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KENYATTA UNIVERSITY

SCHOOL OF BUSINESS

PROGRAMME: MBA

COURSE: MARKETING MANAGEMENT

COURSE CODE: BBA 504

LECTURER: ROSEMARY KOROS

GROUP: 7

No. Name Adm. No. Signature


1 Kamande Micah Muchoki D53/CTY/PT/20683/2010 …………………
2 Ongwesa I. Valentine D53/CTY/PT/21233/2010 …………………
3 Florence Kahara D53/CTY/PT//2010 …………………
4 Njeri Gichuru D53/CTY/PT/20659/2010 …………………
5 Maureen Macharia D53/CTY/PT/20634/2010 …………………
6 Eric Gate Kirubi D53/CTY/PT/21198/2010 …………………

Assignment 1:

Discuss the product decisions.


Before discussing the product decisions, it is important to define a product and its
classifications.

Product
A product can be defined as anything that can be offered to satisfy human needs.

Further it can also be described as anything that is potentially vslued by a target market
for the benefits or satisfaction it provides including objects, services, organizations,
places, people and ideas.(woodruff 1996)

A product is anything that can be offered to the market for attention, acquisition, use or
for consumption and that might satisfy a need or a want. It includes physical objects,
services, places, people, organizations and ideas.

A product can be explained in three levels, i.e.:-

(a) Core Product:


This consists of the problem solving component of a product or the core benefits
of a product e.g. active ingredients in a soap.

(b) Actual Product


This consists of the physical components or characteristics which make up the
product, e.g. packaging, brand name, quality level, etc.

(c) Augmented Product


Marketers often surround their actual products with goods and services that provide
additional value to the customer’s purchase. While these factors may not be key
reasons leading customers to purchase (i.e., not core benefits), for some the inclusion
of these items strengthens the purchase decision while for others failure to include
these may cause the customer not to buy. Items considered part of the augmented
product include:
• Guarantee – This provides a level of assurance that the product will perform up to
expectations and if not the company marketing the product will support the
customer’s decision to replace, have it repaired or return for a refund.
• Warranty – This offers customers a level of protection that often extends past the
guarantee period to cover repair or replacement of certain product components.
• Customer Service – This consists of additional services that support the
customer’s needs including offering training and assistance via telephone or
online.
• Complementary Products – The value of some product purchases can be enhanced
with add-on products, such as items that make the main product easier to use (e.g.,
laptop carrybag), enhance styling (e.g., phone face plates) or extend functionality
(e.g., portable keyboard for PDAs).
• Accessibility – How customers obtain the product can affect its perceived value
depending on such considerations as how easy it is to obtain (e.g., stocked at
nearby store, delivered directly to office), the speed at which it can be obtained,
and the likelihood it will be available when needed.

They are broadly divided into two depending on consumers who use them.
1. Consumer products
2. Industrial products
.

Consumer products
These are products bought by the final consumer for personal use. Consumer products
can be classified as follows:-

(i) According to durability


Can either be durable or non-durable products. Durable products are used for
an extended period of time e.g. car and furniture while non-durable products
are those that are consumed only once e.g. beer and soap.

(ii) According to tangibility


They can either be physical products that can be touched and seen or services
that cannot be touched e.g. doctor’s services.

(iii) According to consumer buying habits


Products can be classified into four categories according to consumer buying
behaviour, i.e.
a. Convenience goods – These are products that the consumer buys
immediately without a lot of comparison. They are oftenly bought, lowly
priced and widely available and repeatedly consumed for example toilet
paper, milk salt. beer and bread. They are further subdivided into staples ,
impulse goods and emergency goods.
b. Shopping goods – They are frequently purchased consumer products that
customers compare carefully on suitability, quality, price and style. Price
is a major decider on this kind of products e.g. TVs, refrigerators,
cookers, investment firms, etc.

c. Specialty goods – These are products with special or unique


characteristics and can normally be identified with a certain group of
buyers who are willing to pay a special price for that product or use an
extra effort to purchase them. Their consumers do not normally compare
them between suppliers and are willing to postpone purchases for a
reasonable time if the product is out of stock, and will not accept
substitutes e.g. specific brand of cars, designer clothes etc
Marketing strategies for these type of goods typically emphasise quality
and branding (and sometimes advertising) rather than distribution
convenience
Unsought goods – These are consumer products that consumers do not know
about or they know about but do not normally think of buying them. g. e.g.
Cemetery plot, Life insurance, grave stones.
They are not aggressively sought and thus require substantial well designed
marketing strategies. They need a lot of marketing. They are sold through
personal selling

Industrial goods can be classified in three broad categories:-

(a) Material and parts – These are industrial products that enter the manufacturers’
products completely either through further processing or as components e.g. raw
materials, barley to process beer. It is important to note that once materials enter
into a process, it is turned into something else but parts will not change.

