Marketing Management

Unit -3
Product:-
Meaning and Definition:-

A product is an object, or system, or service made available for consumer use as of the consumer
demand; it is anything that can be offered to a market to satisfy the desire or need of a customer.

A product may be defined as a set of tangible, intangible and associate attributes capable of
being exchanged for a value with the ability to satisfy consumers and business needs. It is
anything that can be offered to a market to satisfy the needs or wants of the customer. The
products that are marketed include physical goods, services, experiences, events, person, place,
properties, organization, information and ideas.

According to Philip Kotler: “A product is anything that can be offered to a market for attention,
acquisition, use or consumption. It includes physical objects, services, personalities, place,
organizations and ideas.”
According to Alderson: “A product is a bundle of utilities consisting of various features and
accompanying services.”

Features of Product:-

1. Customer Satisfaction: Products are the means through which customers fulfill their needs
and wants. It serves as a medium through which business offers service to customers for
satisfying their requirements.
2. Exchange value: The product should have an exchange value in monetary terms for which it
is exchanged with people. This enables the exchange of products between the buyer and seller
possible.
3. Tangibility: It is one of the important features of the product. The product should have
tangible attributes like it should be seen, touched or should have a physical presence.
4. Intangible attributes: Product may be intangible which means that it does not have any
physical presence. In the case of availing services like banking, repairing, and transportation, a
product is intangible.
5. Associated attributes: The product should have differential and unique features that make its
identification and acceptance by buyers quite easy. It helps in product differentiation and
creating a better image.
6. Function: Functions work toward maximizing customer satisfaction, addressing pain points,
and providing the tools buyers need to complete tasks.
7. Design: Design refers to the ease of use and how clearly steps are laid out for product
interaction.
8. Quality: Quality ties into the durability and reputation of a product. Companies that
continually produce products with reliable features build customer loyalty.
9. Experience: A customer’s experience with a product or service over time is part of its
features. The user experience, from on boarding customers to gathering customer feedback after
purchases, is also an integral aspect of a product’s features.

Levels or Dimensions of Product

A product has many dimensions beside its physical appearance. In fact, a product is like an
‘onion’ with several layers and each layer contributes to the total product image. According to
Philip Kotler, “The consumers will favour those products that offer most quality, performance
and features.” Philip Kotler has described the five levels of products.

Core Benefit (or product)

This is the basic level that represents the heart of the product. Here, the focus is on the purpose
for which the product is intended. It answers the question ‘What is the buyer really buying? For
instance, a woman doesn’t purchase a washing machine merely because of its machinery but for
her comfort and praise from her family. Likewise, we buy a warm coat to protect us from the
cold and the rain. Thus, the basic job of marketing manager is to sell the core benefits of the
product.
Tangible Product
The second level of the product, the tangible product (also called the actual, physical or formal
product) is the physical product or service offered to consumers. This represents all the
characteristics of the product like quality, features, design, brand name, packaging, etc. For
example, we buy a warm coat which has a good quality material, rain repellent ability, fit and
high-quality fasteners, etc.
Expected Product
At this level, a marketer prepares an expected product, a set of attributes and conditions buyer
normally expect when he purchase the product. For example, when we purchase a coat, it should
be really warm, protect us from the weather and the wind and be comfortable when riding a
bicycle.
Augmented Product
This level is supported by additional customer services and benefits. In other words, it exceeds
customer expectations. For example, when we purchase a freeze, we not only see its style, trendy
colour and fashion brand but also its service, warranty and safe-home delivery, etc. Thus, we can
say, this dimension of product is very important for a
firm operating in a competitive market.
Potential product
The last level of product is its potential part i.e. all the
unexpected changes in technology, attributes, features,
styles, colour, grade, quality, etc. that might change the
characteristics and structure of company in future are
taken into account. For example, as per the needs &
demands of customers, IT companies changes the
processing speed of computer, laptops, smart
phones, etc. to remain competitive in the market.

Product Hierarchy
Each product is related to certain other products.
The product hierarchy stretches from basic needs
to particular items that satisfy those needs. There
are 7 levels of the product hierarchy:

1. Need family:
The core need that underlines the existence of a
product family. Let us consider computation as
one of needs.

2. Product family:
All the product classes that can satisfy a core need with reasonable effectiveness. For example,
all of the products like computer, calculator or abacus can do computation.

3. Product class:
A group of products within the product family recognised as having a certain functional
coherence. For instance, personal computer (PC) is one product class

4. Product line:
A group of products within a product class that are closely related because they perform a similar
function, are sold to the same customer groups, are marketed through the same channels or fall
within given price range. For instance, portable wire-less PC is one product line.
5. Product type:
A group of items within a product line that share one of several possible forms of the product.
For instance, palm top is one product type.

