UNIT 2: PRODUCT MIXUNIT 2: PRODUCT MIX

ContentsContents

2.0 Aims and Objectives2.0 Aims and Objectives

2.1 Introduction2.1 Introduction

2.2 Meaning of a Product2.2 Meaning of a Product

2.32.3 Levels of a ProductLevels of a Product

2.42.4 Product HierarchyProduct Hierarchy

2.52.5 Product ClassificationProduct Classification

2.5.12.5.1 DurabilityDurability

2.5.22.5.2 TangibilityTangibility

2.5.32.5.3 UseUse

2.62.6 Product Planning and DevelopmentProduct Planning and Development

2.72.7 Product Line and Product MixProduct Line and Product Mix

2.7.12.7.1 Meaning of Product LineMeaning of Product Line

2.7.22.7.2 Meaning of Product MixMeaning of Product Mix

2.82.8 Product Mix StrategiesProduct Mix Strategies

2.8.12.8.1 Positioning the ProductPositioning the Product

2.8.22.8.2 Product Mix ExpansionProduct Mix Expansion

2.8.32.8.3 Alteration of Existing ProductAlteration of Existing Product

2.8.42.8.4 Product Mix ContractionProduct Mix Contraction

2.92.9 Product Identification Product Identification

2.9.12.9.1 BrandBrand

2.9.1.12.9.1.1 Meaning of a BrandMeaning of a Brand

2.9.1.22.9.1.2 Brand Name SelectionBrand Name Selection

2.9.1.32.9.1.3 Brand StrategyBrand Strategy

2.9.1.42.9.1.4 Advantage of BrandingAdvantage of Branding

2.9.22.9.2 PackagingPackaging

2.9.2.12.9.2.1 Meaning of PackagingMeaning of Packaging

2.9.2.22.9.2.2 Advantages of PackagingAdvantages of Packaging

2.9.2.32.9.2.3 Criticism of PackagingCriticism of Packaging

2.9.32.9.3 LabelingLabeling

2.9.3.12.9.3.1 Meaning of LabelingMeaning of Labeling

2.9.3.22.9.3.2 Types of LabelingTypes of Labeling

2.9.3.32.9.3.3 Function of LabelingFunction of Labeling

2.9.3.42.9.3.4 Contents of a LabelContents of a Label

2.102.10 New Product adoption and Diffusion New Product adoption and Diffusion

2.10.12.10.1 Stages in Adoption ProcessStages in Adoption Process

2.10.22.10.2 Adopter CategoriesAdopter Categories

2.112.11 Product Lifecycle Product Lifecycle

2.11.12.11.1 Characteristics of Each StageCharacteristics of Each Stage

2.11.22.11.2 Marketing Strategies through out the PLCMarketing Strategies through out the PLC

2.11.2.12.11.2.1 Introduction StageIntroduction Stage

2.11.2.22.11.2.2 Growth Stage Growth Stage

2.11.2.32.11.2.3 Maturity StageMaturity Stage

2.11.2.42.11.2.4 Decline StageDecline Stage

2.122.12 Summary Summary

2.132.13 Answer to Check Your Progress Exercise Answer to Check Your Progress Exercise

2.0 AIMS AND OBJECTIVES2.0 AIMS AND OBJECTIVES

After you study this unit, you will be able to explain,After you study this unit, you will be able to explain,

Meaning of product in its fullest senseMeaning of product in its fullest sense

Classification of consumer and business productsClassification of consumer and business products

Steps in product development processSteps in product development process

How can a company build and manage its product mix and product lines?How can a company build and manage its product mix and product lines?

The nature and importance of brandsThe nature and importance of brands

How can a company make better brand decisions?How can a company make better brand decisions?

How can packaging and labeling be used as marketing tools?How can packaging and labeling be used as marketing tools?

Characteristics of a good brand nameCharacteristics of a good brand name

2.1 INTRODUCTION2.1 INTRODUCTION

Product is the first and most important element of the marketing mix. Product strategy calls forProduct is the first and most important element of the marketing mix. Product strategy calls for

making coordinated decisions on product mixes, product lines, brands, packaging and labeling.making coordinated decisions on product mixes, product lines, brands, packaging and labeling.

Most companies sell more than are product. Their product mix can be classified according toMost companies sell more than are product. Their product mix can be classified according to

width, length, depth and consistency. These four dimensions are the tools for developing thewidth, length, depth and consistency. These four dimensions are the tools for developing the

company’s marketing strategy and deciding which products lines to grow, maintain, harvest andcompany’s marketing strategy and deciding which products lines to grow, maintain, harvest and

divest. divest.

Strong products shard be grown or maintained weak and/or unprofitable lines shard be harvestedStrong products shard be grown or maintained weak and/or unprofitable lines shard be harvested

or divested. To analyze a product line and decide how many resources shard be invested in thator divested. To analyze a product line and decide how many resources shard be invested in that

line, product line manages need to look at the line’s sales and profit and market profile.line, product line manages need to look at the line’s sales and profit and market profile.

A company can change the product component of its marketing mix by lengthening its productA company can change the product component of its marketing mix by lengthening its product

via line stretching or line filling. By modernizing its products; by featuring certain products andvia line stretching or line filling. By modernizing its products; by featuring certain products and

by proving its products to eliminate the least profitable. by proving its products to eliminate the least profitable.

2.2 MEANING OF A PRODUCT2.2 MEANING OF A PRODUCT

A product is anything that can be offered to satisfy a need or want.A product is anything that can be offered to satisfy a need or want.

A product consists of as many as there components: A product consists of as many as there components: Physical good(s) service(s) and idea (s).Physical good(s) service(s) and idea (s).

Products that are marketed include physical goods (automobiles, books etc), service (concerts, Products that are marketed include physical goods (automobiles, books etc), service (concerts,

professional advice), persons (Mr A, B, C), places (Langano, Sodere), organizations. (Health professional advice), persons (Mr A, B, C), places (Langano, Sodere), organizations. (Health

association, social clubs(, and ideas (family planning, safe driving) etc.association, social clubs(, and ideas (family planning, safe driving) etc.

2.3 FIVE LEVELS OF A PRODUCT2.3 FIVE LEVELS OF A PRODUCT

In planning its market offering, the marketer needs to think through five levels of the product.In planning its market offering, the marketer needs to think through five levels of the product.

Each levels adds more customer value, and the five constitute of a customer value hierarchy. TheEach levels adds more customer value, and the five constitute of a customer value hierarchy. The

most fundamental levels is the core benefit: the fundamental service or benefits that the customermost fundamental levels is the core benefit: the fundamental service or benefits that the customer

is really buying. I.e., a Hotel gust is buying "rest and sleep." Marketers must see themselves asis really buying. I.e., a Hotel gust is buying "rest and sleep." Marketers must see themselves as

benefit providers.benefit providers.

At the second level, the marketer has to tern the core benefit into a basic product. Thus a hotelAt the second level, the marketer has to tern the core benefit into a basic product. Thus a hotel

room includes a bed, bathroom, towels, desk, dresser and closet.room includes a bed, bathroom, towels, desk, dresser and closet.

At the third level, the marketer prepares an expected product, a set of attributes and conditionsAt the third level, the marketer prepares an expected product, a set of attributes and conditions

that buyer normally expect and agree to when they purchase this product. For example, hotelthat buyer normally expect and agree to when they purchase this product. For example, hotel

guests expect a clean bed, fresh towels, working lumps, and a relative degree of guiet. Sinceguests expect a clean bed, fresh towels, working lumps, and a relative degree of guiet. Since

most hotels can meet this minimum expectation, the traveler normally will have no preferencemost hotels can meet this minimum expectation, the traveler normally will have no preference

and will settle for whichever hotel is most convenient or least expensive. and will settle for whichever hotel is most convenient or least expensive.

At the fourth level, the marketer prepares an augmented product that meets the customers' desiresAt the fourth level, the marketer prepares an augmented product that meets the customers' desires

beyond their expectations. A Hotel can augment its product by including a remote controlbeyond their expectations. A Hotel can augment its product by including a remote control

television set, fresh flowers, rapid check-in, express check-out, fine dining and room service andtelevision set, fresh flowers, rapid check-in, express check-out, fine dining and room service and

so on.so on.

Today's competition essentially takes place at the product augmentation level. (In less developedToday's competition essentially takes place at the product augmentation level. (In less developed

countries, competition takes place mostly at the expected product level). Product augmentationcountries, competition takes place mostly at the expected product level). Product augmentation

leads the marketer to look at the buyers total consumption system: the way the purchaser of aleads the marketer to look at the buyers total consumption system: the way the purchaser of a

product performs the total task of whatever it is that he or she is trying to accomplish when usingproduct performs the total task of whatever it is that he or she is trying to accomplish when using

the product. In this way, the marketer will recognize many opportunities for augmenting its offerthe product. In this way, the marketer will recognize many opportunities for augmenting its offer

is a competitively effective way. According to Luitl:is a competitively effective way. According to Luitl:

The new competition is not between what companies produce in their factories, but betweenThe new competition is not between what companies produce in their factories, but between

what they add to their factory output in the form of packaging, services, advertising, customerwhat they add to their factory output in the form of packaging, services, advertising, customer

advise, financing, delivery arrangements, warehousing, and other things that people value.advise, financing, delivery arrangements, warehousing, and other things that people value.

However, something should be noted about product augmentation strategy. First, eachHowever, something should be noted about product augmentation strategy. First, each

augmentation costs the company. The marketer has to ask whether customers will pay enough toaugmentation costs the company. The marketer has to ask whether customers will pay enough to

cover the extra cost. Second, augmented benefits soon become expected benefits. Thus hotelcover the extra cost. Second, augmented benefits soon become expected benefits. Thus hotel

guests today expect a remote control television set and other amenities in their room. This meansguests today expect a remote control television set and other amenities in their room. This means

that competitors will have to search for still further features and benefits to add to their offer.that competitors will have to search for still further features and benefits to add to their offer.

Third, as companies raise the price of there augmented product. Some companies along side theThird, as companies raise the price of there augmented product. Some companies along side the

growth of five hotels.growth of five hotels.

At the fifth level stands the potential products, which encompasses all the augmentations andAt the fifth level stands the potential products, which encompasses all the augmentations and

transformations that the product might ultimately undergo in the future. While the augmentedtransformations that the product might ultimately undergo in the future. While the augmented

product describes what is included in the product today, the potential product points to itsproduct describes what is included in the product today, the potential product points to its

possible evolution. Here is where companies search aggressively for new ways to satisfypossible evolution. Here is where companies search aggressively for new ways to satisfy

customers and distinguish their offer. The recent emergence of all site hotels where the guestcustomers and distinguish their offer. The recent emergence of all site hotels where the guest

occupies a set of rooms represents an innovative transformation of the traditional hotel product.occupies a set of rooms represents an innovative transformation of the traditional hotel product.

