CHAPTER 1

Unit 1: Product

Presented by:
Prof. Pradnya Bhambure
(Assistant Professor)

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Contents:

• Product: Meaning, The Role of Product as a market offering,

• Goods & Services Continuum,
• Classification of consumer products- convenience, shopping,
shopping, unsought goods.
• Classification of industrial products- materials and parts, capital
items, supplies and services.
• The Product Hierarchy,
• Product Systems and Mixes,
• Product Line Analysis, Product Line Length,
• The Customer Value Hierarchy.
• New Product Development - Need, Booz Allen & Hamilton
Classification Scheme for New Products,
• New Product Development Process - Idea Generation to
commercialization.
• Branding: Concept, Definition, Commodity Vs. Brand,
• Product Vs Brand,
• Concept of Brand equity
Product

A product is a bundle of attributes (features, functions, benefits, and uses) that a person
receives in an exchange. In essence, the term “product” refers to anything offered by a
firm to provide customer satisfaction, tangible or intangible. Thus, a product may be an
idea (recycling), a physical good (a pair of sneakers), a service (banking), or any
combination of the three.

Market Offering : People buy things to solve needs. In the case of the iPod, the need is to
have better access to music, to look cool, or both. Offering are products and services
designed to deliver value to customers—either to fulfill their needs, satisfy their “wants,”
or both.

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 Role of Product as a Market Offering:

1) Product is focal point at all Marketing Functions.: All marketing functions are
around it.

2) It is origin of planning: Product policies are the genesis of all the other types
of policies.

3) It is essential: It is inevitable to have a product to perform any kind of

marketing activity.

4) It is destination: Many policy decisions take help of product in order to

furnish high level of utilities satisfaction.
 Goods Services Continuum

At the pure goods end of the continuum, goods that have no related
services are positioned. At the pure services end are services that are
not associated with physical products.

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Most business theorists see continuum with pure service at one end point and pure
tangible commodity goods at the other. Most products fall between these two
extremes.
Goods are normally structural and can be transferred in an instant while services are
delivered over period of time.
The goods and services continuum enables marketers to see the relative goods/services
composition of total products. A product's position on the continuum, in turn, enables
marketers to spot opportunities.
Products that are a combination of goods and services fall between the two ends. For
example, goods such as furnaces, which require accompanying services such as delivery
and installation, are situated toward the pure goods end. Products that involve the sale
of both goods and services, such as auto repair, are near the center. And products that
are primarily services but rely on physical equipment, such as taxis, are located toward
the pure services end.
 The Classification of Products in Marketing

Product classifications help marketers focus their efforts using consumers’

buying behavior.
Your business can use these buying habits to design your marketing efforts
for a clearly defined target audience.
Consumer products are often classified as convenience goods, shopping
goods, specialty products or unsought goods.
Although these classifications are named as types of products, focusing on
how your customers buy these goods is equally important as you classify
products and develop your marketing campaigns.

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Classification based on use -
1) Convenience Goods

Those products your customers buy often and without much thought or
planning are classified as convenience goods.
Soap, condiments and toothpaste are common examples of convenience
goods.
Consumers typically make a choice once on their brand preference for
these products and repeat that choice over many purchases.
Making your convenience goods available for impulse or emergency
purchases can be particularly effective.

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 2) Shopping Goods

Buying decisions are detailed considerations of price, quality and value for
products classified as shopping goods.
Successful marketing of your shopping goods can come from positioning as
a better buy than your competitors -- for example, presenting better value
with higher quality for the price or vice versa.
Products in the shopping goods classification tend to rely on heavy
advertising and even trained salespeople to influence consumer choices.

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 3) Specialty Products

Goods in the specialty products classification tend to promote very strong brand
identities, often resulting in strong brand loyalty among consumers.
Examples include stereos, computers, cameras and the most high-end brands of
cars and clothing(marriage shopping).
While used cars are classified as shopping goods, a brand-new Mercedes is
classified as a specialty good.
Buyers for your specialty goods generally spend more time seeking the product
they want than on comparing brands or products to make a value decision.

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4) Unsought Goods

The products classified as unsought goods are those that your consumers
don’t put much thought into and generally don’t have compelling impulse to
buy.
Examples include batteries or life insurance.
Marketing your unsought goods will likely be most effective with lots of
advertising and salespeople promoting the idea of unresolved need for your
unsought products.

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INDUSTRIAL PRODUCTS

“Individuals and organizations that acquire goods and

services to be used, directly or indirectly, in the production
of other goods and services or to be resold.”