6.Item/stock-keeping unit/product variant:

A distinct unit within a brand or product line distinguishable by size, price, appearance or some
other attributes. For instance, LCD, CD- ROM drive and joystick are various items under palm
top product type.
Essentials of a Good Product:

Importance of Product:-

1. Element of marketing mix: Product is the key element of the whole marketing mix. All
other elements that are price, promotion, and place mix are all dependent and decided in
accordance with the product.
2. Initiates market planning: Product is termed as the starting point and center of all
marketing programs. All marketing activities like sales promotion, advertising and
distribution are decided according to the nature of the product.
3. Competitive weapon: Product is a powerful weapon of business to face strict market
competition. Businesses by efficiently producing products are able to provide better
quality at a lower cost which attracts more and more customers.
4. Means of consumption and satisfaction: Product is the center of consumption and
satisfaction of customers. People buy and consume different products for satisfying their
numerous needs.
5. Key to market success: Product is an important element for attaining success in the
market. If business is able to deliver products in accordance with customer requirements,
their product will widely be accepted. It will attract more customers and will provide
growth opportunities for the business.
6. Essential from social viewpoint: It is important from the viewpoint of society as it
provides numerous benefits to them. The product satisfies the wants of society, improves
their standard of living and also serves as a means of providing employment
opportunities to a large number of peoples involved in various processes of the product.
Product Mix:-

Product mix, also known as product assortment or product portfolio, refers to the complete set of
products and/or services offered by a firm. A product mix consists of product lines, which are
associated items that consumers tend to use together or think of as similar products or services.

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, Kellogg’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.

Key Product Mix Strategies

There are four key product mix strategies:

1. Expansion: A company increases the number of product lines or depth (i.e., product
variations) within lines.
2. Contraction: A company narrows its product mix to eliminate lower-performing
products or lines or to simplify remaining products or lines.
3. Change an Existing Product: A company improves a current product rather than
creating a completely new product.
4. Product Differentiation: Without modifying the product in any way, a
company positions it as a superior choice to a competitive product.
Illustration of a Product Mix

In the illustration above, the product mix shows a:

 Width of 3
 Length of 5
 Product Line 1 Depth of 2
 Product Line 2 Depth of 1
 Product Line 3 Depth of 2

The mix is considered consistent if the products in all the product lines are similar.

Example of a Product Mix

Let us take a look at a simple product mix example of Coca-Cola. For simplicity, assume that
Coca-Cola oversees two product lines – soft drinks and juice (Minute Maid). Products classified
as soft drinks are Coca-Cola, Fanta, Sprite, Diet Coke, Coke Zero, and products classified as
Minute Maid juice are Guava, Orange, Mango, and Mixed Fruit.

The product (mix) consistency of Coca-Cola would be high, as all products within the product
line fall under beverage. In addition, production and distribution channels remain similar for
each product. The product mix of Coca-Cola in the simplified example would be illustrated as
follows:
Product Life Cycle:-

A product life cycle is a management tool that evaluates a product’s journey from development
to withdrawal from the market. As mentioned earlier, it includes four stages- introduction,
growth, maturity, and decline.
A PLC enables brands to create strategies to sustain a product’s longevity or adapt to the
dynamic market condition.

Here are some characteristics of a product life cycle:

 Each product has a life cycle that differs from one another
 The life cycle of a product starts with its introduction and continues till its decline
 The speed of movement between PLC stages is different for all products

Benefits of using a product life cycle

1. Formulate marketing strategies for products

2. Helps companies shift resources from one product to another
3. Positively impacts economic growth and promotes innovation
Four Stages of Product Life Cycle

1. Introduction

This is the first stage of the product life cycle, starting with product ideation and continuing until
the product is introduced in the market. In this stage, brands conduct marketing and promotional
activities, adapt product life strategies, etc., to ensure the product reaches its target audience.

2. Growth

In this stage, consumers start buying the product, it becomes popular, and its sales increase. In
simpler words, the customer begins recognising the brand. In this stage, brands undertake
different brand retention strategies to build a loyal customer base.

3. Maturity

In this stage, sales slowdown, indicating

that the market has begun to reach
saturation. With products reaching
saturation, competition is higher than at
another location, and profits start getting
thinner by the day.

In this stage, brands look for ways to

innovate their product and strategies to
increase their longevity.

4. Decline

While companies make all efforts

throughout the different stages of the
product life cycle to ensure that it stays
alive in the market, an eventual decline cannot be ruled out. A decline’s characteristics are a drop
in sales, affected revenue, changed consumer behaviour and fluctuating demand.

Examples of a product life cycle

Typewriter

Typewriters were replaced by computers and laptops for their speed, effectiveness, and holistic
experience.

VCR

VCRs were effectively phased out after the advent of CDs, DVDs, and the Internet.
Electric vehicles

Electric vehicles are currently in the growth stage because their demand is slowly picking up.

Conclusion

Every product undergoes a product life cycle. Although every product’s journey differs, the PLC
remains the same- introduction, growth, maturity, and decline. Whether a fresher or an
experienced product manager, knowledge of PLC will help you tactfully utilise the company’s
resources, predict the future, and make strategic plans for product launches, among others.

Diffusion of Innovation:-
Diffusion of Innovation (DOI) is a theory popularized by American communication theorist and
sociologist, Everett Rogers, in 1962 that aims to explain how, why, and the rate at which a
product, service, or process spreads through a population or social system. In other words, the
diffusion of innovation explains the rate at which new ideas and technology spread. The
diffusion of innovation theory is used extensively by marketers to understand the rate at which
consumers are likely to adopt a new product or service.