(b) Capital items – These are industrial products that help in production or in
operation and may include accessory equipments installations, e.g. typewriters
and photocopiers.

(c) Supplies and services – These are industrial goods those do not enter the finished
goods at all but are used in operation e.g. fuel and repairs, legal services, auditing,
etc. They are the convenient goods of industrial consumers as they are purchased
within minimum effort of comparison.

Industrial Products
These are purchased for further processing or for use in conducting business. There are 3
types of industrial products;
i. Material and parts
ii. Capital items
iii. Supplies and services

Product decision
1. Individual product decision

(i) Product attribute decisions


Developing a product involves defining the benefits that the product will
offer, which are communicated and offered by attributes such as:-

a. Product quality – Refers to the ability of a product to perform its


functions as expected by the consumer or will satisfy consumers
need. Its reliability, ease of operation or repairing etc.

(a) Product design – External appearance of a product that involves


giving the product a style e.g. colour, shape, weight, simplicity or
complexity etc. It adds attractiveness to the product.
(ii) Product branding decisions
A brand is a name, symbol, sign or design intended to identify the product and
differentiate it from those of the competitors. This involves the activities of designing
and producing the container or the brand mark is a design element, such as a symbol
(e.g., Nike swoosh ), logo (e.g., Yahoo! graphic), or even a sound (e.g., Intel inside
sound), that provides visual or auditory recognition for the product.
A brand name brings out the following;

(b) Attributes of a product – e.g. Mercedes Benz communicates


certain attributes such as well engineered car, prestigious car,
expensive car, durable car.

(c) Benefits – these are emotional attributes a consumer gets from a


product e.g. status and safety.

(d) Values – a brand name says something about the consumers of the
products e.g. safety conscious, status conscious, etc.