Some of the most successful companies add benefit to their offering that not only satisfyingSome of the most successful companies add benefit to their offering that not only satisfying

customers but also surprise and delight them. Delighting is a matter of exceeding the normalcustomers but also surprise and delight them. Delighting is a matter of exceeding the normal

expectations and desires with in anticipated benefits. Thus the hotel guests find candy on theexpectations and desires with in anticipated benefits. Thus the hotel guests find candy on the

pillow, or a bowl of fruit, or a video recorder with optional video tapes.pillow, or a bowl of fruit, or a video recorder with optional video tapes.

2.4 PRODUCT HIERARCHY2.4 PRODUCT HIERARCHY

Each product is related to certain products. The product hierarchy stretches from basic needs toEach product is related to certain products. The product hierarchy stretches from basic needs to

particular items that satisfy these needs. We can identify seven levels of the product hierarchy.particular items that satisfy these needs. We can identify seven levels of the product hierarchy.

Here we define and illustrate them for life insurance.Here we define and illustrate them for life insurance.

1.1. Need family:Need family: The core needs that underlies the existence of a product family. I.e., The core needs that underlies the existence of a product family. I.e.,

security.security.

2.2. Product family:Product family: All the product classes that can satisfy a core need with reasonable All the product classes that can satisfy a core need with reasonable

effectiveness. I.e., savings and incomeeffectiveness. I.e., savings and income

3.3. Product class:Product class: A groupA group of products within the product family recognized as having aof products within the product family recognized as having a

certain functional coherence. I.e., financial instrumentscertain functional coherence. I.e., financial instruments

4.4. Product line:Product line: A group of products within a product class that are closely related becauseA 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 throughthey perform a similar function are sold to the same customer groups, are marketed through

the same channels or fall within given price ranges. I.e., Life insurance.the same channels or fall within given price ranges. I.e., Life insurance.

5.5. Product type:Product type: AA group of items within a product line that share one of several possiblegroup of items within a product line that share one of several possible

forms of the product. I.e., Term life.forms of the product. I.e., Term life.

6.6. Brand:Brand: The name, associated with one or more items in the product line, that is used toThe name, associated with one or more items in the product line, that is used to

identify the source or character of the items. I.e., Prudentialidentify the source or character of the items. I.e., Prudential

7.7. Item:Item: (also called stock keeping until or product variant). A distinct unit with in a brand(also called stock keeping until or product variant). A distinct unit with in a brand

or product line that is distinguishable by size, price, appearance, or some other attribute. I.e.,or product line that is distinguishable by size, price, appearance, or some other attribute. I.e.,

Prudential renewable term life insurance.Prudential renewable term life insurance.

The other terms are frequently used with respect to the product hierarchy. A product system is aThe other terms are frequently used with respect to the product hierarchy. A product system is a

group of diverse but related items that function in a compatible manner. A product mix (productgroup of diverse but related items that function in a compatible manner. A product mix (product

assortment) is the set of all products and items that a particular seller offers for sale to buyers.assortment) is the set of all products and items that a particular seller offers for sale to buyers.

2.5 PRODUCT CLASSIFICATION2.5 PRODUCT CLASSIFICATION

Marketers have traditionally classified products on the basis of varying products characteristics:Marketers have traditionally classified products on the basis of varying products characteristics:

durability, tangibility, and use (consumer or industrial). Each product type has an appropriatedurability, tangibility, and use (consumer or industrial). Each product type has an appropriate

marketing mix strategy.marketing mix strategy.

2.5.1 Durability & Tangibility2.5.1 Durability & Tangibility

Products can be classified into three groups, according to their durability and tangibility.Products can be classified into three groups, according to their durability and tangibility.

2.5.1.1 Durability2.5.1.1 Durability

Products based up on Durability could be classifies as Durable and Non-Durable goodsProducts based up on Durability could be classifies as Durable and Non-Durable goods

Non-durable goodsNon-durable goods

Non-durable goods are tangible goods that normally are consumed in one or few uses. i.e. soap,Non-durable goods are tangible goods that normally are consumed in one or few uses. i.e. soap,

beet etc. since these goods are consumed quickly and purchased frequently, the appropriatebeet etc. since these goods are consumed quickly and purchased frequently, the appropriate

strategy is to make them available in many locations, charge only a small mark up, and advertisestrategy is to make them available in many locations, charge only a small mark up, and advertise

heavily to induce trail and build preference.heavily to induce trail and build preference.

2.5.1.22.5.1.2 Durable GoodsDurable Goods

Durable goods are tangible goods that normally service many uses. i.e. refrigerators, machineDurable goods are tangible goods that normally service many uses. i.e. refrigerators, machine

tools, clothing etc.tools, clothing etc.

Durable products normally require more personal selling and service, command a higher margin,Durable products normally require more personal selling and service, command a higher margin,

an require more seller guarantees.an require more seller guarantees.

2.5.2 Tangibility2.5.2 Tangibility

Products further more could be classified based upon tangibility. On this basis we could find:Products further more could be classified based upon tangibility. On this basis we could find:

Tangible and Intangible ProductsTangible and Intangible Products

Intangible Product (Service)Intangible Product (Service)

Intangible products (Service) are those products that cannot be touched, seen, felt etc.Intangible products (Service) are those products that cannot be touched, seen, felt etc.

Services are intangible, inseparable, variable, and perishable. So as a result they normallyServices are intangible, inseparable, variable, and perishable. So as a result they normally

require more quality control, supplier credibility, and adaptability. e.g. repairs, professionalrequire more quality control, supplier credibility, and adaptability. e.g. repairs, professional

services.services.

Tangible Products Tangible Products

Tangible products are those products that can be seen ,touched ,felt etc. E.g Refrigerator, Car, Tangible products are those products that can be seen ,touched ,felt etc. E.g Refrigerator, Car,

StereoStereo

2.5.3 Use2.5.3 Use

Products further could be classified based up on their use. Accordingly they will be classified as: Products further could be classified based up on their use. Accordingly they will be classified as:

Consumer Goods and Industrial GoodsConsumer Goods and Industrial Goods

Consumer -Goods classificationConsumer -Goods classification

Consumers buy a vast array of goods. These goods can be classified on the basis of consumerConsumers buy a vast array of goods. These goods can be classified on the basis of consumer

shopping habits. They can be classified as convenience, shopping, specialty and unsoughtshopping habits. They can be classified as convenience, shopping, specialty and unsought

goods.goods.

Convenience goods:Convenience goods: are goods that the customers usually purchase frequently, immediately, and are goods that the customers usually purchase frequently, immediately, and

with a minimum of efforts, i.e. soaps, newspapers, etc.with a minimum of efforts, i.e. soaps, newspapers, etc.

Convenience goods can be further divided into staples, impulse goods, and emergency goods.Convenience goods can be further divided into staples, impulse goods, and emergency goods.

StaplesStaples are goods that customers purchase on a regular basis. I.e., Tooth paste. are goods that customers purchase on a regular basis. I.e., Tooth paste. ImpulseImpulse goodsgoods

are purchased on impulse, without any planning or search effort. These goods are usuallyare purchased on impulse, without any planning or search effort. These goods are usually

displayed widely. Thus candy bars and magazines are placed next to check out counters becausedisplayed widely. Thus candy bars and magazines are placed next to check out counters because

shoppers may not have thought of buying them until they spot them. shoppers may not have thought of buying them until they spot them.

EmergenceEmergence goodsgoods are purchased when a need is urgent – umbrella during a rainstorm, boots are purchased when a need is urgent – umbrella during a rainstorm, boots

during the first winter snow term. Manufacturers of emergence goods will place them in manyduring the first winter snow term. Manufacturers of emergence goods will place them in many

outlets so as to capture the sale when the customer needs them.outlets so as to capture the sale when the customer needs them.

Shopping goods:Shopping goods: are goods that the customer, in the process of selection and purchase, are goods that the customer, in the process of selection and purchase,

characteristically compares on such bases as suitability, quality, price, and style. i.e. furniture,characteristically compares on such bases as suitability, quality, price, and style. i.e. furniture,

clothing, cars & major appliances etc. Shopping goods can be divided into homogeneous goodsclothing, cars & major appliances etc. Shopping goods can be divided into homogeneous goods

and heterogeneous goods. The buyer sees homogeneous shopping goods as similar in quality butand heterogeneous goods. The buyer sees homogeneous shopping goods as similar in quality but

different enough in price to justify shopping comparisons. But in shopping for clothing, furnituredifferent enough in price to justify shopping comparisons. But in shopping for clothing, furniture

and other heterogeneous shopping goods, product features are often more important to theand other heterogeneous shopping goods, product features are often more important to the

consumer than the price. The seller of heterogeneous shopping goods must therefore carry a wideconsumer than the price. The seller of heterogeneous shopping goods must therefore carry a wide

assortment to satisfy individual tastes and must have well-trained sales people to provideassortment to satisfy individual tastes and must have well-trained sales people to provide

information and advise to customers. information and advise to customers.

Specialty goods: Specialty goods: are goods with unique characteristics and/or brand identification for which aare goods with unique characteristics and/or brand identification for which a

significant group of buyers is habitually willing to make a special purchasing effort i.e. specificsignificant group of buyers is habitually willing to make a special purchasing effort i.e. specific

brands and types of fancy goods, cars stereo components, photographic equipment etc.brands and types of fancy goods, cars stereo components, photographic equipment etc.

Unsought goods:Unsought goods: are goods that the consumer does not know about or knows about but does not are goods that the consumer does not know about or knows about but does not

normally think of buying? New products, such as smoke detectors, food processors, arenormally think of buying? New products, such as smoke detectors, food processors, are

unsought goods until the consumer is made aware of them through advertising. The classicunsought goods until the consumer is made aware of them through advertising. The classic

examples of known but unsought goods are life insurance, cemetery plots, gravestones, &examples of known but unsought goods are life insurance, cemetery plots, gravestones, &

encyclopedias etc.encyclopedias etc.

Industrial goods classificationIndustrial goods classification

Organizations buy a vast array of goods and services. Industrial goods can be classified in termsOrganizations buy a vast array of goods and services. Industrial goods can be classified in terms

of how they enter the production process and their relative costliness. They are classified as:of how they enter the production process and their relative costliness. They are classified as:

material & parts, capital items, and supplies and business services.material & parts, capital items, and supplies and business services.

Materials and parts Materials and parts

Are goods that enter the manufacturer's product completely? They fall into two classes: rawAre goods that enter the manufacturer's product completely? They fall into two classes: raw

materials, and manufactured materials and parts. materials, and manufactured materials and parts.

Raw materials fall into two major classes:Raw materials fall into two major classes:

- Farm products - wheat, cotton, livestock, fruits etc, and - Farm products - wheat, cotton, livestock, fruits etc, and

- Natural products - fish, lumber, crude petroleum etc. - Natural products - fish, lumber, crude petroleum etc.

Manufactured materials and parts divided into two categories:Manufactured materials and parts divided into two categories:

- Component materials - Iron, yarn , cement, wires and - Component materials - Iron, yarn , cement, wires and

- Component parts - small mortars, tires, casting etc. - Component parts - small mortars, tires, casting etc.