In the diffusion of innovation theory, there are five adopter categories:

1. Innovators: Characterized by those who want to be the first to try the innovation.
2. Early Adopters: Characterized by those who are comfortable with change and adopting
new ideas.
3. Early Majority: Characterized by those who adopt new innovations before the average
person. However, evidence is needed that the innovation works before this category will
adopt the innovation.
4. Late Majority: Characterized by those who are skeptical of change and will only adopt
an innovation after it’s been generally accepted and adopted by the majority of the
population.
5. Laggards: Characterized by those who are very traditional and conservative – they are
the last to make the changeover to new technologies. This category is the hardest to
appeal to.

Rogers provides the distribution of the five adopter categories as follows: Innovators represent
the first 2.5% of the group to adopt an innovation, followed by 13.5% as early adopters, 34% as
early majorities, 34% as late majorities, and finally,16% as laggards. Note that the size of the
laggards category is much larger than that of the innovators category on the opposite end of the
spectrum.
Diffusion of Innovation: Innovators

Innovators are those who want to be the first to acquire a new product or service. They are risk-
takers, price-insensitive, and are able to cope with a high degree of uncertainty. Innovators are
crucial to the success of any new product or service, as they help it to gain market acceptance.

For example, individuals who stay overnight outside a movie theatre to be the first to purchase
the first showing to a movie are considered innovators.

Diffusion of Innovation: Early Adopters

Early adopters are those who are not quite as risk-taking as innovators and typically wait until
the product or service receives some reviews before making a purchase. Early adopters are
referred to as “influencers” or “opinion leaders”, and are often regarded as role models within
their social system. They are key in helping the spread of a product or service achieve “critical
mass”.

Therefore, if early adopters of a product or service are small, the total number of people who
adopt the product or service will likely be small as well. Individuals who wait a couple of days
and spend some time reading reviews before going to see a movie are regarded as early adopters.

Diffusion of Innovation: Early Majority

Early majorities represent the majority of the market – 34%. Early majorities are not risk-taking
and typically wait until a product or service is tested or used by a trusted peer. These individuals
are prudent and want to purchase things that are proven to work.
Individuals who go to a movie after it’s been out several weeks and gotten good reviews and
made profits at the box office are early majorities.

Diffusion of Innovation: Late Majority

Late majorities also represent an important percentage of the market – 34%. Late majorities are
the last large group of consumers to enter the market. They are deemed conservative and are
often technologically shy, very cost-sensitive, skeptical, and cautious in making a purchase. In
addition, late majorities are often peer pressured into purchasing the product or service.

People who wait for a movie to become available online or on Netflix are regarded as late
majorities.

Diffusion of Innovation: Laggards

Laggards are the last to adopt a new product or service. They resent change and may continue to
rely on traditional products or services until they are no longer available. In other words, they
typically only adopt the new technology when virtually forced to.

Laggards perhaps finally catch a hit movie when it’s shown on network TV.

New Product Development:-

New product development refers to the process that goes into bringing a new
product to market, from brainstorming an idea to understanding if it fits into the
market, ironing it out to prototyping to final commercialization.

1. Idea generation
2. Idea screening
3. Concept development and testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Test marketing
8. Commercialization

These are 8 steps that you can formalise into a product development process that will keep you
innovating in the most flexible, sustainable, and profitable way.
1. Idea Generation
Companies need to have a clear-eyed view of the challenges and feasibility inherent in certain
ideas, but they need to have a range of creative wells to draw from as they think of their ‘next big
idea’.
Companies should always be ideating, finding ways to feed new product ideas into the
organisation from across their internal teams and elsewhere. Formal and informal processes
should funnel ideas into the mix, resulting in sound initial proposals for further exploration.
These tactics and techniques include:
 SWOT (strengths, weaknesses, opportunities, and threats) analysis
 Market research
 Market scanning
 Morphological analysis
 Focus groups with customers
 Value analysis of existing
products
At the end of this process there should
be a formal means of submitting
proposals for further screening by your
business. This will entail providing a
minimum level of supporting evidence
and documentation to share with key
decision-makers.

2. Idea screening
Before further resource is allocated to
any of these projects, the ideas must be filtered. This is often done by a panel of experts drawn
from your internal teams. For each proposal they should ask the following questions to assess
initial feasibility:
 How will the customer in the target market benefit from the product?
 What unmet need will the product fulfill in the marketplace?
 Why can you fulfill this need where other products fail?
 Have you got the product design expertise and process in place to do this properly?
 Have you got the technical expertise to manufacture the product?
 Does the proposed product fit with your manufacturing and distribution capabilities?
3. Concept development and testing
After a number of initial ideas are approved for further development, detailed feasibility studies
should begin. The business should be working on documentation that captures:
 Who is the target market and who is the decision-maker in the purchasing process?
 What product features must the product incorporate to be a success?
 How much will the customer be willing to pay for the product?
 How much will it cost to produce it?
 Can the product be produced and sold at a profit?
 How can the product be produced most cost-effectively?
Businesses can help prove feasibility through virtual computer-aided rendering, and rapid
prototyping. Answering these questions and seeing a rapid prototype in the flesh, can help
validate customer and market needs, as well as your potential design and pricing strategy.