(e) Personality – a brand can communicate the personality of a


consumer e.g. pilsner may be associated with sociable persons

Advantages of Brands
A strong brand offers many advantages for marketers including:
• Brands provide multiple sensory stimuli to enhance customer recognition. For
example, a brand can be visually recognizable from its packaging, logo, shape,
etc. It can also be recognizable via sound, such as hearing the name on a radio
advertisement or talking with someone who mentions the product.
• Customers who are frequent and enthusiastic purchasers of a particular brand are
likely to become Brand Loyal. Cultivating brand loyalty among customers is the
ultimate reward for successful marketers since these customers are far less likely
to be enticed to switch to other brands compared to non-loyal customers.
• Well-developed and promoted brands make product positioning efforts more
effective. The result is that upon exposure to a brand (e.g., hearing it, seeing it)
customers conjure up mental images or feelings of the benefits they receive from
using that brand. The reverse is even better. When customers associate benefits
with a particular brand, the brand may have attained a significant competitive
advantage. In these situations the customer who recognizes he needs a solution to
a problem (e.g., needs to bleach clothes) may automatically think of one brand
that offers the solution to the problem (e.g., jik). This “benefit = brand”
association provides a significant advantage for the brand that the customer
associates with the benefit sought.
• Firms that establish a successful brand can extend the brand by adding new
products under the same “family” brand. Such branding may allow companies to
introduce new products more easily since the brand is already recognized within
the market.
• Strong brands can lead to financial advantages through the concept of Brand
Equity in which the brand itself becomes valuable. Such gains can be realized
through the out-right sale of a brand or through licensing arrangements. .
(iii) Packaging
Nearly all tangible products (i.e., goods) are sold to customers within a container or
package that, as we will discuss, serves many purposes including protecting the product
during shipment. In a few cases, such as with certain produce items, the final customer
may purchase the product without a package but the produce marketer still faces
packaging decisions when it comes to shipping to the store. Thus, for many products there
are two packaging decisions:
1. Final Customer Package
2. Distribution Channel Package
Final Customer Package
This relates to the package the final customer receives in exchange for their payment.
When the final customer makes a purchase he or she is initially exposed to the Primary
Package – the outermost container that is seen and touched by the final customer. This
primary package can be further divided into the following:
• First-Level Package - This is packaging that holds the actual product (e.g., Tylenol
Bottle). In some cases this packaging is minimal since it only serves to protect the
product. For instance, certain frozen food products are sold to consumers in a
cardboard box with the product itself contained in a plastic bag found inside the
box. This plastic bag represents the first-level package. In other cases frozen food
products are sold in the plastic bag that contains the product. In these cases the
plastic bag is both first-level package and the primary package for convey product
information.
• Second-Level Package – In some cases the first-level package is surrounded by
one or more outer packages (e.g., box holding the Tylenol Bottle). This second-
level package may act as the primary package for the product.
• Package Inserts - Marketers use a variety of other methods to communicate with
customers after they open the product package. These methods are often inserted
within, or sometimes on, the product’s package. Insertions include information
such as instruction manuals and warranty cards, promotional incentives such as
coupons, and items that add value such as recipes and software.
Packaging: Distribution Channel Package
This packaging is used to transport the customer package through the supply chain. It
generally holds multiple customer packages and also offers a higher level of damage
protection than that of customer packaging.
Factors in Packaging Decisions
Packaging decisions are important for several reasons including:
• Protection – Packaging is used to protect the product from damage during
shipping and handling, and to lessen spoilage if the protect is exposed to air or
other elements.
• Visibility – Packaging design is used to capture customers’ attention as they are
shopping or glancing through a catalog or website. This is particularly important
for customers who are not familiar with the product and in situations, such as
those found in grocery stores, where a product must stand out among thousands of
other products. Packaging designs that standout are more likely to be remembered
on future shopping trips.
• Added Value – Packaging design and structure can add value to a product. For
instance, benefits can be obtained from package structures that make the product
easier to use while stylistic designs can make the product more attractive to
display in the customer’s home.
• Distributor Acceptance – Packaging decisions must not only be accepted by the
final customer, they may also have to be accepted by distributors who sell the
product for the supplier. For instance, a retailer may not accept packages unless
they conform to requirements they have for storing products on their shelves.
• Cost – Packaging can represent a significant portion of a product’s selling price.
For example, it is estimated that in the cosmetics industry the packaging cost of
some products may be as high as 40% of a product’s selling price. Smart
packaging decisions can help reduce costs and possibly lead to higher profits.
• Expensive to Create - Developing new packaging can be extremely expensive. The
costs involved in creating new packaging include: graphic and structural design,
production, customer testing, possible destruction of leftover old packaging, and
possible advertising to inform customer of the new packaging.
• Long Term Decision – When companies create a new package it is most often
with the intention of having the design on the market for an extended period of
time. In fact, changing a product’s packaging too frequently can have negative
effects since customers become conditioned to locate the product based on its
package and may be confused if the design is altered.
• Environmental or Legal Issues – Packaging decisions must also include an
assessment of its environmental impact especially for products with packages that
are frequently discarded. Packages that are not easily bio-degradable could draw
customer and possibly governmental concern. Also, caution must be exercised in
order to create packages that do not infringe on intellectual property, such as
copyrights.
(iv) Labeling
Most packages, whether final customer packaging or distribution packaging, are
imprinted with information intended to assist the customer. For consumer products,
labeling decisions are extremely important for the following reasons.
• Labels serve to capture the attention of shoppers. The use of catchy words may
cause strolling customers to stop and evaluate the product.
• The label is likely to be the first thing a new customer sees and thus offers their
first impression of the product.
• The label provides customers with product information to aid their purchase
decision or help improve the customer’s experience when using the product (e.g.,
recipes).
• Labels generally include a universal product codes (UPC) and, in some cases,
radio frequency identification (RFID) tags, that make it easy for resellers, such as
retailers, to checkout customers and manage inventory.
• For companies serving international markets or diverse cultures within a single
country, bilingual or multilingual labels may be needed.
• In some countries many products, including food and pharmaceuticals, are
required by law to contain certain labels such as listing ingredients, providing
nutritional information or including usage warning information.

(v)
Product Support Services decision:-
These include other benefits which come with the product and should be well
tailored to the needs of the various target markets. The producer has to decide
the product support services to be offered in the market e.g. user training,
delivery, guarantees etc.
2. Product line decisions

It’s a group of products that are closely related because they function in a similar manner
are sold in to the same customers group are marketed through the same outlet of fall
within a given price range e.g. EABL Tusker White cap Guinness, Smirnoff
Uniliever Colgate, Colgate herbal, Colgate fresh, Colgate max

The major product line decision include

i. Product line length


This Refers to the number of items in a product line. e.g. whether to have a long
line such as 2kg, 1kg, 500g, 250g of Kasuku cooking fat, i.e. several variances of
one product. The line lengthening/stretching decisions can either be upwards or
downwards. When you stretch upwards, you enter a higher market and when you
stretch downwards, you enter a poor market and the decision mainly depends on:-

(i) Which side of the market is more attractive i.e. lower or top market.