Capital Item:Capital Item:

Are long-lasting goods that facilitate developing and/or managing the finished product? TheyAre long-lasting goods that facilitate developing and/or managing the finished product? They

include installation and equipment.include installation and equipment.

Installations consist of building (i.e. factories & offices) and equipment (i.e. generators, drillInstallations consist of building (i.e. factories & offices) and equipment (i.e. generators, drill

presses, computers, elevators). Installations are major purchases. They are usually broughtpresses, computers, elevators). Installations are major purchases. They are usually brought

directly from the producer, with the typical sale preceded by a long negotiation period.directly from the producer, with the typical sale preceded by a long negotiation period.

Equipment comprises portable factory equipment and tools (hand tools, life trucks) and officeEquipment comprises portable factory equipment and tools (hand tools, life trucks) and office

equipment (e.g. personal computers, desks). These types of equipment do not become part of theequipment (e.g. personal computers, desks). These types of equipment do not become part of the

finished product.finished product.

Supplies and Business Services are short-lasting goods and services that facilitate developingSupplies and Business Services are short-lasting goods and services that facilitate developing

and/or managing the finished product.and/or managing the finished product.

Supplies are of two kinds: operating supplies (e.g. lubricants, coal, writing paper, pencils) andSupplies are of two kinds: operating supplies (e.g. lubricants, coal, writing paper, pencils) and

maintenance and repair items (paint, nails, brooms): supplies are the equivalent of conveniencemaintenance and repair items (paint, nails, brooms): supplies are the equivalent of convenience

goods in the industrial field; they are usually purchased with a minimum effort on a straight re-goods in the industrial field; they are usually purchased with a minimum effort on a straight re-

buy basis.buy basis.

Business services include maintenance and repair services (e.g. window cleaning, typewriterBusiness services include maintenance and repair services (e.g. window cleaning, typewriter

repair etc.) and Business advisory service (e.g. legal, management, consulting, advertising)repair etc.) and Business advisory service (e.g. legal, management, consulting, advertising)

maintenance services are often provided by small producers, and repair services are oftenmaintenance services are often provided by small producers, and repair services are often

available from the manufacturers of the original equipment.available from the manufacturers of the original equipment.

Business advisory services are usually purchased in new task-buying situations, and theBusiness advisory services are usually purchased in new task-buying situations, and the

industrial buyer will choose the supplier on the basis of the supplier's reputation and people. industrial buyer will choose the supplier on the basis of the supplier's reputation and people.

2.6 PRODUCT PLANNING AND DEVELOPMENT2.6 PRODUCT PLANNING AND DEVELOPMENT

Guided by a company's new-product strategy, a new product is best developed through a series Guided by a company's new-product strategy, a new product is best developed through a series

of six stages. of six stages.

Major steps in development process Major steps in development process

IdentifyIdentify thethe strategicstrategic role ofrole of newnew productsproducts

11 22 22 33 44 55IdeaIdea

generationgenerationScreening ofScreening of

ideasideas

BusinessBusiness AnalysisAnalysis

PrototypePrototype developmentdevelopment

MarketMarket TestTest

CommercializationCommercialization

The formal development of new products provides benefits such as higher success rates,The formal development of new products provides benefits such as higher success rates,

increased customer satisfaction, and greater achievement of time, quality, and cost objectives forincreased customer satisfaction, and greater achievement of time, quality, and cost objectives for

new products.new products.

Stages of the new product development process Stages of the new product development process

1. Generating new product ideas1. Generating new product ideas

New product development starts with an idea. A system must be designed for stimulating newNew product development starts with an idea. A system must be designed for stimulating new

ideas within an organization and then acknowledging and reviewing them promptly. Customersideas within an organization and then acknowledging and reviewing them promptly. Customers

should also be encouraged to propose innovations.should also be encouraged to propose innovations.

2. Screening ideas2. Screening ideas

At this stage, new product ideas are evaluated to determine which one warrant further study.At this stage, new product ideas are evaluated to determine which one warrant further study.

Typically, a management team screens the pool of ideas.Typically, a management team screens the pool of ideas.

3. Business Analysis3. Business Analysis

A surviving idea is expanded in to a concrete business proposal. This means management (a)A surviving idea is expanded in to a concrete business proposal. This means management (a)

identifies product features (b) estimates a market demand, competition, and the productsidentifies product features (b) estimates a market demand, competition, and the products

profitability (c) establishes a program to develop the product, and (d) assigns responsibility forprofitability (c) establishes a program to develop the product, and (d) assigns responsibility for

further study of the products feasibility further study of the products feasibility

4. Prototype development 4. Prototype development

If the result of the business analysis is feasible, then a prototype (or trail model) of the product isIf the result of the business analysis is feasible, then a prototype (or trail model) of the product is

developed. In the cases of goods, a small quantity of the trail model is manufactured todeveloped. In the cases of goods, a small quantity of the trail model is manufactured to

designated specifications. designated specifications.

5. Market tests 5. Market tests

Unlike the internal tests conducted during prototype development, this test involves actualUnlike the internal tests conducted during prototype development, this test involves actual

customers. A new tangible product may be given to a sample of people for use in theircustomers. A new tangible product may be given to a sample of people for use in their

households (in the case of consumer good) or their organization (a business good). Followinghouseholds (in the case of consumer good) or their organization (a business good). Following

this trail, consumers are asked to evaluate the product. Consumers use tests are less practical forthis trail, consumers are asked to evaluate the product. Consumers use tests are less practical for

services due to their intangible nature.services due to their intangible nature.

This stage in new product development often entails test marketing, in which the product isThis stage in new product development often entails test marketing, in which the product is

placed on sale in a limited geographic area. Results, including sales and repeat purchases, areplaced on sale in a limited geographic area. Results, including sales and repeat purchases, are

monitored by the company that developed the product and perhaps by competitors as well. monitored by the company that developed the product and perhaps by competitors as well.

6. Commercialization 6. Commercialization

In this stage, full-scale production and marketing programs are planned and finally,In this stage, full-scale production and marketing programs are planned and finally,

implemented, up to this point in development, management has virtually complete control overimplemented, up to this point in development, management has virtually complete control over

the product. the product.

2.7 PRODUCT LINE AND PRODUCT MIX 2.7 PRODUCT LINE AND PRODUCT MIX

2.7.1 Meaning of Product Line2.7.1 Meaning of Product Line

A broad group of products, intended for essentially similar uses and having similar physical A broad group of products, intended for essentially similar uses and having similar physical

characteristics, constitutes a product line. characteristics, constitutes a product line.

2.7.2 Meaning of Product Mix2.7.2 Meaning of Product Mix

The set of all products offered for sale by a company is a called a product mix.The set of all products offered for sale by a company is a called a product mix.

The structure of a product mix has both breadth & depth. Its breadth is measured by the numberThe structure of a product mix has both breadth & depth. Its breadth is measured by the number

of product lines carried, its depth by the variety of sizes, colors, and models offered with in eachof product lines carried, its depth by the variety of sizes, colors, and models offered with in each

product line.product line.

2.8 PRODUCT MIX STRATEGIES2.8 PRODUCT MIX STRATEGIES

To be successful in marketing, producers and middlemen need carefully planned strategies for To be successful in marketing, producers and middlemen need carefully planned strategies for

managing their product mixes.managing their product mixes.

The major product mix strategies include:The major product mix strategies include:

- Positioning - Positioning - Alteration- Alteration

- Expansion - Expansion - Contraction- Contraction

2.8.1 Positioning the Product2.8.1 Positioning the Product

Positioning means developing the image that a product projects in relation to competitivePositioning means developing the image that a product projects in relation to competitive

products and to the firm's other products. A company must try to identify the specific way it canproducts and to the firm's other products. A company must try to identify the specific way it can

differentiate its products to obtain a competitive advantage.differentiate its products to obtain a competitive advantage.

Differentiation is the act of designing a set of meaningful differences to distinguish theDifferentiation is the act of designing a set of meaningful differences to distinguish the

company’s offering from competitors offering.company’s offering from competitors offering.

How exactly can a company differentiate its market offering from competitors? Here we willHow exactly can a company differentiate its market offering from competitors? Here we will

examine how a market offering can be differentiated along time dimensions: - product, services,examine how a market offering can be differentiated along time dimensions: - product, services,

personnel, channel or image.personnel, channel or image.

Product DifferentiationProduct Differentiation

Differentiation of physical products takes place along a continuous. At one extreme we findDifferentiation of physical products takes place along a continuous. At one extreme we find

highly standards products that allow little variation. At the other extreme are products capable ofhighly standards products that allow little variation. At the other extreme are products capable of

high differentiation, such as automobiles, commercial holdings, and furniture. Here the sellerhigh differentiation, such as automobiles, commercial holdings, and furniture. Here the seller

faces an abundance of design parameters. The main product differentiations are features,faces an abundance of design parameters. The main product differentiations are features,

performance, conformance, durability, reliability, reparability, style and design.performance, conformance, durability, reliability, reparability, style and design.

1.1. Features: -Features: -

Features are characteristics that supplement the products basic function. The starting point ofFeatures are characteristics that supplement the products basic function. The starting point of

feature differentiation is a stripped down, or “bare bones”, version of the product. The companyfeature differentiation is a stripped down, or “bare bones”, version of the product. The company

can create additional version by adding extra features. Thus automobile manufacturers can offercan create additional version by adding extra features. Thus automobile manufacturers can offer

optional features, such as electric windows, air bags, automatic transmission, and airoptional features, such as electric windows, air bags, automatic transmission, and air

conditioning. Each features has a chance of capturing the fancy of additional buyers.conditioning. Each features has a chance of capturing the fancy of additional buyers.

How can a company identify and select appropriate features? One answer is for the company toHow can a company identify and select appropriate features? One answer is for the company to

contact recent buyers and ask them a series of questions. How do you like the product? Any badcontact recent buyers and ask them a series of questions. How do you like the product? Any bad

features? Good features? Are there any features that could be added that would improve yourfeatures? Good features? Are there any features that could be added that would improve your

satisfaction? What are they? How much would you pay for each feature? How do you feel aboutsatisfaction? What are they? How much would you pay for each feature? How do you feel about

each of several features that other customers suggested?each of several features that other customers suggested?

This research will provide the company with a long list of potential features. The next task is toThis research will provide the company with a long list of potential features. The next task is to

decide which features one worth adding.decide which features one worth adding.

2.2. Performance QualityPerformance Quality

Most products are established initially at one of four performance levels, low, average, high andMost products are established initially at one of four performance levels, low, average, high and

superior.superior.

Performance quality refers to the level at which the products primary characteristics operate. Performance quality refers to the level at which the products primary characteristics operate.

The important question here is: Does higher product performance produce higher profitability?The important question here is: Does higher product performance produce higher profitability?