4. Marketing strategy development

To help the company decide what ideas have the most promising future, you should create a
potential marketing plan for each. A competitive marketing strategy comprises four key
elements.
1. It recognises market need and customer requirements should be the driving force behind
any product development. If you can’t define and express the unique value your product
brings to your customer, it may not be worth pursuing.
2. It attempts to establish a sustainable, profitable market position: its end target is always
creating profit for the company.
3. It recognizes and acknowledges the forces that are determining competition in B2B
markets: i.e. government regulation, global competition, the extent of buyers´ knowledge
and understanding of a particular market
4. It aims to create a sustainable competitive advantage: Since the forces that are
determining competition are changing it is necessary to constantly work on adapting and
improving the competitive marketing strategy in order to identify a market position that
fits the available resources of the company.

5. Business analysis
These are the hard-nosed calculations that will need to feed into your stop/go decision-making at
this critical stage of product development.
  Estimate likely selling price based upon competition and customer feedback
 Estimate sales volume based upon size of market
 Estimate profitability and break-even point
 Is there a high chance of a good pay-off?
If the figures add up and there is a compelling business case for your new product - then the
business can approve development to start.

6. Technical Implementation
Now, the detailed, exhaustive project requirements are assembled that will guide the design and
development phase.
Formal engineering specifications are created. Verification and validation plans are developed
for the future. These are the final quality checks that will systematically determine that all agreed
deliverables are present and working in the end product. The product is then developed against
the designs, with regular checks made throughout the process to assess and mitigate the risk of
its failure for the end-user and the project itself. Requirements for this process include:
 Resource estimation
 Requirements publication
 Engineering operations planning
 Scheduling
 Supplier collaboration
 Resource plan publication
 Program review and monitoring
 Contingencies (what-if planning)

7. Test marketing activities

When you have developed the product and the first complete prototype is available, you need to
test it thoroughly:
 Conduct focus groups or customer interviews to assess the product
 Introduce the product at a trade show
 Produce an initial run of the product and sell it in a test market area to determine
customer acceptance.
Now is your opportunity to tweak the product based on market feedback, in readiness to bring it
to market.
8. Launch the product
Products that have been carefully developed through this process are ready for release, but the
development work doesn’t stop there. Companies need to monitor the success of the product to
plan for future upgrades and potential new additions to the product suite:
 Produce and place advertisements and other promotions
 Plan sales channels and activities
 Activate the marketing plan
 Fill the distribution pipeline with product
 Conduct post-market monitoring to capture refinements/new product ideas

VUCA is the enemy

VUCA - the famous futurist acronym - sums up these challenges perfectly. In the age of
disruptive technology, business success is constantly threatened by Volatility, Uncertainty,
Complexity and Ambiguity.

Factor Affecting Product Mix:-

1. Profitability:
Every business unit tries to maximize its profits. It makes certain changes in its product mix in a
way to realize positive impact on profitability. Company prefers to introduce more product lines
or product items in existing product lines to improve its profitability. Product mix is constantly
adjusted to realize more profits.

2. Objectives and Policy of Company:

Company frames its product mix to achieve its objective. Product mix is prepared, modified, or
changed in light of objectives. Therefore, addition, subtraction, or replacement of product lines
or product items is based on what a company wants to achieve. Product mix is prepared and
modified according to a company’s policy.

3. Production Capacity:
Marketing mix decisions, to a greater extent, depend on plant or production capacity of
company. Company will design its product mix in a way that optimum production capacity can
be utilized.

4. Demand:
Product mix decisions are taken with reference to demand. Marketer should study consumer
behaviour to find the popularity of products. Changes in consumers’ preference, fashion, interest,
habits, etc., must be reflected in product mix of company. Company, naturally, priories those
products which have more demand. In case of falling demand, company must drop poor products
gradually. Thus, product mix is constantly adjusted to meet consumer needs and wants.
5. Production Costs:
Product mix is widened or narrowed depending upon production costs. Company will prefer
those products, which can be produced within budgeted limit. Sometimes, for any reason, the
manufacturing costs for existing products rise, the company decides to drop such products to
reduce their production costs. It tries to balance selling price, profit margin, and production costs.

6. Government Rules and Restriction:

Every company produces such products, which are not restricted or banned by the governments.
Even, sometimes, company has to stop certain products or varieties when it is declared as illegal.
In same way, social and religious protests also play a vital role in this regard. Contemporary
legal framework has direct impact on size and composition of product mix.

7. Demand Fluctuation:
Apart from consumer behaviour, demand is also fluctuated due to many reasons. Especially,
demand is affected due to seasonal effect, non-availability of substitutes, increase in population,
war, draught, flood, or any other reason. In order to meet with the changed demand of certain
products, the company has to adjust its product mix.

8. Competition:
It is one of the powerful factors affecting product mix. A company formulates its product mix in
such a way that competitors can be strongly responded. Product mix strategy adopted by the
close competitors has direct impact on company’s product mix.

