Chapter 4 PRODUCT

A product is a bundle of utilities consisting of various product features & accompanying services A product is something that a firm markets that will satisfy a personal want or fill a business or commercial need A product is a complex of tangible attributes including packing,colour,price,manufactures & retailers service which the buyer may expect as offering satisfaction of wants or needs

Can be described in the two forms: 1. Physical description May be in the set of components of product Such as CPU, hard disk, monitor, key-board of computer
2. Functional description In terms of the needs or wants it satisfies like File transfer, sending Emails etc.

Classification of product

Consumer Products Industrial Products

Consumer Products

Convenience goods Shopping goods

Soaps, salt, newspaper, tooth paste

Clothing, major appliances, furniture, refrigerators

Refrigerators, computer

Durable goods

Non-Durable goods
Fruits, vegetables

-Specialty goods Specific brands & types of fancy goods, cars Jewelers

-Unsought able goods These are goods with which potential customers

are not yet familiar, new products like water purifier, food processors etc are unsought goods until consumer is made aware of them through advertising

Industrial Products Machinery

Like

lathes, milling machine, road roller etc

Components

Like

spare parts of machinery, monitor of computer

Raw materials

Like Like

cotton clay, wood, iron billets etc

Suppliers

lubricant, continuous-stationary for computer printing

PRODUCT MIX
A product mix also called product assortment is the set all product lines and items that a particular seller offers for sale to buyers. An organization with several product lines has a product mix

It is mix of all the products offered by sale for company. It is defined as the composite of products offered for sale by a firm or a business unit.

Example:
The HLL beauty line breaks down into make-up, skin care, bath, beauty, fragrance, outdoor protection products. Each line and sub line has many individual items like toilet soap categorylux, rexona, liril, lifeboy etc.

Example: if a firm manufactures or deals with different varieties of soap, toothbrush, toothpaste etc the group of these products is called PRODUCT MIX

Factors influencing change in product mix

1. Change in the market demand Due to changes in habits, fashion, purchasing power, income, attitudes & preferences of consumer affects the decision of product mix 2. Cost production If the company can develop a new product with the help of the same labor form, plant, machinery & techniques it can decide to start the production of that at lower cost 3. Quality of production If the production of the product to be considered to at large scale & the company can add one more item to its product line just to get the economies of large scale production

4. Change in purchasing power or Behaviour of the customer If the numbers of customers are increased with the increase in their purchasing power or with the change in their buying habits, fashion etc

5. Goodwill of the company

If the company is of repute it can market any new product in the market without much difficulty.

PRODUCT LINE
Products that are closely related, either because they function in a similar manner or are sold to the same customer groups or are marketed through the some type of outlets or fall within given price ranges.

According to J.Stanton, product line is defined as a broad group of products, intended for essentially similar uses and processing reasonably similar physical characteristics, constitute a product line

Example: HLL, Goderjs, P & Gs range of toilet soaps is product line

Product line decision Consumers preferences The tactics of competitors The firms cost structure Changes in market demand Buying habits Marketing influences Product influences Objectives of the company Product specialization Dropping of obsolete product's

Means that the manufacturer offers more than one product. It involves adding new products or lines to have balanced or optimum product range. Reasons -To reduce risks of product obsolescence & exploit new markets To utilize the un-utilized or under utilized capacity To spread overheads & fixed costs & increase sales turnover & profits To maximize seasonal fluctuations in demand

Product Diversification

Merits 1. Reduces change in demand 2. Balanced optimum line of products 3. Optimum use complimentary process Types of Product Diversification *Related Diversification Means adding new products of the same line for facilities *Un-related Diversification Means adding new products which are not related to the existing line. The cost is usually high

PRODUCT LIFE CYCLE (PLC)

-All products have certain strength, like during which they pass through identifiable stages. -Through the conception of the product during its development & up to the market introduction, product remains in the parental stage -Its life begins with its market INTODUCTION, then goes through a period during which its market GROWS rapidly, eventually its reaches its MATURITY & then stands SATURATED & finally its life comes to an END

 Definition-The

product life cycle is an attempt to recognize distinct stages in the sales history of the product PHILIP KOTLER stages of PLC INTRODUCTION GROWTH MATURITY SATURATION DECLINE OBSOLESCENCE

Different

1. 2. 3. 4. 5. 6.