Quality’s link to profitability does not mean that the firms should always design the highestQuality’s link to profitability does not mean that the firms should always design the highest

performance level possible. There are diminishing returns to level increasing performance, inperformance level possible. There are diminishing returns to level increasing performance, in

that fewer buyers are willing to pay for it. The manufacturer must design a performance levelthat fewer buyers are willing to pay for it. The manufacturer must design a performance level

appropriate to the target market and competitor’s performance levels.appropriate to the target market and competitor’s performance levels.

A company must also decide how to manage performance quality through time. Three strategiesA company must also decide how to manage performance quality through time. Three strategies

are available here. The first, where the manufacture continuously improves the product, oftenare available here. The first, where the manufacture continuously improves the product, often

produces the highest return and market share.produces the highest return and market share.

The second strategy is to maintain product quality at a given level. The third strategy is to reduceThe second strategy is to maintain product quality at a given level. The third strategy is to reduce

product quality through time. Some companies cut quality to offset rising costs, hoping theproduct quality through time. Some companies cut quality to offset rising costs, hoping the

buyers will not notice any difference. Others reduce the quality deliberated by in order tobuyers will not notice any difference. Others reduce the quality deliberated by in order to

increase this current profits, although this course of action often hurt this long run profitability.increase this current profits, although this course of action often hurt this long run profitability.

3.3. Conformance QualityConformance Quality

Buyers expect products to have a high conformance quality.Buyers expect products to have a high conformance quality.

Conformance quality is the degree to which all the produced units are identical and meet theConformance quality is the degree to which all the produced units are identical and meet the

promised target specifications.promised target specifications.

Suppose a Porsche 933 is designed to accelerate to 50 miles an hour within 10 seconds. If everySuppose a Porsche 933 is designed to accelerate to 50 miles an hour within 10 seconds. If every

Porsche 933 coming off the assembly line does this, the model is said to have high conformancePorsche 933 coming off the assembly line does this, the model is said to have high conformance

quality. However, If 933s vary greatly in their acceleration time, they have low conformance onquality. However, If 933s vary greatly in their acceleration time, they have low conformance on

this criterion. The problem with low conformance is that the product will felt to deliver on itsthis criterion. The problem with low conformance is that the product will felt to deliver on its

promises to many buyers.promises to many buyers.

4. Durability: - 4. Durability: -

Durability is a very important product attribute to most buyers. Durability is a very important product attribute to most buyers.

Durability is a measure of the product’s expected operating life under natural and/or stressfulDurability is a measure of the product’s expected operating life under natural and/or stressful

conditions.conditions.

Buyers will generally pay more for products that have more durability. However, this rule isBuyers will generally pay more for products that have more durability. However, this rule is

subject to some qualifications. The extra price must not be exclusive. Further more, the productsubject to some qualifications. The extra price must not be exclusive. Further more, the product

must not be subject to technological obsolescence, in which case the buyer may not pay more formust not be subject to technological obsolescence, in which case the buyer may not pay more for

longer-lined products.longer-lined products.

5. Reliability5. Reliability

Buyers normally will pay a premium for product with more reliability.Buyers normally will pay a premium for product with more reliability.

Reliability is a measure of the probability that a product will not manufacture or fail within aReliability is a measure of the probability that a product will not manufacture or fail within a

specified time period.specified time period.

Buyers want to avoid the high costs of product breakdowns and repair time.Buyers want to avoid the high costs of product breakdowns and repair time.

6. Reparability: -6. Reparability: -

Buyers prefer products that are easy to repair. Buyers prefer products that are easy to repair.

* Reparability is a measure of the ease of fixing a product that manufactures or fails.* Reparability is a measure of the ease of fixing a product that manufactures or fails.

Thus an automobile made with standard parts that are easily replaced has high reparability. IdealThus an automobile made with standard parts that are easily replaced has high reparability. Ideal

reparability would exist if users could fix the product themselves with little or no cost or timereparability would exist if users could fix the product themselves with little or no cost or time

lost. The buyer might simply remove the defective part and insert a replacement part.lost. The buyer might simply remove the defective part and insert a replacement part.

7. Style: -7. Style: -

Buyers are normally willing to pay a premium for products that are attractively styled. StyleBuyers are normally willing to pay a premium for products that are attractively styled. Style

describes the product’s looks and feel to the buyer.describes the product’s looks and feel to the buyer.

Many car buyers pay a premium for jaguar automobiles because of this extraordinary look, evenMany car buyers pay a premium for jaguar automobiles because of this extraordinary look, even

though Jaguar had in the past a poor record of reliability.though Jaguar had in the past a poor record of reliability.

Style has the advantage of creating product distinctiveness that is difficult to copy. Under styleStyle has the advantage of creating product distinctiveness that is difficult to copy. Under style

differentiation, we must include packaging as a styling weapon, especially in food products,differentiation, we must include packaging as a styling weapon, especially in food products,

cosmetics, toiletries, and small-consumer appliances. cosmetics, toiletries, and small-consumer appliances.

The package provides the buyer’s first encounter with the product and is capable of turning theThe package provides the buyer’s first encounter with the product and is capable of turning the

buyer on or off.buyer on or off.

8. Design8. Design

As competitions intensify, designs will offer one of the most patent ways to differentiate andAs competitions intensify, designs will offer one of the most patent ways to differentiate and

position a company’s products and services.position a company’s products and services.

Design is the totality of features that affect how a products look and functions in terms ofDesign is the totality of features that affect how a products look and functions in terms of

customer requirements.customer requirements.

Design is particularity important in making and marketing desirable equipment, apparel, retailDesign is particularity important in making and marketing desirable equipment, apparel, retail

services and packaged goods. All of the qualities we’ve discussed under the meaning “Productservices and packaged goods. All of the qualities we’ve discussed under the meaning “Product

differentiation are design parameters. The design has to figure out how much to invest in featuredifferentiation are design parameters. The design has to figure out how much to invest in feature

development, performance, conformance, reliability, reparability, style and so forth.development, performance, conformance, reliability, reparability, style and so forth.

Marketing executives can choose from a variety of positioning strategies. Sometimes theyMarketing executives can choose from a variety of positioning strategies. Sometimes they

decided to use more than one for particular products. Several types of positioning includes decided to use more than one for particular products. Several types of positioning includes

i) Positioning in relation to a competitor i) Positioning in relation to a competitor

ii) Positioning in relation to a product class or attributeii) Positioning in relation to a product class or attribute

iii) Positioning by price and qualityiii) Positioning by price and quality

iv) Positioning in relation to a target marketiv) Positioning in relation to a target market

2.8.2 Product Mix Expansion2.8.2 Product Mix Expansion

Product mix expansion is accomplished by increasing the depth with in a particular line and/orProduct mix expansion is accomplished by increasing the depth with in a particular line and/or

the number of lines a firm offers to consumers.the number of lines a firm offers to consumers.

When a company adds a similar item to an existing product line with the same brand name, isWhen a company adds a similar item to an existing product line with the same brand name, is

termed as line extension.termed as line extension.

Another way to expand the product mix, referred to as mix extension. Under a mix extension theAnother way to expand the product mix, referred to as mix extension. Under a mix extension the

company is to add a new product line to its present assortment. company is to add a new product line to its present assortment.

The new line may be related or unrelated to current products. Furthermore, it may carry one ofThe new line may be related or unrelated to current products. Furthermore, it may carry one of

the company's existing brand names or may be given a entirely new name.the company's existing brand names or may be given a entirely new name.

The product strategies of trading up and trading down involve a change in product positioningThe product strategies of trading up and trading down involve a change in product positioning

and an expansion of the product line. and an expansion of the product line.

Trading up means adding a higher price product to a line to attract a broader market. Also theTrading up means adding a higher price product to a line to attract a broader market. Also the

seller intends that the new product's prestige will help the sale of its existing lower priceseller intends that the new product's prestige will help the sale of its existing lower price

products.products.

Trading down means adding a lower-price product to a company's product line. The firmTrading down means adding a lower-price product to a company's product line. The firm

expects that people who cannot afford the original higher price product or who see it as tooexpects that people who cannot afford the original higher price product or who see it as too

expensive will buy the new lower-price one.expensive will buy the new lower-price one.

2.8.3 Alteration of Existing Products2.8.3 Alteration of Existing Products

Product alteration is often improving an established product. Product alteration can be moreProduct alteration is often improving an established product. Product alteration can be more

profitable and less risky than developing a new one. Redesigning the product itself can sustainprofitable and less risky than developing a new one. Redesigning the product itself can sustain

its appeal or even initiate its renaissance. Alternatively, especially for consumer goods, theits appeal or even initiate its renaissance. Alternatively, especially for consumer goods, the

product itself is not changed but its packaging is altered. product itself is not changed but its packaging is altered.

2.8.4 Product Mix Contraction2.8.4 Product Mix Contraction

Another product strategy, product mix contraction, is carried out either by eliminating an entireAnother product strategy, product mix contraction, is carried out either by eliminating an entire

line or by simplifying the assortment with in a lien. Thinner and/or shorter product lines orline or by simplifying the assortment with in a lien. Thinner and/or shorter product lines or

mixes can weed out low-profit and unprofitable products. The intended result of product-mixmixes can weed out low-profit and unprofitable products. The intended result of product-mix

contraction is higher profits form fewer products. contraction is higher profits form fewer products.

As firms find that they have an unmanageable number of products or that various terms or lines As firms find that they have an unmanageable number of products or that various terms or lines

are unprofitable, or both, product-mix pruning is likely. are unprofitable, or both, product-mix pruning is likely.

2.9 PRODUCT IDENTIFICATION2.9 PRODUCT IDENTIFICATION

2.9.1 Brand2.9.1 Brand

In developing a marketing strategy for individual products, the seller has to confront theIn developing a marketing strategy for individual products, the seller has to confront the

branding decision, branding is a major issue in product strategy. On the one hand, developing abranding decision, branding is a major issue in product strategy. On the one hand, developing a

branded product requires a great deal of long-term investment spending, especially frombranded product requires a great deal of long-term investment spending, especially from

advertising, promotion, and packaging.advertising, promotion, and packaging.

Perhaps the most distinctive skill of professional marketers is their ability to create, maintain,Perhaps the most distinctive skill of professional marketers is their ability to create, maintain,

protect, and enhance brands, marketers say that "Branding is the art and cornerstone ofprotect, and enhance brands, marketers say that "Branding is the art and cornerstone of

marketing." The American marketing association defines a brand as follows: -marketing." The American marketing association defines a brand as follows: -

2.9.1.1 Meaning of a Brand2.9.1.1 Meaning of a Brand

"A Brand is a name, term, sign, symbol, or design, or a combination of them, intended to identify"A Brand is a name, term, sign, symbol, or design, or a combination of them, intended to identify

the goods or services of one seller or group of sellers and to differentiate them from those ofthe goods or services of one seller or group of sellers and to differentiate them from those of

competitors".competitors".

A brand is essentially a seller's promise to consistently deliver a specific set of features, benefits,A brand is essentially a seller's promise to consistently deliver a specific set of features, benefits,

and services to the buyers.and services to the buyers.