9. Impact of Other Elements of Marketing Mix:

Over and above these factors, other elements of marketing mix such as price, promotion, and
distribution are also equally important in designing product mix. Company tries to maintain
consistency among these all elements to carry out marketing activities effectively and efficiently.

10. Overall Business Condition or Condition of Economy:

Domestic as well as global economic conditions are also important considerations. Because of
liberalization and globalization, no business can dare underestimate macro picture of the world
economy. A company should keep in mind health of domestic economy with reference to the
world economy. This is more relevant when a company is involved in international trade.

Packaging:-
Packaging is the basic necessity of every product. Without packaging the product cannot
be stored or moved from one location to another. Packaging provides an identity to the
product.

Packaging: Packaging is the process of providing a protective and informative covering

to the product in such a way that it protects the product during material handling, storage,
and movement and also provides useful information to all the concerned parties about the
content of the package.
Packaging is the act of enclosing or protecting the product using a container to aid its
distribution, identification, storage, promotion, and usage.

According to Kotler –

Packing constitutes all the activities of designing and producing the container for a product.

In simple terms, packaging refers to designing and developing the wrapping material or container
around a product that helps to

 Identify and differentiate the product in the market,

 Transport and distribute the product,
 Store the product,
 Promote the product,
 Use the product properly.

Characteristics of Good Packaging

Packaging is more than just your product’s pretty face. Your package design may affect
everything from breakage rates in shipment to whether stores will be willing to stock it. These
are the characteristics of good packaging:

1. Labeling
2. Opening
3. Size
4. Durability

Labeling
You may be required to include certain information on the label of your product when it is
distributed in specific ways. For example, labels of food products sold in retail outlets must
contain information about their ingredients and nutritional value.

Opening
If your product is one that will be distributed in such a way that customers will want to–and
should be able to–sample or examine it before buying, your packaging will have to be easy to
open and to reclose. If, on the other hand, your product should not be opened by anyone other
than the purchaser–an over-the-counter medication, for instance- -then the packaging will have
to be designed to resist and reveal tampering.

Size
If your product must be shipped a long distance to its distribution point, then bulky or heavy
packaging may add too much to transportation costs.
Durability
Many products endure rough handling between their production point and their ultimate
consumer. If your distribution system can’t be relied upon to protect your product, your
packaging will have to do the job.

Functions of Packaging
There are many of the functions of packaging of the product performs. Some of the important
ones are mentioned below:

1. Protection
2. Unitize
3. Convenience
4. Contain

Protection
Protection of product during handling, movement and storage. Prevents any damage by avoiding
shifting, movement or collision of products inside the package during handling and movement.
There should be protection of the product from environmental effects such as heat, cold,
moisture etc. It should also be tamper proof to prevent any kind of adulteration.

Unitize
Unitize to convert the package in to a unit load. It helps in ease of storage and handling. There is
fuller utilization of storage space and also time and efforts can be saved during handling, loading
and unloading if the packages are of uniform size.

Convenience
Convenience the package should be convenient from logistical and consumer point of view.
Logistical convenience deals with handling and storage. Consumer convenience deals with easy
to open, easy to carry, etc.

Contain
Contain the package should be designed in such a way that it contains the predetermined volume
or quantity of the product comfortably.

Factors Affecting Packaging

Along with the functions mentioned above, there are some other factors which also affect the
packaging such as:

1. Purpose of packaging
2. Nature of Product
3. Distance
4. Material Handling System
5. Product Sensitivity
Purpose of packaging
Type of packaging will depend on the purpose of packaging. Packaging for logistical purpose
will be different from packaging for marketing (i.e. consumer) purpose.

Nature of Product
Packaging for different types of products will be different. Physical form of the product (i.e.
solid, liquid, gas) will decide which type of packaging would me more appropriate. Even for
product having same physical form say liquid, different types of packages e.g. cans, bottles, tetra
packs etc. will be available.

Distance
Packaging may also depend upon transportation distance. Longer distance would require tougher
as well as more protective packaging.

Material Handling System

Packaging should be decided keeping in mind what type of material handling system is to be
used. Mechanized and automated systems are capable of handling large-sized packages whereas
manual material handling will require the size of the packages to be smaller.

Product Sensitivity
Sensitivity of the product towards, physical environment and outside elements should also be
considered. Some products are more sensitive to temperature (heat and cold), moisture
(humidity), dust, chemicals, etc.

Types of Packaging

Primary Packaging

Primary packaging, also referred to as consumer packaging, is in direct contact with the product
and is intended for the customer to identify, gain product knowledge, and to aid product
consumption.

It’s the base packaging that emphasises both utility and appearance.

It is the primary layer like the plastic pouch, cardboard box, etc. containing the finished product,
that protects and preserves the finished product from contamination and tampering, while
including aesthetic elements that make the product stand out.

Besides aiding identification, differentiation, and consumption, primary packaging also acts as a
promotional tool to attract more customers at the point of sale by making the product look more
appealing.