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 Classification is done on the basis of three broad groups:

Material and Parts

Capital Items

Supplies and Services

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 MATERIAL AND PARTS

Goods that enter the product directly. The cost of these items are
treated by the purchasing company as the part of manufacturing
cost. Material and parts are further segregated into three parts
that are:

⮚ Raw Materials
⮚ Manufacturing Materials
⮚ Component Parts

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Raw Material: These are the basic products which enter into the production
process with little or no alterations. They may be marked to user customers or
OEMs (Original Equipment Manufactures).

Manufactured Materials: That also includes those raw materials that are subjected
to some amount of processing before entering the production process.

Component parts: These are the semi finished parts that can installed directly into
the products with little or no additional change. Such as small motors, batteries
and tyres.

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 CAPITAL ITEMS

Capital items are those which are used in the production process.
Capital items are classified into three groups:

Heavy equipments
Light Equipments
Plant and Buildings

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Heavy Equipments: These are the major and long term investments such as general
purpose and special purpose machines, turbines, generators and earth moving
equipments.

Light Equipments: Light equipments and tools which have lower purchase prices
and are not considered as the part of heavy equipment such as typewriters,
computers and small electric motors.

Plants and Buildings: These are the real estate property of the company. It includes
the firm offices, plant, warehouses, warehouses and parking lots.

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 SUPPLIES AND SERVICES

Supplies and services support the operations of the purchasing

organization. They are not consider as the part of the finished goods.
They are further segregated into two parts:

Supplies
Services

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Supplies: These items are generally standardized and are marketed to
a wide cross section of industrial users. Such as paints, oils, grease,
pencils, stationary etc.

Services: Company needs a wide range of services like building

maintenance services, auditing services, legal services, courier
services and many more.

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Based on durability:

Durable goods: Products which are used for long period.

e.g: refrigerator, car, washing machine
Requires more personal selling efforts, have high profit margin
Seller’s reputation, pre sales and after sales service are important determinants
of purchase

Non durable goods: Normally consumed in one or lasts for few uses.
e.G soap, salt, pickles etc
 Product Hierarchy
1. Core Product – The most fundamental level is the core benefit. It is the
fundamental benefit or service the customer is really buying.
2. Generic/Basic Product – At the second level the, marketer has to turn the core
benefit into basic product.
3. Expected Product –marketer prepares an expected product a set of attributes
and conditions that buyers normally expect and agree to when they purchase this
product.
4. Augmented Product – At this level the marketer prepares an augmented product
that meets the customer’s desires beyond their expectations.
5. Potential Product – At the fifth level the potential product encompasses all the
augmentations and transformations that the product might ultimately undergo in
the future. Here companies search for aggressively new ways to satisfy surprise
and delight the customers.
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Meaning of Product Mix

several products that a company offers to its customers. For example, a company
might sell multiple lines of products, with the product lines being fairly similar, such
as toothpaste, toothbrush, or mouthwash, and also other such toiletries. All these
are under the same brand umbrella. Whereas, a company may have varied and
distinct other product lines that may be in good contrast to each other, such as
medicines and clothing apparel.
Product mix can also be understood as the complete set of products and services
that are offered by a firm. A product mix consists of the product lines, which are
associated items that a consumer purchases.
Dimensions of a Product Mix
1 Width
Width, also known as breadth, refers to the number of product lines offered by a
company. For example, kellog’s product lines consist of:
(1) Ready-to-eat cereal, (2) Pastries and breakfast snacks, (3) Crackers and
cookies, and (4) Frozen/Organic/Natural goods.
2 Length
Length refers to the total number of products in a firm’s product mix. For
example, consider a car company with two car product lines (3-series and 5-
series). Within each product line series are three types of cars. In this example,
the product length of the company would be six.
3 Depth
Depth refers to the number of variations within a product line. For example,
continuing with the car company example above, a 3-series product line may offer
several variations such as coupe, sedan, truck, and convertible. In such a case, the
depth of the 3-series product line would be four.
4 Consistency
Consistency refers to how closely related product lines are to each other. It is in
reference to their use, production, and distribution channels. The consistency of a
product mix is advantageous for firms attempting to position themselves as a
niche producer or distributor. In addition, consistency aids with ensuring a firm’s
brand image is synonymous with the product or service itself.
Importance of a Product Mix
The product mix of a firm is crucial to understand as it exerts a profound impact on a
firm’s brand image. Maintaining high product width and depth diversifies a firm’s
product risk and reduces dependence on one product or product line. With that being
said, unnecessary or non-value-adding product width diversification can hurt a brand’s
image. For example, if Apple were to expand its product line to include refrigerators, it
would likely have a negative impact on its brand image with consumers.
In regard to a firm expanding its product mix:
•Expanding the width can provide a company with the ability to satisfy the needs or
demands of different consumers and diversify risk.
•Expanding the depth can provide the ability to readdress and better fulfill current
consumers.
 Product Line Analysis