A brand name is the part of brand consisting of words, letters, and/or numbers that can beA brand name is the part of brand consisting of words, letters, and/or numbers that can be

vocalized. A trademark is defined as a brand that is given legal protection. Therefore, trademarkvocalized. A trademark is defined as a brand that is given legal protection. Therefore, trademark

is a legal term meaning the words, names, or symbols that the law designates as trademarks. is a legal term meaning the words, names, or symbols that the law designates as trademarks.

2.9.1.2 Brand Name Selection2.9.1.2 Brand Name Selection

A good name can add greatly to a products' success. However, finding the best brand name is aA good name can add greatly to a products' success. However, finding the best brand name is a

difficult task. It begins with a careful review of the product and its benefits, the target marketdifficult task. It begins with a careful review of the product and its benefits, the target market

and proposed marketing strategies.and proposed marketing strategies.

Desirable qualities for a brand name includes:-Desirable qualities for a brand name includes:-

It should suggest something about the product's benefits & qualitiesIt should suggest something about the product's benefits & qualities

It should be easy to pronounce, recognize, and remember. The brand name should be It should be easy to pronounce, recognize, and remember. The brand name should be

distinctivedistinctive

It should be capable of registration and legal protectionIt should be capable of registration and legal protection

Once, chosen, the brand name must be protected. Many times try to build a brand name that willOnce, chosen, the brand name must be protected. Many times try to build a brand name that will

eventually become identified with the product category.eventually become identified with the product category.

Brand sponsor: -Brand sponsor: -

A manufacture has certain sponsorship option; as illustrated below, A manufacture has certain sponsorship option; as illustrated below,

i)i) Manufacturer's brandManufacturer's brand

The product may be launched as a manufacturer's brand (or national brand), as when theThe product may be launched as a manufacturer's brand (or national brand), as when the

manufacturer sells its output under its own brand names.manufacturer sells its output under its own brand names.

ii)ii) Private brand:Private brand:

The manufacturer may sell to reseller who give it a private brand (also called a storeThe manufacturer may sell to reseller who give it a private brand (also called a store

brand or distributor brand).brand or distributor brand).

iii)iii) Licensed brand:-Licensed brand:-

The manufacturer may produce some output under its own name and some underThe manufacturer may produce some output under its own name and some under

distributors labels. distributors labels.

2.9.1.3 Brand Strategy2.9.1.3 Brand Strategy

A company has four choices when it comes to brand strategy, which are as follows:-A company has four choices when it comes to brand strategy, which are as follows:-

i) Line extension: i) Line extension:

Line extension occur when a company introduces additional items in the same product category Line extension occur when a company introduces additional items in the same product category

under the same brand name, usually with features, such as new flavors, forms, colors, added under the same brand name, usually with features, such as new flavors, forms, colors, added

ingredients, package sizes, and so on. ingredients, package sizes, and so on.

ii) Brand Extensionii) Brand Extension

A company may decide to use an existing brand name to launch a product in a new category.A company may decide to use an existing brand name to launch a product in a new category.

Brand extension strategy offers a number of advantages. A well-regarded brand name gives theBrand extension strategy offers a number of advantages. A well-regarded brand name gives the

new product instant recognition and earlier acceptance. It enables the company to enter newnew product instant recognition and earlier acceptance. It enables the company to enter new

product categories more easily. product categories more easily.

i.e. Sony puts its name on most of its electronic products and instantly establish a connection ofi.e. Sony puts its name on most of its electronic products and instantly establish a connection of

the new products high quality.the new products high quality.

iii) Multi brands:iii) Multi brands:

A company will often introduce additional brands in the same product category. There areA company will often introduce additional brands in the same product category. There are

various motives for doing this. Sometimes the company is trying to establish different featuresvarious motives for doing this. Sometimes the company is trying to establish different features

and/or appeal to different buying motives. and/or appeal to different buying motives.

A multi branding strategy also enables the company to lock up more distributors shelf space andA multi branding strategy also enables the company to lock up more distributors shelf space and

to protect its major brand by setting up flanker brands. to protect its major brand by setting up flanker brands.

For example, Seiko establishes different brand names for its higher priced (Seiko LaSalle) andFor example, Seiko establishes different brand names for its higher priced (Seiko LaSalle) and

lower-priced watch (pulsar) to protect its flanks.lower-priced watch (pulsar) to protect its flanks.

iv) New brandiv) New brand

When a company launches products in a new category, it may find that none of its current brandWhen a company launches products in a new category, it may find that none of its current brand

names are appropriate.names are appropriate.

v) Co-brands v) Co-brands

A rising phenomenon is the appearance of co-branding (also called dual branding), is which twoA rising phenomenon is the appearance of co-branding (also called dual branding), is which two

or more well-known brands are combined in an offer. Each brand sponsor expects that the otheror more well-known brands are combined in an offer. Each brand sponsor expects that the other

brand name will strengthen brand preference or purchase intention. In the case of co-packagedbrand name will strengthen brand preference or purchase intention. In the case of co-packaged

products, each brand hopes it might be reaching a new audience by associating with the otherproducts, each brand hopes it might be reaching a new audience by associating with the other

brand. brand.

2.9.1.4 Advantages of Branding2.9.1.4 Advantages of Branding

1.1. The brand name makes it easier for the seller to process orders and track downThe brand name makes it easier for the seller to process orders and track down

problems. Further more, he seller find it easier to trace the order if it is misshaped, or toproblems. Further more, he seller find it easier to trace the order if it is misshaped, or to

determine why the beer was rancid if consumes complain.determine why the beer was rancid if consumes complain.

2.2. The seller's brand name and trademark provide legal protection of unique productThe seller's brand name and trademark provide legal protection of unique product

features, which competitors would otherwise be likely to copy. features, which competitors would otherwise be likely to copy.

3.3. Branding gives the seller the opportunity to attract a loyal and profitable set ofBranding gives the seller the opportunity to attract a loyal and profitable set of

customers. Brand loyalty gives sellers some protection from competition and greater controlcustomers. Brand loyalty gives sellers some protection from competition and greater control

in planning their marketing programin planning their marketing program

4.4. Branding helps the seller segment markets.Branding helps the seller segment markets.

5.5. Strong brands helps build the corporate image, making it easier to launch new brands Strong brands helps build the corporate image, making it easier to launch new brands

and gain acceptance by distributors and consumers.and gain acceptance by distributors and consumers.

There is evidence that distributors want manufacturers; brand names because brand makes theThere is evidence that distributors want manufacturers; brand names because brand makes the

product easier to handle, hold production to certain quality standards, strengthen buyer'sproduct easier to handle, hold production to certain quality standards, strengthen buyer's

preferences, and make it easier to identify suppliers. Consumers want brand names to help thempreferences, and make it easier to identify suppliers. Consumers want brand names to help them

identify quality differences and shop more efficiently. identify quality differences and shop more efficiently.

2.9.2 Packaging2.9.2 Packaging

Even after a product is developed and branded, strategies must still be developed for otherEven after a product is developed and branded, strategies must still be developed for other

product related aspects of the marketing mix. One such product feature, and a critical one forproduct related aspects of the marketing mix. One such product feature, and a critical one for

some products, is packaging, which consists of all activities of designing and producing thesome products, is packaging, which consists of all activities of designing and producing the

container or wrapper. Thus packaging is a business function and a package is an item.container or wrapper. Thus packaging is a business function and a package is an item.

2.9.2.1 Meaning of Packaging 2.9.2.1 Meaning of Packaging

Packaging can be defined as follows:Packaging can be defined as follows:

"Packaging includes the activities of designing and producing the container or wrapper for a"Packaging includes the activities of designing and producing the container or wrapper for a

product."product."

The container or wrapper is called the package. The package might include upto three levels ofThe container or wrapper is called the package. The package might include upto three levels of

material. Thus, old spice, after shave lotion is in bottle (primary package) that is in a cardboardmaterial. Thus, old spice, after shave lotion is in bottle (primary package) that is in a cardboard

box (secondary package) that is in a corrugated box (shipping package) containing six-dozenbox (secondary package) that is in a corrugated box (shipping package) containing six-dozen

boxes of old spice.boxes of old spice.

In recent times, packaging has become a potent marketing tool. Well-designed packages canIn recent times, packaging has become a potent marketing tool. Well-designed packages can

create convenience value for the consumer and promotional value for the producer.create convenience value for the consumer and promotional value for the producer.

A product must be packaged to meet the needs of wholesaling and retailing middlemen. ForA product must be packaged to meet the needs of wholesaling and retailing middlemen. For

instance, a packages size and shape must be suitable for displaying and stacking the product ininstance, a packages size and shape must be suitable for displaying and stacking the product in

the store.the store.

2.9.2.2 Advantages of Packaging2.9.2.2 Advantages of Packaging

Packaging and the resulting package are intended to serve several vital purposes. Packaging and the resulting package are intended to serve several vital purposes.

i) Protect the product on its way to the consumer:-i) Protect the product on its way to the consumer:-

A package protects products during shipment. Furthermore, it can prevent tampering withA package protects products during shipment. Furthermore, it can prevent tampering with

products, notably medications and food products, in the warehouse or the retail store.products, notably medications and food products, in the warehouse or the retail store.

ii) Provide protection after the product is purchased:-ii) Provide protection after the product is purchased:-

Compared with bulk (that is unpackaged) items, packaged goods generally are more convenient,Compared with bulk (that is unpackaged) items, packaged goods generally are more convenient,

cleaner, and less susceptible to lossescleaner, and less susceptible to losses form evaporation, spilling and spoilage.form evaporation, spilling and spoilage.

iii) Be part of a company's trade marketing program:-iii) Be part of a company's trade marketing program:-

A product must be packaged to meet the needs of wholesaling and retailing middlemen. ForA product must be packaged to meet the needs of wholesaling and retailing middlemen. For

instance, a packages size and shape must be suitable for displaying and stacking the product ininstance, a packages size and shape must be suitable for displaying and stacking the product in

the store.the store.

iv) Be part of a company's consumer marketing program:-iv) Be part of a company's consumer marketing program:-

Packaging helps identify a product and thus may prevent substitution of competitive product. AtPackaging helps identify a product and thus may prevent substitution of competitive product. At

the point of purchase such as supermarket aisle - the package can serve as a 'silent sales person'the point of purchase such as supermarket aisle - the package can serve as a 'silent sales person'

Ultimately, a package may become a product's differential advantage, or at least a significant partUltimately, a package may become a product's differential advantage, or at least a significant part

of it. In the case of convenience goods and operating suppliers buyers feel that are well-knownof it. In the case of convenience goods and operating suppliers buyers feel that are well-known

brand is about as good as another. Thus a feature of the package - reusable jar, self-containedbrand is about as good as another. Thus a feature of the package - reusable jar, self-contained

applicator etc, might differentiate these types of a product.applicator etc, might differentiate these types of a product.