Some examples of primary packaging are:

  Laminated pouches for dry fruits
 Plastic containers for fruits
 Tin cans for soft drinks
 Laminated tubes for beauty products
 Composite cans for chips
Often, removing the primary packaging of a product affects the product’s quality or attribute.

Secondary Packaging

Secondary packaging forms the second packaging layer that the customers don’t usually see. Its
main use is to group and hold together individual units of the product to deliver large quantities
of that product to the point of sale.

It collates smaller product units into a single pack and aids in inventory management (grouping
and identification) before the product is showcased to the customer.

Some examples of secondary packaging are:

 Plastic ring that holds soda cans together, and

 Cardboard box containing multiple individual boxes of cereal, etc.
Removing secondary packaging doesn’t affect the product’s quality or attributes.

Tertiary Packaging

Tertiary packaging, also referred to as bulk or transit packaging, is used to group a large quantity
of a particular product to transport it from point A to B.

The main objective of this packaging is to make it easier to transport heavy loads or large
quantities of a product easily and securely, while facilitating easy storage and handling.

Some examples of tertiary packaging are:

 Wooden pallets used in freight shipping

 A stretch-wrapped pallet containing a large quantity of secondary packaged goods.
Types of Packaging Material
These are the types of packaging material which mentioned below:

1. Glass
2. Metals
3. Rubbers
4. Plastics
5. Fibrous Materials
6. Foils, Films and Laminates
7. Blister Pack
8. Textile

Importance of Packaging

Importance of Packaging for the Seller

 Distribution: Good packaging makes it possible for the seller to transport the product
from the manufacturing unit to the final selling point and then to the customer. The seller
uses different packaging for the same – transport packaging to transport the products and
consumer packaging to aid the consumer in consuming the product.
 Storage: Warehousing comes with its own risks of product spoilage, spillage, and
mishandling. Proper packaging helps the seller store and assorts the products better.
 Promotion: Packaging forms a vital marketing element that the brand uses to
differentiate the product using attractive, colourful, and visually appealing packages and
informs the buyer about the product’s performance, features, and benefits.
 Safety: Good packaging aids in product safety before it reaches the final consumer. For
example, a Tetra Pak prevents the milk from getting spoilt before its expiry date.

Importance of Packaging for the Buyer

 Identification: Packaging and labeling help the customers identify the product and
differentiate it from other products in the market.
 Usage: Often, packaging, like that of a toothpaste, that forms a part of the product aids in
its usage and consumption.
 Safety: It also protects the consumer from the dangers that the product comes with. For
example, an acid bottle protects the user from getting acid burns.

Packaging Advantages

Packaging comes with its own set of advantages. These are:

 It protects the product from any physical harm and damage.

 It helps increasing sales as it adds to the aesthetic value of the product.
 It keeps the product hygiene by preventing adulteration and hampering.
 Some specialized packaging also prevents the products from going bad.

Packaging Disadvantages

While packaging forms an important element of a product, it comes with its own disadvantages.
These are:
  Packaging can be deceptive and may trick the customer into getting a wrong perception
of the product.
 It adds to the cost. Packaging can add to the cost of the product, which the customer
eventually bears.
 It adds to the waste that can turn hazardous, especially if it is plastic.

Labeling:-
Labelling is the display of label in a product. A label contains information about a product on its
container, packaging, or the product itself. It also has warnings in it. For e.g. in some products, it
is written that the products contain traces of nuts and shouldn’t be consumed by a person who’s
allergic to nuts. The type and extent of information that must be imparted by a label are governed
by the relevant safety and shipping laws.
Labeling is also an important part of the brand of the product and the company. It helps the
product stand out in the market, and identifies it as a part of a particular brand. This is important
in the era of high and intense competition.

The part of the product or a tag which is attached directly or indirectly and carries information
about the product or the seller is known as a Label. Labels provide information to the
customer. The process of putting identification marks on the package is known as Labelling.
Labelling includes information like name of the products, expiry and manufacturing date,
instruction for use, weight, price, etc.

Characteristics of highly effective Label

Labels are one of the most efficient marketing tools. In any product, the label is the factor that
interacts with the customers and can make a good impact. Not all the labels designed are
successful and fulfill the purpose. Therefore, there are some of the generic characteristics that
make a label highly effective. Some of such characteristics are;

 A label needs to be clear in communicating the desired or expected information.

 Attractive label always holds attention of the users. For communicating something, one
should be engaging first. For attractive label, marketers need to focus on font, color,
graphics, shape and size of label.
 Users prefer labels for getting some information hence; a label should include the
expected and essential information.
 A highly effective label needs to be credible/legible which means, it should not only
contain information of the product but also of producers.
 Adaptability is another characteristic which means the context; content, design; texture
etc. should be integrated and adapted across the product. For instance, the labels in juice
brands are different as per its taste i.e. Mango juice has yellow dominance and apple juice
has red color dominance.
Types of Labelling

There are four distinct forms of labelling.

Brand label

It is a label that contains information about the brand to which a product belongs. The brand
label denotes the product’s brand name, trademark or logo and does not include any other
information outside the brand name. Some examples of brand labels include L.G., Samsung,
Whirlpool, and Raymond.

