
process
Make improvements in supporting
services.

Stages of new product

development
1. Idea Generation
2. Idea Screening
3. Business Planning & market analysis
4. Product Development & selection
5. Test Marketing
6. Commercialization ( Launch)

Idea Generation
Finding promising new ideas is the
starting point in the new-product
development process.
Idea generation ranges from incremental
improvements to existing products to new
to the world products.
(produce a drug to reduce cholesterol
with less side effects = improvement
produce a drug that cures AIDS = new to
the world product)

Sources of new ideas

Internal

staff/ R&D/ sales force

Customers
Competitors
Outside inventors
Channel members
Consultants

Methods of generating
new ideas
Search
Searching new product idea from research
publications, the internet, exhibitions, conventions.
Marketing Research
Meet product end users and find out what kind of
products that can be used to satisfy their needs.
Meet focus groups of consumers - retailers to
discuss new products.
Technical research
Firms internal research laboratories and other
external laboratories could generate new idea for
you.

Idea Screening
Screening
All ideas that emerge wont be viable either in the technical sense
or from commercial perspective
All ideas then cannot be considered for the next stage in the
product development stage. Viz., product development
There should be a very clear cut screening policy that would
reject the unpromising product ideas and further the promising
ideas.
Two basic questions need to be answered at the screening stage.
Can the idea be practically developed into a product with
development, production, marketing and financial capabilities of
the company?
Is the venture commercially feasible? (market attractiveness,
profitability, social and environmental concerns)

Business Planning & market

analysis
In the next stage, the company has to work out
elaborate business plan by taking into
consideration resource availability and
features of the target market
It also has to find out market potential and
profitability
It has to consider the size, shape and dynamics
of the market

Business Analysis
Business analysis estimates the expected
commercial performance of the proposed
product.
Demand and Revenue forecast
Cost Estimation
Profit Projections
Acceptable level of profit for a given product
development
Assess the amount of risk involved

Product development and

selection
Idea has to be developed into a concept
A concept is a detailed version of the idea stated
in a meaningful consumer terms.
The developed concept will be tested among a
sample of consumers.
This will be presented to the target market in
words or pictures.
Questions will be asked to check whether the
target market will buy the product.

Product Development and selection also

involves
Prototype development
User Tests of the product
Manufacturing development
Laboratory tests
Technical evaluations
This

stage culminates in actual development of the

product

Test Market the product

During the test marketing, the marketers offer the
product for sale in a limited area where they can
measure the response.
Ideally the test market should reflect the target
market for the product. The marketers evaluate
not only the customers reaction but all the
elements of the marketing mix.
Based on the results of test marketing, marketers
determine how the marketing mix should be
adjusted before a full scale launch.

Depending on the nature of the product and

the sample size, cost and time of test
marketing may vary. E.g. test marketing a
car could be more expensive than test
marketing a new cell phone.
If test marketing welcomes competition and
gives ideas for competitors and the product
could be copied easily one can avoid the
test marketing or use alternative methods of
seeking customer response.

Launch of the
product
This the stage of full scale introduction of the
product in the market
This involves
Determining

time schedule of launch

Selection of venue for launch
Brief distributors about the product
Press conference
Distribute promotional material
Execution of advertising strategy

Product launch has to be

preceded by thorough analysis
of Market Mix issues
Product
Price
Place
Promotion
9- 80

Why products fail

According Peter Drucker, new products fail
in market for 3 reasons
1.There is no demand for the product
2.The product does not meet the
requirement of the customers
3.The product is good, but the company
fails communicate the customer benefit to
the prospects
9- 81

Reasons for failure of new

products
Product problems
Distribution & channel problems
Promotional problems
Pricing problems
Timing problems
Failure to estimate competition
9- 82

STAGES IN ADOPTION PROCESS

AWARENESS the consumer become aware
of the innovation but lack information about
the product
INTEREST the consumer is induced to seek
information about the innovation
EVALUATION the consumer considers
whether to try the innovation
TRIAL the consumer tries the innovation to
improve his or her estimate of its value
ADOPTION the consumer decide to make
full and regular use of the innovation

Diffusion of innovation
Innovators 2.5% -- willing to try new idea at a risk
Early adopters 13.5%-- opinion leaders , adopt new
ideas early but carefully
Early majority 34% -- deliberate they adopt new ideas
before the average person
Late majority 34% they adopt only after a majority of
people have tried it.
Laggards 16% -- suspicious of changes and only
adopt when all options are exhausted

Packaging
9- 85

Packaging
Packaging refers to the act of designing
and producing the container or wrapper
of a product.
Packaging plays a very important role in
the marketing success or failure of
many products, particularly the
consumer non-durable products

9- 86

Packaging involves designing a

container or wrapper for a product

9- 87

Levels of Packaging
1. Primary Package:
(e.g., a toothpaste tube, a match box, etc.).
2. Secondary Packaging:
e.g., a tube of shaving cream usually comes in a card board
box. When consumers start using the shaving cream, they will
dispose off the box but retain the primary tube.
3. Transportation Packaging:
For example a toothpaste manufacturer may send the goods
to retailers in corrugated boxes containing 10, 20, or 100 units.

9- 88

9- 89

Importance of Packaging
(i) Rising Standards of Health and Sanitation
(ii) Self Service Outlets
(iii) Opportunity for innovations
(iv) Product Differentiation
(v) Preventing damage to products from insects,
moisture, etc.
(vi) Avoiding pilferage
(vii) Preventing contamination by dirt or dust, eg.
clothing
9- 90

Functions of Packaging
(i) Product Identification
(ii) Product Protection
(iii) Facilitating Use of the Product:
(iv) Product Promotion
(v) Facilitating display of contents
(vi) Complying with legal requirements

9- 91

Label
What is a label?
Informative tag, wrapper, or seal attached
to the product or the products package. It
presents information.

What information does it present?

Brand name (Bold detergent)
Ingredients, Instructions (machine
washable), how to open or dispose,
guarantees, danger warnings

Labelling - Functions
1. Describe the Product and Specify its
Contents:
2. Identification of the product or Brand:
3. Grading of Products
4. Helps in Promotion of Products
5. Providing Information Required by Law
6. Instructions for use/ warnings

9- 93