In general, packaging provides the following advantages:-In general, packaging provides the following advantages:-

i) It physically protect the products from damage, theft, pilferagei) It physically protect the products from damage, theft, pilferage

ii) It helps in identifying the products ii) It helps in identifying the products

iii) It encourages impulse buying iii) It encourages impulse buying

iv) It is used as an advertising media iv) It is used as an advertising media

v) It serves as an information toolv) It serves as an information tool

vi) It serves as a sales toolvi) It serves as a sales tool

When packing, the following points should be considered:When packing, the following points should be considered:

i) Product description:-i) Product description:-

The package is expected to show not only what the product is, but also what it does in terms ofThe package is expected to show not only what the product is, but also what it does in terms of

benefits it gives the promotional message. This could be done using words or pictures.benefits it gives the promotional message. This could be done using words or pictures.

ii) Product image-ii) Product image-

The packaging material ought to match the image of the product inside. Highly prestigiousThe packaging material ought to match the image of the product inside. Highly prestigious

products and inferior products should be packed differently.products and inferior products should be packed differently.

iii) Product valueiii) Product value

The pack is often designed to make its contents look more than they really are in terms of value aThe pack is often designed to make its contents look more than they really are in terms of value a

small value item looks huge in certain packages.small value item looks huge in certain packages.

iv) Shelf displayiv) Shelf display

It is also important products are packed in such a way that they occupy small space, they areIt is also important products are packed in such a way that they occupy small space, they are

protected from shocks damages, their shelf life increases, they are protected from pilferage.protected from shocks damages, their shelf life increases, they are protected from pilferage.

2.9.2.3 Criticism of Packaging2.9.2.3 Criticism of Packaging

Packaging in the public eye today, largely because of environmental issues, specific concerns Packaging in the public eye today, largely because of environmental issues, specific concerns are:are:

i) Packaging depletes natural resources:i) Packaging depletes natural resources:

This concern has been addressed through the use of recycled materials in packaging. A point inThis concern has been addressed through the use of recycled materials in packaging. A point in

favor of effective packaging is that it minimizes spoilage, thereby reducing a form of resourcefavor of effective packaging is that it minimizes spoilage, thereby reducing a form of resource

waste.waste.

ii) Packaging is too expensiveii) Packaging is too expensive

Even it seemingly simple packaging, such as for soft drinks, as much as one-half of theEven it seemingly simple packaging, such as for soft drinks, as much as one-half of the

production cost is for the container. Still, effective packaging reduces transportation costs andproduction cost is for the container. Still, effective packaging reduces transportation costs and

spoilage losses.spoilage losses.

iii) Packaging is deceptiveiii) Packaging is deceptive

Government regulations plus greater integrity on the part of business firms regarding packagingGovernment regulations plus greater integrity on the part of business firms regarding packaging

have alleviated these concerns to some extent.have alleviated these concerns to some extent.

iv)iv) Used and discarded packaging contributes significantly to the solid waste problem Used and discarded packaging contributes significantly to the solid waste problem etc. etc.

Marketing executives are challenged to address these criticisms. At the same time, they mustMarketing executives are challenged to address these criticisms. At the same time, they must

retain or even enhance the positive features of packaging, such as product protection, consumerretain or even enhance the positive features of packaging, such as product protection, consumer

convenience, and marketing support.convenience, and marketing support.

2.9.3 Labeling2.9.3 Labeling

Labeling which is closely related to packaging is another product feature that requiresLabeling which is closely related to packaging is another product feature that requires

managerial attention. managerial attention.

2.9.3.1 Meaning of Labeling2.9.3.1 Meaning of Labeling

A label is a part of a product that carries information about the product and the seller. A labelA label is a part of a product that carries information about the product and the seller. A label

may be part of the package, or it may be a tag attached to the product. Obviously there is a closemay be part of the package, or it may be a tag attached to the product. Obviously there is a close

relationship among labeling, packaging, and branding.relationship among labeling, packaging, and branding.

2.9.3.2 Types of Labels2.9.3.2 Types of Labels

Labels fall into three primary kinds:Labels fall into three primary kinds:

i) A brand label:-i) A brand label:-

It is simply the brand name applied to the product or package.It is simply the brand name applied to the product or package.

ii) A descriptive labelii) A descriptive label

It gives objectives information about the products' use construction, care, performance, and/orIt gives objectives information about the products' use construction, care, performance, and/or

other pertinent features ingredients and nutritional contents.other pertinent features ingredients and nutritional contents.

iii) A grade labeliii) A grade label

It identifies the products judged quality with a letter, number, or word. Canned peaches areIt identifies the products judged quality with a letter, number, or word. Canned peaches are

grade labeled A,B,C, corn and wheat are grade labeled 1 & 2.grade labeled A,B,C, corn and wheat are grade labeled 1 & 2.

Brand labeling is an acceptable form of labeling, but it does not supply sufficient information to Brand labeling is an acceptable form of labeling, but it does not supply sufficient information to

a buyer. Descriptive labels provide more product information but not necessarily all that is a buyer. Descriptive labels provide more product information but not necessarily all that is

needed or desired by a consumer in making a purchase decision. needed or desired by a consumer in making a purchase decision.

2.9.3.3 Functions of Labeling2.9.3.3 Functions of Labeling

Labeling performs several functions. Some of which are illustrated below:-Labeling performs several functions. Some of which are illustrated below:-

The label identifies the product or brand The label identifies the product or brand

The label might also describe several things about the product, which made it, where itThe label might also describe several things about the product, which made it, where it

was made, when it was made, its contents, how it is to be used, and how to use it safely.was made, when it was made, its contents, how it is to be used, and how to use it safely.

The label might promote the product through attractive graphics In general the label mayThe label might promote the product through attractive graphics In general the label may

contain: contain:

Other want-satisfaction product features may contain product quality, color, design, andOther want-satisfaction product features may contain product quality, color, design, and

warranty.warranty.

2.9.3.4 Contents of a Label2.9.3.4 Contents of a Label

Brand nameBrand name

Name & address of manufacturerName & address of manufacturer

Weights, measures, contentsWeights, measures, contents

Direction of proper useDirection of proper use

Precaution on safety usePrecaution on safety use

Recipe on food products Recipe on food products

Nutritional guidelinesNutritional guidelines

Wholesale & retail pricesWholesale & retail prices

IngredientsIngredients

Manufacturing & expiry dateManufacturing & expiry date

Gross & net weightGross & net weight

2.10 NEW PRODUCT ADOPTION AND DIFFUSION2.10 NEW PRODUCT ADOPTION AND DIFFUSION

The likelihood of achieving success with a new product, especially a really innovative product isThe likelihood of achieving success with a new product, especially a really innovative product is

increased if management understands the adoption and diffusion process for that product. Onceincreased if management understands the adoption and diffusion process for that product. Once

again, we are stressing that organizations needs to understand how consumers behave. Theagain, we are stressing that organizations needs to understand how consumers behave. The

adoption process is the set of successive decisions on individual makes before accepting anadoption process is the set of successive decisions on individual makes before accepting an

innovation.innovation.

Diffusion of a new product is the process by which an innovation spreads throughout a socialDiffusion of a new product is the process by which an innovation spreads throughout a social

system over time. system over time.

By understanding these processes, an organization can gain insight into how a product is or is notBy understanding these processes, an organization can gain insight into how a product is or is not

accepted by consumers and which groups of consumers are likely to buy a product soon after it isaccepted by consumers and which groups of consumers are likely to buy a product soon after it is

introduced, later on or never. This knowledge of consumer behavior can be valuable in designingintroduced, later on or never. This knowledge of consumer behavior can be valuable in designing

an effective marketing programan effective marketing program

2.10.1 Stages in Adoption Process2.10.1 Stages in Adoption Process

A prospective user goes through six stages in the adoption process – deciding whether toA prospective user goes through six stages in the adoption process – deciding whether to

purchase something new:purchase something new:

1.1. Awareness: individual is exposed to the innovation. Becomes a prospectAwareness: individual is exposed to the innovation. Becomes a prospect

2.2. Interest: prospect is interested enough to seek informationInterest: prospect is interested enough to seek information

3.3. Evaluation: prospect judges the advantages and disadvantages of a productEvaluation: prospect judges the advantages and disadvantages of a product

4.4. Trial: prospect adopts the innovations on a limited basis. A consumer buys a sample, ifTrial: prospect adopts the innovations on a limited basis. A consumer buys a sample, if

the product can be sampledthe product can be sampled

5.5. Adoption: prospect decides whether to use the innovation on a full scale basisAdoption: prospect decides whether to use the innovation on a full scale basis

6.6. Confirmation: after adopting the innovation, prospects becomes a user who immediatelyConfirmation: after adopting the innovation, prospects becomes a user who immediately

seeks assurances that decision to purchase the product was correct.seeks assurances that decision to purchase the product was correct.

2.10.2 Adopter Categories2.10.2 Adopter Categories

Some people will adopt an innovation soon after it is introduced. Others will delay beforeSome people will adopt an innovation soon after it is introduced. Others will delay before

accepting a new product, and still others may never adopt it. Research has identified fiveaccepting a new product, and still others may never adopt it. Research has identified five

innovation adopter categories, based on the point in time when individuals adopt a giveninnovation adopter categories, based on the point in time when individuals adopt a given

innovation.innovation.

1.1. InnovatorsInnovators

Innovators representing three percent of the market, innovators are venture some consumers whoInnovators representing three percent of the market, innovators are venture some consumers who

are the first to adopt an innovation. In relation to later adopters, innovators are likely to beare the first to adopt an innovation. In relation to later adopters, innovators are likely to be

younger, have higher social status, and be in a better financial shape. younger, have higher social status, and be in a better financial shape.

2.2. Early AdoptersEarly Adopters

Early adopters comprising about 12 percent of the market, early adopters purchase a new productEarly adopters comprising about 12 percent of the market, early adopters purchase a new product

after innovators but sooner than other consumers. Unlike innovators, who have broadafter innovators but sooner than other consumers. Unlike innovators, who have broad

involvement outside a local community, early adopters tend to be involved socially with in ainvolvement outside a local community, early adopters tend to be involved socially with in a

local community. Early adopters are greatly respected in their social system. In fact, other peoplelocal community. Early adopters are greatly respected in their social system. In fact, other people

are interested in and influenced by their opinions.are interested in and influenced by their opinions.

3.3. Early majorityEarly majority

The early majority, representing about 23 percent of the market, includes more deliberateThe early majority, representing about 23 percent of the market, includes more deliberate

consumers who accept an innovation just before the average adopter in a social system. Thisconsumers who accept an innovation just before the average adopter in a social system. This

group is a bit above average in social and economic measures. Consumers in the early majoritygroup is a bit above average in social and economic measures. Consumers in the early majority

group rely quite a bit on ads, sales people, and contact with early adopters.group rely quite a bit on ads, sales people, and contact with early adopters.