(ii) Positioning and the Company’s image needed e.g. rich marketer you
stretch downwards.

ii. Product Line filling


It involves adding items within the present product range of the line this can
increase. This can be done for any of the following reasons;
(a) too increase profitability
(b) Satisfy dealers
(c) utilize excess capacity

iii. Product line stretching


It occurs when a company lengthens its product line beyond its current range. The
company can stretch downwards to penetrate new markets currently held by
competitors e.g. Equity

iv. Product line modernization – a product line can be renewed by basically


involving a change of style, e.g. change in packaging.

v. Product line featuring – This is usually in marketing promotion decisions. The


manager selects one or few items in the product line and feature them through
newspapers or mass media to enhance the whole line of the products, e.g. East
African Breweries feature Tusker (Tusker Project Fame) and Coca-cola Company
feature Coca-cola soda or Fanta (Bamboocha).

3. Product mix

Product mix means the total group of products that an organization makes available to
consumers. A product mix (product assortment) is a set of all the product lines and items
that a particular seller offers for sale.
A product decision has the following decision
1) Product mix width the number of different product lines the company carries.
2) Product mix length.is total number of items within the mix
3) Product mix depth the number of versions offered of each product in the line
4) Product mix consistency how closely related the various lines are.

New Product Development decision:

A new product means different things to different people, e.g.

(i) An existing product entering an entirely new market.

(ii) Improvements made to the existing products

(iii) New prices


A product is considered new if it requires new management process.

New products are developed for various reasons:-

1. when the existing products are vulnerable to changing consumer


needs and tastes
2. When new technologies make existing products obsolete.

3. When a company has excess capacity it wants to utilize.

4. Increased foreign and domestic competition.

5. Government regulations.

The Product Life Cycle

A new product progresses through a sequence of stages from introduction to growth,


maturity, and decline. This sequence is known as the product life cycle and is associated
with changes in the marketing situation, thus impacting the marketing strategy and the
marketing mix.
The product revenue and profits can be plotted as a function of the life-cycle stages as
shown in the graph below:

Product Life Cycle Diagram

Introduction Stage
In the introduction stage, the firm seeks to build product awareness and develop a market
for the product. The impact on the marketing mix is as follows:
Product branding and quality level is established, and intellectual property protection
such as patents and trademarks are obtained.
Pricing may be low penetration pricing to build market share rapidly, or high skim
pricing to recover development costs.
Distribution is selective until consumers show acceptance of the product.
Promotion is aimed at innovators and early adopters. Marketing communications seeks to
build product awareness and to educate potential consumers about the product.

Growth Stage
In the growth stage, the firm seeks to build brand preference and increase market share.
Product quality is maintained and additional features and support services may be added.
Pricing is maintained as the firm enjoys increasing demand with little competition.
Distribution channels are added as demand increases and customers accept the product.
Promotion is aimed at a broader audience.

Maturity Stage
At maturity, the strong growth in sales diminishes. Competition may appear with similar
products. The primary objective at this point is to defend market share while maximizing
profit.
Product features may be enhanced to differentiate the product from that of competitors.
Pricing may be lower because of the new competition.
Distribution becomes more intensive and incentives may be offered to encourage
preference over competing products.
Promotion emphasizes product differentiation.

Decline Stage
As sales decline, the firm has several options:
Maintain the product, possibly rejuvenating it by adding new features and finding new
uses.
Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche
segment.
Discontinue the product, liquidating remaining inventory or selling it to another firm that
is willing to continue the product.

The marketing mix decisions in the decline phase will depend on the selected strategy.
For example, the product may be changed if it is being rejuvenated, or left unchanged if it
is being harvested or liquidated. The price may be maintained if the product is harvested,
or reduced drastically if liquidated.

Reference:

Woodruff R. Cravens D. & Hills G. (1996) Marketing Management A.I.T.B.S. Publishers


& distributors

Kotler, P. & Keller K.L 2006 Marketing management 12th .ed New Jersey Pearson

Kotler, P (1997) Marketing management: analysis , planning implementation and control,


9th ed. New Delhi : Prentice Hall