1. INTRODUCTION the market with full scale production & marketing programme whole industry

-During the stage of PLC, the product is put in

-The company is an innovator may be the

-The product has gone through the embryonic

stages of idea screening, pilot methods & test marketing.

product

- The entire product may be new or the basic

- In the pioneering stage there is virtually no competition

-Technical defects in the product often appear during this stage because of insufficient prior testing of the product, in these initial stages these defects may be detected & eliminated. -The pioneering stage is very difficult & expensive as there are a high percentage of product failures in this product Operations in this stage are characterized by high costs, low sales volume, ltd distribution & heavy promotion & the type of the product rather than the sellers brand is emphasized

2. GROWTH or market Acceptance stage -In this stage the product gains popularity among & recognition from the customers -The product is produced in sufficient quantity & put in the market without delay. - The DEAMND generally continuous to exceed the SUPPLY

-The demand & sales go up tremendously due to promotional efforts

-Consequently profits of the firm start going up & up because of the two primary reasons: *Production & sales goes up *Advertising & distribution cost though goes up but its per unit reduced

3. Market MATURITY

-During this stage the sales volume continue to increase but at a decreasing rate, while the sales curve is leveling off, the profits of both the manufacturer & the retailers are starting to decline
-BECAUSE of rising expenditure & lowering of prices -MARGINAL producers are therefore force to drop out of the market -Price competition assumes a greater share of the total promotional efforts in order to retain his dealers -The producer search for new market & market & marketing research goes up, supply exceeds the demand for the first time

4. SATURATION
-Here the sales volume comes to standstill despite best efforts

-In this stage the market may peaks & levels off & it may start to decline, sales volume becomes stagnant as there no customers -Competition intensifies & profit margins decline further as production & distribution cost increase & prices tumble down further due to increasing competition -High competition brings the cost of distribution & promotional efforts at new high -Fresh efforts are made in this stage to impress the products

 5.

DECLINE

products gradual replacement by some new innovation or by an evolving change in consumer buying behaviour
-The buyers dont buy as much as they did before, NEW & SUPERIOR products are being introduced to the market many of which meet the consumers demand

-This stage is characterized by either the

-The sales drop off & many of the competitors

withdraw from the market. Cost control becomes increasingly important as demand drops.

6. OBSOLENSCENCE
- After sometime, consumers want NEWNESS i.e., new products, new styles, new colors etc - As new products are developed & introduced by the competitors, the companys product dies out. Its demand & sales are likely to tamper off. Profits are reduced to negligible point

- At this stage it is advisable to stop the production of the products & switch of to other products

Characteri Introducti Growth stics on 1.Custom ers Innovativ e High income Product High income mass Market Brand Brand superiorit y Many Lower Under

Maturity

Saturatio n Large scale

Decline

Mass market

Few

2. Approach

Brand Lowest price Many Lower Optimum

Specializa tion

Availabilit y

3.Advertis Awarenes ing s 4.Copmeti Few tors 5.Price 6.Capacit y High Over

Psychogra space phic Some Rising Over Few High Over

Reasons for PLC

1.

Continuous research for product development Simultaneous attempts by several companies in the same direction

2.

3.

Tendency of a new idea to attract competitors in a relatively short period

 Product

Addition (Expansion) -A firm may expand its present product mix by increasing the number of product lines or increasing the number of items within the same line. New line may be related or unrelated to the present products ITC added to its biscuit category Sun feast. Similarly the provision stores may add drugs, cosmetics, baby foods, dry fruits etc

Example:

Types 1. Horizontal addition Where the company introduces a new product which is similar to the industrys product line 2. Vertical Addition Where the company includes new products such as components, parts & materials in the current product portfolio of the company

3. Lateral Addition When a company may include any kind of materials in the current product portfolio of the company

Product Deletion (Elimination)

---Refers to the withdrawal of the product from companys line of products. Generally because it is no longer profitable. It also the process of avoiding or stopping the production of a particular product. ---It is also defined as deleting or eliminating those product items, which are unsatisfactory or unnecessary from the product line ---The various term used are deletion, contraction, dropping Example: Hindustan Levers toilet soap Le Sancy has been dropped long ago due to its unacceptabitility by the buyers

PRODUCT PLANNING

It involves:
The development & introduction of new product The modification of existing lines to suit the changing consumer needs & preferences The discontinuance of unprofitable or marginal product Products plans provisions in light of changing market situations

Product planning embraces all activities which enable producers & middlemen to determine what should constitute a companys line of products

Elements of product Planning

Research before production Possibility of production Modification in existing lines Elimination of the product Improvement in the product Price Determination

Product Planning & development strategy

Market Penetration Market development Product development Product diversification

Importance of Product Planning

---Product Planning is the starting point of the entire marketing program ---Customers interest is the supreme & it must be protected by all means ---Product planning ensures profitability of the product ---Helpful in facing the competition

NEW PRODUCT DVELOPMENT

What is New Product Development?

Basic requirements 1. Customer or consumer acceptance 2. Satisfactory performance 3. Economical production 4. Adequate distribution 5. Effective packaging & branding 6. Adequate servicing where required after the product is sold 7. Ultimate replacement

Steps in developing new product development OR Process of New product development

Exploration

of New Ideas Screening of Ideas Business Analysis Product Development Testing the Product Commercialization of Product

1. Exploration of New Ideas Main Sources

1.