4.4. Late majorityLate majority

The late majority another 23 percent of the market is a skeptical group of consumers who usuallyThe late majority another 23 percent of the market is a skeptical group of consumers who usually

adopt an innovation to save some money or in response to social pressure from their peers. Theyadopt an innovation to save some money or in response to social pressure from their peers. They

rely on their peers – late or early majority – as sources of information. Advertising and personalrely on their peers – late or early majority – as sources of information. Advertising and personal

selling are less effective with this group than is word of mouth communication.selling are less effective with this group than is word of mouth communication.

5.5. LaggardsLaggards

Laggards are consumers who are bound by tradition and, hence are last to adopt an innovation.Laggards are consumers who are bound by tradition and, hence are last to adopt an innovation.

They comprise about 15 percent of the market. Laggards are suspicious of innovations andThey comprise about 15 percent of the market. Laggards are suspicious of innovations and

innovators. They wonder why any one would pay a lot more for a new kind of light bulbs, forinnovators. They wonder why any one would pay a lot more for a new kind of light bulbs, for

example. By the time laggards adopt something new, the innovators in favor of a newer conceptexample. By the time laggards adopt something new, the innovators in favor of a newer concept

may already have discarded it.may already have discarded it.

Time of Adoption of InnovationsTime of Adoption of Innovations

2.11 2.11 PRODUCT LIFE CYCLEPRODUCT LIFE CYCLE

Introducing a new product at the proper time will help maintain a company's desired level ofIntroducing a new product at the proper time will help maintain a company's desired level of

profit. Striving to maintain its dominant position in the market, the company has to face thatprofit. Striving to maintain its dominant position in the market, the company has to face that

challenge often. challenge often.

However, any product moves though identifiable stages, each of which is related to the passageHowever, any product moves though identifiable stages, each of which is related to the passage

of time and each of which has different characteristics.of time and each of which has different characteristics.

The Life cycle of a product consists of four stagesThe Life cycle of a product consists of four stages::

Introduction, Growth, Maturity and Decline.Introduction, Growth, Maturity and Decline. A product life cycle consists of the aggregate A product life cycle consists of the aggregate

demand over an extended period of time for all brands comprising a generic product category.demand over an extended period of time for all brands comprising a generic product category.

EarlyEarly AdoptersAdopters

12%12%

InnovatorsInnovators 12%12% EarlyEarly

MajorityMajority 23%23%

LateLateMajorityMajority

23%23%LaggardsLaggards

15%15%

IntroductionIntroduction Growth Growth Maturity Decline Maturity Decline

Time in years Time in years

2.11.1 Characteristics of Each Stage2.11.1 Characteristics of Each Stage

Management must be able to recognize what part of the life cycle its product is in at any givenManagement must be able to recognize what part of the life cycle its product is in at any given

time. The competitive environment and marketing strategies that should be used ordinarilytime. The competitive environment and marketing strategies that should be used ordinarily

depend on the particular stage.depend on the particular stage.

1. Introduction1. Introduction

During the introduction stage, a product is launched into the market in a full-scale marketingDuring the introduction stage, a product is launched into the market in a full-scale marketing

program. It has gone through product development, including idea screening prototype andprogram. It has gone through product development, including idea screening prototype and

market tests. market tests.

Sales, Profit

Sales ValueSales Value

ProfitProfit

LossLoss

This introductory (Sometimes called pioneering) stage is the most risky and expensive one,This introductory (Sometimes called pioneering) stage is the most risky and expensive one,

because substantial amount of money spent in seeking consumer's acceptance of the product.because substantial amount of money spent in seeking consumer's acceptance of the product.

2. Growth 2. Growth

In the growth stage, or market acceptance stage, sales and profit rises, often at a rapid rate.In the growth stage, or market acceptance stage, sales and profit rises, often at a rapid rate.

Competitors inter the market, often in a large numbers if the profit outlook is particularlyCompetitors inter the market, often in a large numbers if the profit outlook is particularly

attractive. Mostly as a result of competition, profits start to decline near the end of the growthattractive. Mostly as a result of competition, profits start to decline near the end of the growth

stage. stage.

2. Maturity2. Maturity

During the first part of the maturity stage, sales continue to increase, but at a decreasing rate.During the first part of the maturity stage, sales continue to increase, but at a decreasing rate.

When sales level of profits of producers and middlemen decline, the primary reason: IntenseWhen sales level of profits of producers and middlemen decline, the primary reason: Intense

price competition. During the latter part of this stage, marginal producers, those with high costsprice competition. During the latter part of this stage, marginal producers, those with high costs

or with out a deferential advantages are forced to drop out of the market. They do so becauseor with out a deferential advantages are forced to drop out of the market. They do so because

they lack sufficient customers and /or profits.they lack sufficient customers and /or profits.

3. Decline3. Decline

For most products, a decline stage as gauged by sales volume for the total category is inevitableFor most products, a decline stage as gauged by sales volume for the total category is inevitable

for one of the following reasons:for one of the following reasons:

The need for the product disappears.The need for the product disappears.

Better or less expensive product is developed to fill the same needBetter or less expensive product is developed to fill the same need

People simply tired of a product (a clothing style for instance) People simply tired of a product (a clothing style for instance)

So it disappears from the market.So it disappears from the market.

The concept of product life cycle is very important in modern marketing. Steps in planning andThe concept of product life cycle is very important in modern marketing. Steps in planning and

development of products, why new product fail? And strategies used on every stage of the lifedevelopment of products, why new product fail? And strategies used on every stage of the life

cycle is illustrated as follows:cycle is illustrated as follows:

2.11.22.11.2 Marketing Strategies Through Out the PLCMarketing Strategies Through Out the PLC

2.11.2.1 Introduction Stage2.11.2.1 Introduction Stage

Because it takes time to roll out a new product and fill dealer pipeline, sales growth tends to beBecause it takes time to roll out a new product and fill dealer pipeline, sales growth tends to be

slow at this stage. There are several causes for the slow growth: delays in the expansion ofslow at this stage. There are several causes for the slow growth: delays in the expansion of

production capacity; technical problems; delays in obtaining adequate distribution through retailproduction capacity; technical problems; delays in obtaining adequate distribution through retail

outlets; and customer reluctance to change established behaviors.outlets; and customer reluctance to change established behaviors.

Profits are negative or low in the introduction stage because of low sales and heavy distributionProfits are negative or low in the introduction stage because of low sales and heavy distribution

and promotion expenses. Much money is needed to attract distributors. Promotional expendituresand promotion expenses. Much money is needed to attract distributors. Promotional expenditures

are at their highest ratio to sales because of the need to:are at their highest ratio to sales because of the need to:

1)1) Inform potential customersInform potential customers

2)2) Induce product trial and Induce product trial and

3)3) Secure distribution in retail outlets.Secure distribution in retail outlets.

In launching a new product, marketing management can set a high or a low level for eachIn launching a new product, marketing management can set a high or a low level for each

marketing variable (price, promotion, distribution, product quality). Considering only price andmarketing variable (price, promotion, distribution, product quality). Considering only price and

promotion, management can persue one of four strategies. promotion, management can persue one of four strategies.

1.1. Rapid SkimmingRapid Skimming

Launching the new product at a high price and a high promotion level. This strategy makes senseLaunching the new product at a high price and a high promotion level. This strategy makes sense

when a large part of the potential market is unaware of the product; these who become aware ofwhen a large part of the potential market is unaware of the product; these who become aware of

the product are eager to have it and can pay the asking price; and the faces potential competitionthe product are eager to have it and can pay the asking price; and the faces potential competition

and want to build brand preferences.and want to build brand preferences.

2.2. Slow SkimmingSlow Skimming

Launching the new product at a high price and low promotion. This strategy makes sense whenLaunching the new product at a high price and low promotion. This strategy makes sense when

the market is limited in size; most of the market is aware of the product; buyers are willing tothe market is limited in size; most of the market is aware of the product; buyers are willing to

pay a high price; and potential competition is not imminent.pay a high price; and potential competition is not imminent.

3.3. Rapid PenetrationRapid Penetration

Launching the product at a low price and spending heavily on promotion. This strategy makesLaunching the product at a low price and spending heavily on promotion. This strategy makes

sense when the market is large, the market is unaware of the product, most buyers are pricesense when the market is large, the market is unaware of the product, most buyers are price

sensitive, there is strong potential competition, and the unit manufacturing costs fall with thesensitive, there is strong potential competition, and the unit manufacturing costs fall with the

company's scale of production and accumulated manufacturing experience. company's scale of production and accumulated manufacturing experience.

4.4. Slow PenetrationSlow Penetration

Launching the new product at a low price and low level of promotion. This strategy makes senseLaunching the new product at a low price and low level of promotion. This strategy makes sense

when the market is large, is highly aware of the product, is price sensitive, and there is somewhen the market is large, is highly aware of the product, is price sensitive, and there is some

potential competition. potential competition.

2.11.2.2 Growth Stage2.11.2.2 Growth Stage

The growth stage is marked by a rapid climb in sales. Early adopters like the product, andThe growth stage is marked by a rapid climb in sales. Early adopters like the product, and

additional consumers start buying it. New competitors enter, attracted by the opportunities. Theyadditional consumers start buying it. New competitors enter, attracted by the opportunities. They

introduce new product features and expand distribution.introduce new product features and expand distribution.

Price remains where they are fall slightly, depending on how fast demand increases. CompaniesPrice remains where they are fall slightly, depending on how fast demand increases. Companies

maintain their promotional expenditures at the same or at a slightly increased level to meetmaintain their promotional expenditures at the same or at a slightly increased level to meet

competition and to continue to educate the market. Sales rise much faster than promotionalcompetition and to continue to educate the market. Sales rise much faster than promotional

expenditures, causing a welcome decline in the promotion sales ratio.expenditures, causing a welcome decline in the promotion sales ratio.

Profits increase during this stage as promotion costs are spread over a large volume and unitProfits increase during this stage as promotion costs are spread over a large volume and unit

manufacturing costs fall faster than price declines owing to the producer learning effect. Firmsmanufacturing costs fall faster than price declines owing to the producer learning effect. Firms

have to watch for a change from an accelerating to a decelerating rate of growth in order tohave to watch for a change from an accelerating to a decelerating rate of growth in order to

prepare new strategies.prepare new strategies.

During this stage, the firm uses several strategies to sustain rapid market growth as long asDuring this stage, the firm uses several strategies to sustain rapid market growth as long as

possible:possible:

It improves product quality and adds new product features and improved styling It improves product quality and adds new product features and improved styling

It adds new models and flanker products (i.e., productsIt adds new models and flanker products (i.e., products

of different sizes, flavors, and so forth that protect the main product)of different sizes, flavors, and so forth that protect the main product)

It enters new market segmentsIt enters new market segments

It increases its distribution coverage and enters new distribution channels.It increases its distribution coverage and enters new distribution channels.

It shifts from product-awareness advertising to product-It shifts from product-awareness advertising to product-

preference advertisingpreference advertising

It lowers prices to attract the next layer of price-It lowers prices to attract the next layer of price-

sensitive buyers.sensitive buyers.