A product line is a group of related products all marketed under a single

brand name that is sold by the same company. Companies sell multiple
product lines under their various brand names, seeking to distinguish
them from each other for better usability for consumers.
Product Line Analysis is the process also acts as a "validation" as to
whether a given product line is appropriate for the business at its stage of
development: there are times in the life of a business in which it is wise to
add product lines, and there are times when it is prudent to withdraw
them.
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Product Line Analysis:

1. Gain clarity on your sales & marketing strategy

2. Understand how the sales & marketing strategy is converted to units
3. Dive in: perform a detailed product line analysis
4. Take action: implement the results

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Customer’s Value Hierarchy:
Customers will choose a product based
on their perceived value of it. Satisfaction
is the degree to which the actual use of a
product matches the perceived value at
the time of the purchase. A customer is
satisfied only if the actual value is the
same or exceeds the perceived value.
Kotler attributed five levels to products:
https://www.cgma.org/resources/tools/cost-transformation-model/kotlers-
five-product-level-model.html
Consumer Value Hierarchy
1) Core Benefit – Its the most fundamental level wherein it encompasses the service or the
benefit that the customer is really buying.
(2) Basic Product – At this level the marketer must convert the core benefit into a basic
product. Thus a Happy Meal is in a way a combo-meal containing individual product
offering of McDonald’s.
(3) Expected Product – At this level, the product has a set of attributes and conditions that
customers will normally expect while purchasing the product.
(4) Augmented Product – The level in which the product exceeds customer expectations.
For a Happy Meal the free toy contributes at this level.
(5) Potential Product – This encompasses all the possible augmentations and
transformations that the product might undergo in the future

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NEW PRODUCT DEVELOPMENT
WHY DEVELOP NEW PRODUCTS FOR YOUR BUSINESS?

Introduction
Every business needs to innovate to stay ahead of the competition.
No business can continue to offer the same unchanged product;
otherwise sales would decrease and profits reduced.

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Consumer "Needs and Wants" Change
Consumer "needs and wants" continuously changes.
Firms should respond to these changes through their products and
services.
Otherwise consumers will switch to competitor products that satisfy
their "needs and wants".
For example consumers are becoming more health conscious, this is
forcing companies to introduce low sugar, salt and fat products.

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Product Reaches The End Of Its Product Life Cycle
The product maybe at the end of its Product Life Cycle, so the company
may introduce new and improved updated versions.
Product Is At The Maturity Stage Of Its Product Life Cycle
The product might be at the maturity stage of its Product Life Cycle and
need modifications to stimulate an increase in sales.

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Environmental Changes
There may be environmental changes which the company wants to capitalize
on.
Music companies are now selling more music via internet downloads than
through traditional retail shops.
Record companies were pushed into selling music through the internet.

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Competitors
Competitors may force change.
This is very apparent in the technology market, where new products
are constantly being introduced to a target market that welcomes
change and innovation.
Technology consumers are not afraid to try new products, in fact
they often want the latest gadget to show to friends and colleagues.
If a product is successful then competitors will attempt to develop
similar products.

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Utilization Of Excess Capacity
Invariably, each and every company starts with a spare capacity- in
terms of certain minimum amount of costs which are irreducible.
In case, the rated capacity is not used, the cost of production will
be normally higher than what is expected.
To have fuller use of capacity, the existing sales may be limiting
factor.
Hence , new product, in whatever form, is to be produced with
double advantage.

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Recycling of Waste Product
In mass Production Lines, waste, scrap, rejects are in large quantities
though may be representing a normal percentage of input.
Recycling of these will go a long way in reducing the burden of costs.
It may result in production innovation.

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Need of New Product Development

1) New product development is an essential activity for all businesses.

2) It helps you stay ahead of the competition.
3) If you do not develop new products someone else will and steal all of your
customers.
4) The number of businesses that have gone into administration during the
current world recession demonstrate the importance of change management.

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 Booz & Hamilton Classification scheme of new product

New-to-the-world products.
These products are truly new because they create a totally new market and are only
a small percentage of the new product category.
New product lines.
When a company offers a product from a new category that they haven't previously
offered, then it would be a new product line.
Additions to existing product lines occur when a company adds a new product that
solidifies its area of product offerings.
improvements or revisions of existing products
Repositioned Products are products that can be targeted or changed slightly to increase
sales.