Consumers opinions & suggestions offered by the consumers or invited or collected by the company

2. Salesmen or distributors or retailers opinions & suggestions 3. Competitors product may give an idea to innovate the firms product 4.Own research & development department of the company may bring new ideas after market research 5. Universities & government research laboratories 6. Employees of the enterprise 7. Management of the company

The above ideas or sources needs specific activities

Determine

the product fields of interest of the company a programme for planned idea generation of ideas through an organized work

Establishing

Collection

2. Screening of Ideas Activities performed

1. Expanding each idea into full product concept 2. Collecting facts & opinion to decide whether the product idea can be converted into a business proposition

3. Assessing each idea for its potential value to the company

The main object of this step is to scrap unsuitable ideas as quickly as possible & look out for the idea which can be developed

 3.

Business Analysis 1. Estimating future sales of product under consideration

2. Estimating future costs of the product, if developed as a product, for these purpose different elements of costs are to be analyzed 3. Estimating future profits

4. Product Development The following decisions should be taken:

1. Developing Models 2. Consumer preferences testing 3. Brands 4. Packaging

5. Testing the product

It reduces the risk of the producer to great extent

Objectives:

to evaluate a complete market plan including advertising, distribution sales, pricing to determine media mix, channels to forecast sales volume

6. Commercialization of product ---If the product is proved successfully in testing, a decision to produce it on commercial; basis may be taken

Why there is a failure of NEW PRODUCT in the market Inadequate market analysis

Failure to recognize rapidly changing environment failure to recognize consumer attitudes toward the product Technical or production problems, insufficient & ineffective marketing programs
Failure to estimate the strength & competition & too many products entering the market

 What

is DIFFUSION & ADOPTION Diffusion of a new product is the process by which an innovation is communicated in a social system over a period of time
Adoption

process is a set of successive decisions an individual makes before accepting an innovation

 BRANDING

Is the management process by which a product is branded. It is a general term covering various activities such as giving a brand name to a product, designing a brand mark & establishing & popularizing
BRAND

A name, term, sign, symbol or design or a combination of them which is intended to identify the goods or services of one seller or group of sellers & to differentiate them from those of competitors.

 Characteristics 1. The name should readily come to the minds of customers. It should be easy to pronounce

2. The name should be easy to read & understand 3. The name should be appropriate for the product. It must suggest something about the product 4. It should be easy to remember & descriptive in nature & different from other brands 5. It should be registered so that any other firm might not take advantage of its popularity 6. It should be short & pointing & should be far from obscene 7. It should be economic so that it could be easily printed on packages

 Types

Manufactures/

producers brand Example: use of Philips on all the products of Philips company like Philips radio, Philips T.V, transistor, bulbs Individual brands Manufacturer decides to sell each product under a separate brand Example: Hindustan Lever Limited bears different brands for the different products in the same product line like life boy, lux, and rexona

Family or umbrella brand When the manufacturer use a single brand for all his products & in all market segments Example: all the products of Bajaj group are marketer with the brand name of Bajaj such as bulbs, tube lights, scooter, toaster, ceiling fan etc Combination brands Combination of both brands i.e., individual & family 2. Distributors/ Private brands Branding can be done by distributors such as wholesalers & large sized retailers 3. Mixed brands Uses distributors, manufacturer brand name to sell the product

Merits of branding Advantages to the consumer

Easy

to identify Assurance of quality Easy selection

Advantages
Builds

to Manufacturers

up reputation & image Builds product loyalty Discourages price competition

Advantages
Eases

to middlemen

the selling process Reduces bargaining & price Flexibility Reduces distribution cost

Branding polices & strategies

Branding policies & strategies adapted by manufactures

---marketing under the own brand of manufacture ---marketing under the brand of middlemen

Branding policies & strategies adapted by middlemen 1. Use of brands of manufacturers only 2. Using tow brand names

Other polices & strategies

1. Multiple brand policy 2. Product line brand policy

PACKING May be defined as the general group of activities in product planning which involve designing & producing the container or wrapper for a product. Characteristics/ Formula A----ATTENTION I-----INTERST D-----DESIRE A-----ACTION S------SATISFACTION

Importance 1. To assemble & arrange the contents in the desired form 2.To protect the production from production time to the final use 3.To provide a suitable product mix including sizes, weights, prices, grades 4. To facilitate retailers functions. He can store & sell the goods easily 5.To facilitate transporting, storing & warehousing handling & to display of contents on packages 6.To encourages the customers for repurchases & to help in complying with legal requirements 7.To provide opportunity & space for advertising

Labeling Means offering label on the part that carriers verbal information about the product or the seller & may be part of a package or a tag attached directly to the product. The label might carry only the brand name or a great deal of information