Grade Label

A grade label denotes the quality or grade level of a product. Such labels describe the features of
the product and the organization uses such labels to categorize their items based on their quality.
For example, the USHA is brand manufacture of various fan qualities such as deluxe, continental,
and prime. The labels in USHA brand classify their products in Grade label.

Example of Grade Label

Descriptive label

A descriptive label is one that indicates significant information about a product. Such label
includes product ingredients, distinct uses, instructions, precautions for usage,
producers information, date of manufacture, weight, size, and value of product.

Example of Descriptive Label

Informative label

Informative labels contain a lot of information and provide specific details regarding the product.
It differs from descriptive labeling in that it provides detailed instructions on how to use the
product and how to take care of it. These labels include recipes, thorough clearing directions, and
other similar information.

Functions of Labels:
 Describe the product and specify its contents: Since the customers cannot meet each and
every customer personally, labelling is used to communicate and share information about
the product to the customer. All the information related to the product such as content,
price, instructions to use, etc., is printed on the product by the manufacturer. For
example, labels of ready-to-eat food products have a complete description of how to serve
the food.

 Identify the products and brands: Identification of products from various types of
products available in the market can be easily done with the help of labelling. A label helps
a customer to identify the product. For example, Amul products can be easily identified
 because of the Amul girl printed on the label.

 Helps in grading: Products can be graded with the help of label. For example, Amul milk
is of different types: Amul full-toned milk, Amul Full cream, Amul Gold, etc.

 Promotes sales: Label attracts customers and promotes sales. They also help in
promotional schemes, like 25% extra, Buy 2 get 1 free, 4 kg + 2 kg free, etc.

 Provides information required by law/ legal requirements: Legal requirements are also
fulfilled with the help of labelling as it is a legal compulsion to print batch number,
content, MRP, weight, volume, etc. There is also a legal compulsion to provide statutory
warning in case of certain products, like cigarettes, liquor, etc. Appropriate safety warnings
should be mentioned on the labels of hazardous goods. For example, the Danger (Skull
and Crossbones) symbol is mentioned on the label of rat kill.

Pricing:-

Pricing is a process of fixing the value that a manufacturer will receive in the exchange of
services and goods. Pricing method is exercised to adjust the cost of the producer’s offerings
suitable to both the manufacturer and the customer. The pricing depends on the company’s
average prices, and the buyer’s perceived value of an item, as compared to the perceived value of
competitors product.
While fixing the cost of a product and services the following point should be considered:

 The identity of the goods and services

 The cost of similar goods and services in the market
 The target audience for whom the goods and services are produces
 The total cost of production (raw material, labour cost, machinery cost, transit, inventory
cost etc).
 External elements like government rules and regulations, policies, economy, etc.,

Price is the amount of money expected and given in exchange for a good or service.

Objectives of Pricing:

 Survival- The objective of pricing for any company is to fix a price that is reasonable for
the consumers and also for the producer to survive in the market. Every company is in
danger of getting ruled out from the market because of rigorous competition, change in
customer’s preferences and taste. Therefore, while determining the cost of a product all
the variables and fixed cost should be taken into consideration. Once the survival phase is
over the company can strive for extra profits.
 Expansion of current profits-Most of the company tries to enlarge their profit margin
by evaluating the demand and supply of services and goods in the market. So the pricing
is fixed according to the product’s demand and the substitute for that product. If the
demand is high, the price will also be high.
  Ruling the market- Firm’s impose low figure for the goods and services to get hold of
large market size. The technique helps to increase the sale by increasing the demand and
leading to low production cost.
 A market for an innovative idea- Here, the company charges a high price for their
product and services that are highly innovative and use cutting-edge technology. The
price is high because of high production cost. Mobile phone, electronic gadgets are a few
examples.

Features of Pricing

(a) One Price Policy:

Under this policy, all the customers who are purchasing a particular quantity at a particular time
are charged the same price i.e., the price is fixed.

(b) Flexible Price Policy:

Under this policy different buyers are charged different prices for the same quantity purchased.
The difference in pricing depends on bargaining power of buyer, his paying capacity, personal
relationship between buyer and seller and many other such factors.

(c) Meeting Competition Policy:

The companies adopting this policy adjust their prices according to that of the competitors.

(d) Under the Market Policy:

It is a policy in which the company always keeps its prices less than those prevailing in the
market.

(e) Bait Pricing Policy:

The marketer keeps low priced and high priced goods. He attracts the consumer by showing low
priced goods. Once the customer gets attracted towards the low priced goods, he is told about its
drawbacks and is encouraged to purchase the other high priced product.

(f) Price Lining Policy:

The various products are priced according to their quality standards. The products may be
classified as good better and best.

(g) Skimming Pricing Policy:

It is a policy, which aims at extracting maximum profits from the market and as such the
manufacturer keeps high prices.

(h) Uniform Delivery Pricing Policy:

It is one in which the firm bears full transportation cost irrespective of location of buyers.

(i) Production Point Pricing Policy:

It is one in which the firm quotes ex-factory price. It does not bear the transportation cost. Such a
policy may be ‘ex-factory’ or ‘free on rail’ (F.O.R.).
(j) Zonal Delivery Pricing Policy:
It is one where the firm divides the country into different zones and quotes uniform prices for
each zone.