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 Classification of Products

The classification of the product depends upon the TANGIBILITY and

DURABILITY found in an offering.
Typical classification of Product:
⮚ Service
⮚ Durable
⮚ Non Durable

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New Product Development Process
Step 1. Idea Generation

Systematic Search for New Product Ideas

• Internal sources
• Customers
• Competitors
• Distributors
• Suppliers

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 New Product Development Process
Step 2. Idea Screening

Process to spot good ideas and drop poor ones

Criteria
• Market Size
• Product Price
• Development Time & Costs
• Manufacturing Costs
• Rate of Return

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New Product Development Process
Step 3. Concept Development & Testing

1. Develop Product Ideas into

Alternative Product Concepts

2. Concept Testing - Test the

Product Concepts with Groups
of Target Customers

3. Choose the Best One

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• Those ideas which survive in the second stage of product
development i.e. the screening stage must be, evaluated further to
assess the product concept.
• Firms use concept testing i.e. getting reaction from customers on how
well new ideas fit with their needs.
• Concept testing uses market research, ranging from formal focus
groups to formal service of potential customers
• Group discussions are widely used for concept testing

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New Product Development Process
Step 4. Business Analysis

Business Analysis

Review of Product Sales, Costs,

and Profits Projections to See if
They Meet Company Objectives
�

If No, Eliminate
Product Concept

If Yes, Move to
Product Development

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• Once the product concept has been developed which will be acceptable
in the market to satisfy the needs and wants of the consumers, it is of
utmost importance to assess the potential business dimensions of such
new products.
• The company will assess future sales, costs, profits, and whether these
criteria will meet its business objectives.
• The business analysis will assume certain micro-macro environmental
conditions and expect its that there will not be any major macro level
change.

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• The product being developed may be good for the market and potential
consumers but the crux of the matter is whether the product will yield
enough sales and profits over a period of time.
• Some idea about the financial performance of the product can be
obtained by carefully analyzing old historical data of similar type of
products & carrying out consumer survey.
• However the company should be able to assess the range of sales revenue
and profit and work out the feasibility of the new product development

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New Product Development Process
Step 5. Marketing Strategy Development
Marketing Strategy Statement Formulation
Part One - Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two - Short-Term:
Product’s Planned Price
Distribution
Marketing Budget

Part Three - Long-Term:

Sales & Profit Goals
Marketing Mix Strategy

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 Step 6. Product Development

• A Product concept which has passed the test of business analysis and has
favorable market demand would now required to be converted into a physical
product.
• The concept paper giving descriptive details of the product, product design,
sketches and drawing details of the product.
• The management would now like this concept to be designed and developed
into a functional useful product for consumers.
• This would need well coordinated cohesive efforts by design and engineering
department, research and development , production dept and marketing dept
of the company to develop prototype product.

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New Product Development Process
Step 7. Test Marketing

Once the developed new product satisfies all functional

performance and overall product style and features, the product is
taken for actual field trials called market testing

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New Product Development Process
Step 7. Test Marketing
Standard
Test Market
Controlled
Full marketing Test Market
campaign
in a small number of A few stores that have
agreed to carry new
representative cities. products for a fee.

Simulated
Test Market

Test in a simulated
shopping environment
to a sample of
consumers.

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 New Product Development Process
Step 8. Commercialization

Commercialization means nothing else than introducing a new product into

the market. At this point, the highest costs are incurred: the company may
need to build or rent a manufacturing facility. Large amounts may be spent
on advertising, sales promotion and other marketing efforts in the first year.

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 Branding

Brand means a name, term, sign, symbol, design, or a mix thereof used to identify the
product of one firm and to distinguish if from the competitive products. A brand is
usually composed of a name and a mark or a mnemonic. A brand name is a part of a
brand which can be vocalized. It consists of words, letters, and / or numbers.
A brand is considered to be one of the most valuable and important assets for a
company. In fact, many companies are often referred to by their brand, which means
they are often inseparable, becoming one and the same. Coca-Cola is a great example,
where the popular soft drink became synonymous with the company itself. This
means it carries a tremendous monetary value, affecting both the bottom line and, for
public companies, shareholder value.
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Branding
• Branding is the perpetual process of identifying, creating, and managing the
cumulative assets and actions that shape the perception of a brand in
stakeholders’ minds.
• Branding is the overarching idea or image of your company that is associated
with your product and might define it in the eyes of your customers. Your name,
designs, logo, and any other features that are unique to your company’s
personality are all part of your brand. They will appear on and around your
product, setting it apart from other similar products in the market.
Branding

1. Perpetual process
Branding is a perpetual process because it never stops. People, markets, and
businesses are constantly changing and the brand must evolve in order to keep pace.
2. Identify, create, manage
There is a structured process to branding, one where you must first identify
who/what you want to be to your stakeholders, create your brand strategy to
position yourself accordingly, and then constantly manage everything that influences
your positioning.
3. Cumulative assets and actions
Your positioning must be translated into assets (e.g., visual identity, content,
products, ads) and actions (e.g., services, customer support, human relations,
experiences) that project it into your stakeholders’ minds, slowly building up that
perception.
4. Perception of a brand
Also known as reputation. This is the association that an individual (customer
or not) has in their mind regarding your brand. This perception is the result of
the branding process (or lack thereof).
5. Stakeholders
Clients are not the only ones that build a perception of your brand in their
minds. Stakeholders include possible clients, existing customers, employees,
shareholders, and business partners. Each one builds up their own perception
and interacts with the brand accordingly.
Why Branding?
• Branding increases business value
Branding is important when trying to generate future business, and a strongly
established brand can increase a business’ value by giving the company more leverage
in the industry. This makes it a more appealing investment opportunity because of its
firmly established place in the marketplace.
• Branding generates new customers
A good brand will have no trouble drumming up referral business. Strong branding
generally means there is a positive impression of the company amongst consumers, and
they are likely to do business with you because of the familiarity and assumed
dependability of using a name they can trust. Once a brand has been well-established,
word of mouth will be the company’s best and most effective advertising technique.
• Improves employee pride and satisfaction
When an employee works for a strongly branded company and truly stands behind
the brand, they will be more satisfied with their job and have a higher degree of
pride in the work that they do. Working for a brand that is reputable and held in
high regard amongst the public makes working for that company more enjoyable
and fulfilling.
• Creates trust within the marketplace
A brand’s reputation ultimately boils down to the amount of trust that clients can
have in it. The more you trust a brand, the better your perception of it, the
stronger its reputation and, thus, the brand itself.
 Commodities vs Brand

• Commodities are goods and services which are useful and valuable (to
buyers). Commodities are goods and services which are usually widely
available and offered from multiple brands. However, no matter which
brand name of a commodity is purchased, they are roughly equivalent.
The main differentiator among commodities is price; when it comes to the
buying decision, brand is nothing.
• A brand, on the other hand, is one of a kind. It can be defined elegantly by
one word, a “mark.”

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 Product vs Brand

1) Companies Make Products and Consumers Make Brands

2) Products Can Be Copied and Replaced but Brands Are Unique
3) Products Can Become Obsolete but Brands Can Be Timeless
4) Products Are Instantly Meaningful but Brands Become Meaningful over
Time.

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 Brand Equity

• Brand equity describes the level of sway a brand name has in the minds of
consumers, and the value of having a brand that is identifiable and well
thought of.
• This is done by generating awareness through campaigns that speak to
target-consumer values, delivering on promises and qualifications when
consumers use the product, and loyalty and retention efforts.
• Awareness and experience are the two key tenets of brand equity.

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•Brand equity refers to the value a company gains from its name recognition
when compared to a generic equivalent.
•Brand equity has three basic components: consumer perception, negative or
positive effects, and the resulting value.
•Brand equity has a direct impact on sales volume and a company's profitability
because consumers gravitate toward products and services with great
reputations.
•Companies can create brand equity for their products by making them
memorable, easily recognizable, and superior in quality and reliability.
Mass marketing campaigns also help to create brand equity.
Brand equity has three basic components: consumer perception, negative or
positive effects, and the resulting value. Foremost, consumer perception, which
includes both knowledge and experience with a brand and its products, builds
brand equity. The perception that a consumer segment holds about
a brand directly results in either positive or negative effects. If the brand equity is
positive, the organization, its products, and its financials can benefit. If the brand
equity is negative, the opposite is true.
Finally, these effects can turn into either tangible or intangible value. If the effect is
positive, tangible value is realized as increases in revenue or profits. Intangible
value is realized in marketing as awareness or goodwill. If the effects are negative,
the tangible or intangible value is also negative.
• Positive brand equity increases profit margin per customer because it
allows a company to charge more for a product than competitors, even
though it was obtained at the same price.
• Brand equity has direct effect on sales volume because consumers gravitate
toward products with great reputations.
• Customer retention is the third area in which brand equity affects profit
margins.
• References:

• https://www.researchgate.net/figure/Goods-and-Services-
Continuum_fig1_271523403/download

• Marketing Management, Philip Kotler, Pearson

• Marketing Management, Ramaswamy & Namakumari, Macmilan

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