Pricing Strategies:-

Customer value-based pricing

The idea behind customer value-based pricing is to price a product based on the value it brings
to customers rather than the cost of producing it. Thus, the pricing decision starts by
examining customer value - how much the product is worth to customers. The steps of value-
based pricing are as follows:

1. Understand customer value perception and needs.

2. Set target price to match perceived value.
3. Analyse costs.
4. Create a product that matches the target value at the target price.
Within value-based pricing, there are two further pricing approaches.

The first is good-value pricing.

Good-value pricing involves offering a quality product and good service at a reasonable price.
Cost-based pricing

The second main pricing strategy is cost-based pricing. Cost-based pricing involves setting
prices based on the costs incurred by producing and marketing the product. This pricing method
sets a floor price - a minimum price a company should charge to recover costs. Three types of
costs considered for this approach are:

 Fixed costs (overhead),

 Variable costs,
 Total costs.
One common cost-based pricing method is cost-plus pricing.

Cost-plus pricing involves adding a pre-set mark-up to the cost of producing a product (e.g.
adding a 20% mark-up).

Mark Up Pricing:-

Markup refers to the difference between the selling price of a good or service and its cost. It is
expressed as a percentage above the cost. In other words, it is the premium over the total cost of
the good or service that provides the seller with a profit.

Markup pricing refers to a pricing strategy wherein the price of a product or service is
determined by calculating the sum of the products and a percentage of it as a markup.
Markup Percentage Formula

The formula for calculating markup percentage can be expressed as:

For example, if a product costs $10 and the selling price is $15, the markup percentage would be
($15 – $10) / $10 = 0.50 x 100 = 50%.

Markup percentage = (sales price - unit cost) / (unit cost) ) x 100

Competitor Based Pricing:-

Competition-based pricing involves setting prices based on competitors' pricing strategies.

To use this approach, a company has to examine its competitors and their strategies, including:

 Competitors' market offering,

 Customers' value perception of competitors' offerings,
 Competitors' current pricing strategies,
 How strong/weak competitors are,
 Whether there is a niche/underserved market.

Market Based Pricing:-

Market-based pricing strategy involves a process in which the product prices are fixed after studying the
costs of the similar products available in the market.

It Includes:-

 Actions that competitors take

 Consumers’ ability to pay
 Consumers’ willingness to pay
 Product features
 Input costs
 Market conditions
 Account segments
 Trade margins
 Production and distribution costs
 Variable costs
Types of Pricing:

1. Price skimming - involves

setting a high price initially as
the product is introduced to the
market to maximise revenues.
Due to the high price, the
company makes fewer sales at a
higher profit margin.
Eventually, as new product
variations and models are
introduced, the company will
decrease the original product's
price.
2. Penetration pricing - involves setting a low initial price to attract many buyers and
increase market share. As prices are low, profit margins may also be lower, but due to the
high number of sales, the company's costs will fall, allowing it to decrease its prices even
further.

Product mix pricing strategies

On the other hand, product mix strategies are used as sometimes companies have to change their
pricing when a product is part of a product mix. The five product mix pricing types are as
follows (see Figure 2 below):

1. Product line pricing - involves determining the price steps to be set between different
products in a product line. These price steps should be determined based on cost and
value differences.
2. Optional product pricing - involves setting prices for optional or additional products
that come with the original product, also known as add-ons and accessories. Examples
include specific types of rims when purchasing a car.
3. Captive product pricing - is similar to optional-product pricing, except the products are
accompanied by another product—for example, ink cartridges for a printer or filters for a
water filtering jug.
4. Byproduct pricing - involves determining a price for the byproducts derived from the
production of the main product. This can help the company recover costs and even make
extra profits. For example, farmers can turn their vegetable resin into biodegradable
plastic.¹
5. Product bundle pricing - involves combining various products into a product bundle
and setting the bundle price lower than what the price would be for buying each product
individually.

Price adjustment strategies

Companies often have to adjust their pricing strategies with situational and environmental
changes. However, this is not a simple task as there are seven different types of price adjustment
strategies:
1. Discount/allowance pricing - including cash discounts (e.g. 5% discount if the bill is
paid within the first ten days) or trade allowances (e.g. a discount if you return your old
machine when buying a new one).
2. Promotional pricing - adding a discount to a product to increase sales volume (e.g. a
20% discount limited time offer).
3. Segmented pricing - charging different prices for different geographical, product, or
customer segments (e.g. students get 20% off).
4. Geographical pricing - setting different prices for customers in different countries or
cities. For example, a standard Netflix subscription in the UK is £10.99; in Egypt, it is
EGP 165 (around £7.20).²
5. Psychological pricing - involves considering the psychology behind pricing. Customers
may be willing to pay a higher price for a product perceived as good quality.
6. Dynamic pricing - constantly monitoring and adjusting prices to match customer
demand and needs.
7. International pricing - setting prices in different countries based on market factors such
as economic conditions, political conditions, legislation, etc.