2.11.2.3 Maturity Stage2.11.2.3 Maturity Stage

At some point, the rate of sales growth will slow, and the product will enter a stage of relativeAt some point, the rate of sales growth will slow, and the product will enter a stage of relative

maturity. This stage normally lasts longer than the previous stages, and poses formidablematurity. This stage normally lasts longer than the previous stages, and poses formidable

challenges to marketing management. Most products are in the maturity stage of the lifecycle,challenges to marketing management. Most products are in the maturity stage of the lifecycle,

and most marketing managers cope with the problem of marketing the mature product.and most marketing managers cope with the problem of marketing the mature product.

The maturity stage divides into three phases: growth, stable, and decaying maturity. In the firstThe maturity stage divides into three phases: growth, stable, and decaying maturity. In the first

phase, the sales growth rate starts to decline. There are no distribution channels to fill. In thephase, the sales growth rate starts to decline. There are no distribution channels to fill. In the

second phase, sales flatten on a per capita basis because of market saturation. Most potentialsecond phase, sales flatten on a per capita basis because of market saturation. Most potential

consumers have tried the product, and future sales are governed by population growth andconsumers have tried the product, and future sales are governed by population growth and

replacement demand. In the third phase, decaying maturity, the absolute level of sales starts toreplacement demand. In the third phase, decaying maturity, the absolute level of sales starts to

decline, and customers begin switching to other products and substitutes.decline, and customers begin switching to other products and substitutes.

The sales slowdown creates overcapacity in the industry, which leads to intensified competition.The sales slowdown creates overcapacity in the industry, which leads to intensified competition.

They increased advertising and trade and consumer promotion. They increase R & D budgets toThey increased advertising and trade and consumer promotion. They increase R & D budgets to

develop product improvement and line extensions.develop product improvement and line extensions.

In the maturity stage, some companies abandon weaker products and concentrate on moreIn the maturity stage, some companies abandon weaker products and concentrate on more

profitable products and on new products.profitable products and on new products.

The firm may adopt the following strategies in order to maintain its survival in the market.The firm may adopt the following strategies in order to maintain its survival in the market.

1. Market Modification1. Market Modification

The company might try to expand the market for its mature product. They can try to expand theThe company might try to expand the market for its mature product. They can try to expand the

number of product users in three ways:number of product users in three ways:

Convert non usersConvert non users

The key the growth of airfreight service is the constant search for new users to whom air carriersThe key the growth of airfreight service is the constant search for new users to whom air carriers

can demonstrate the benefits of using airfreight rather than ground transportation.can demonstrate the benefits of using airfreight rather than ground transportation.

Enter new market segmentsEnter new market segments

Some companies successfully promoted their product to non- users.Some companies successfully promoted their product to non- users.

Competitors CustomersCompetitors Customers

Companies constantly tempting competitors brand users to switch. Volume can also be increasedCompanies constantly tempting competitors brand users to switch. Volume can also be increased

by convincing current brand. Here are three strategies: by convincing current brand. Here are three strategies:

The company can try to get customers to use the product more frequently: Orange juiceThe company can try to get customers to use the product more frequently: Orange juice

marketers try to get people to drink orange juice at occasions other than breakfast time. marketers try to get people to drink orange juice at occasions other than breakfast time.

The company can try to interest users in using more of the product on each occasion: AThe company can try to interest users in using more of the product on each occasion: A

shampoo manufacturer might indicate that the shampoo is more effective with twoshampoo manufacturer might indicate that the shampoo is more effective with two

applications than one. applications than one.

The company can try to discover new product uses and convince people to use theThe company can try to discover new product uses and convince people to use the

product in more varied ways: Food manufacturers list several recipes on their packages toproduct in more varied ways: Food manufacturers list several recipes on their packages to

broaden cobroaden co Product ModificationProduct Modification

Managers also try to stimulate sales by modifying the product's characteristics through qualityManagers also try to stimulate sales by modifying the product's characteristics through quality

improvement, feature improvement, or style improvement.improvement, feature improvement, or style improvement.

Quality improvement aims at increasing the product's functional performance – its durability,Quality improvement aims at increasing the product's functional performance – its durability,

reliability, speed, and taste. A manufactures can often overtake its competition by launching areliability, speed, and taste. A manufactures can often overtake its competition by launching a

"new and improved" product. Grocery manufacturers call this a "plus launch" and promote a new"new and improved" product. Grocery manufacturers call this a "plus launch" and promote a new

additive or advertise something as "stronger", "bigger" or "better."additive or advertise something as "stronger", "bigger" or "better."

This strategy is effective to the extent that the quality is improved, buyers accept the claim ofThis strategy is effective to the extent that the quality is improved, buyers accept the claim of

improved quality, and a sufficient number of buyers will pay for higher quality.improved quality, and a sufficient number of buyers will pay for higher quality.

Feature improvement aims at adding new feature (for example size, weight, materials, additives,Feature improvement aims at adding new feature (for example size, weight, materials, additives,

accessories) that expand the product's versatility, safety, or convenience. accessories) that expand the product's versatility, safety, or convenience.

This strategy has several advantages. New features build the company's image as an innovatorThis strategy has several advantages. New features build the company's image as an innovator

and win the loyalty of market segments that value these features. They provide an opportunityand win the loyalty of market segments that value these features. They provide an opportunity

for free publicity and they generate sales force and distributor enthusiasm. The chieffor free publicity and they generate sales force and distributor enthusiasm. The chief

disadvantages is that feature improvements are easily imitated; unless there is a permanent gaindisadvantages is that feature improvements are easily imitated; unless there is a permanent gain

from being first, the feature improvement might not pay off in the long run.from being first, the feature improvement might not pay off in the long run.

A strategy of style improvement aims at increasing the product's aesthetic appeal. The periodicA strategy of style improvement aims at increasing the product's aesthetic appeal. The periodic

introduction of new car models amounts to style competition rather than quality or featureintroduction of new car models amounts to style competition rather than quality or feature

competition. In the case of packaged – food and household products, companies introduces colorcompetition. In the case of packaged – food and household products, companies introduces color

and texture variations and restyle the package.and texture variations and restyle the package.

A style strategy might give the product a unique market identity. Yet style competition hasA style strategy might give the product a unique market identity. Yet style competition has

problems. First, it is difficult to predict whether people – and which people – will like a newproblems. First, it is difficult to predict whether people – and which people – will like a new

style. Second, a style change usually requires discontinuing the old style, and the company risksstyle. Second, a style change usually requires discontinuing the old style, and the company risks

losing customers. Consumers may become attached to something as seemingly insignificant as alosing customers. Consumers may become attached to something as seemingly insignificant as a

peanut shell.peanut shell.

2. Marketing – mix modification2. Marketing – mix modification

Product managers might also try to stimulate sales by modifying other marketing –mix elements.Product managers might also try to stimulate sales by modifying other marketing –mix elements.

They should ask the following questions.They should ask the following questions.

Prices:Prices:

Would a price cut attract new buyers? If so, should the list price be lowered, or should prices beWould a price cut attract new buyers? If so, should the list price be lowered, or should prices be

lowered through price specials, volume or early purchase discounts, freight cost absorption, orlowered through price specials, volume or early purchase discounts, freight cost absorption, or

easier credit terms? Or would it be better to raise the price to signal higher quality?easier credit terms? Or would it be better to raise the price to signal higher quality?

DistributionDistribution

Can the company obtain more product support and display in existing outlets? Can more outletsCan the company obtain more product support and display in existing outlets? Can more outlets

be penetrated? Can the company introduce the product into new distribution channels?be penetrated? Can the company introduce the product into new distribution channels?

AdvertisingAdvertising

Should advertising expenditures be increased? Should the message or copy be changed? ShouldShould advertising expenditures be increased? Should the message or copy be changed? Should

the media mix be changed? Should the timing, frequency, or size of ads be changed?the media mix be changed? Should the timing, frequency, or size of ads be changed?

Sales promotionSales promotion

Should the company step up sales promotion – trade deals, cents off coupons, rebates,Should the company step up sales promotion – trade deals, cents off coupons, rebates,

warranties, gifts, and contests?warranties, gifts, and contests?

Personal SellingPersonal Selling

Should the number or quality of sales people be increased? Should the basis for sales forceShould the number or quality of sales people be increased? Should the basis for sales force

specialization be changed? Should sales territories be raised? Should sales force incentive bespecialization be changed? Should sales territories be raised? Should sales force incentive be

raised? Can sales call planning be improved?raised? Can sales call planning be improved?

ServicesServices

Can the company speed up delivery? Can it extend more technical assistance to customers? CanCan the company speed up delivery? Can it extend more technical assistance to customers? Can

it extend more credit?it extend more credit?

Marketers often debate which tools are most effective in the mature stage. For example, wouldMarketers often debate which tools are most effective in the mature stage. For example, would

the company gain more by increasing its advertising or its sales promotion budget?the company gain more by increasing its advertising or its sales promotion budget?

A major problem with marketing mix modifications especially price reductions and additionalA major problem with marketing mix modifications especially price reductions and additional

services, is that they are easily initiated. The firm may not gain as much as expected, and allservices, is that they are easily initiated. The firm may not gain as much as expected, and all

firms might experience profit erosion as they step up their marketing attacks on each other.firms might experience profit erosion as they step up their marketing attacks on each other.

2.11.2.4 2.11.2.4 Decline StageDecline Stage

The sales of most product forms and brands eventually decline. The decline might be slow, as inThe sales of most product forms and brands eventually decline. The decline might be slow, as in

the case of certain product; or rapid.the case of certain product; or rapid.

Sales decline for a number of reasons, including technological advances, shifts in consumerSales decline for a number of reasons, including technological advances, shifts in consumer

tastes, and increased domestic and foreign competition. All lead to over capacity, increased pricetastes, and increased domestic and foreign competition. All lead to over capacity, increased price

cutting, and profit erosion.cutting, and profit erosion.

As sales and profit declines some firms withdraw from the market. These remaining may reduceAs sales and profit declines some firms withdraw from the market. These remaining may reduce

the number of products they offer. They may withdraw from smaller market segments andthe number of products they offer. They may withdraw from smaller market segments and

weaker trade channels, and they may cut their promotion budget and reduce their prices further.weaker trade channels, and they may cut their promotion budget and reduce their prices further.

Some firms will abandon declining markets earlier than others much depends on the presenceSome firms will abandon declining markets earlier than others much depends on the presence

and height of exit barriers in the industry.and height of exit barriers in the industry.

In a study of company strategies in declining industries, companies must identified five declineIn a study of company strategies in declining industries, companies must identified five decline

strategies available to the firm.strategies available to the firm.

Increasing the firm's investments (to dominate the market or strengthen its competitiveIncreasing the firm's investments (to dominate the market or strengthen its competitive

position).position).

Maintaining the firm's investment level until the uncertainties about the industry areMaintaining the firm's investment level until the uncertainties about the industry are

resolved.resolved.

Decreasing the firm's investment level selectively by dropping, unprofitable customerDecreasing the firm's investment level selectively by dropping, unprofitable customer

groups, while simultaneously strengthening the firms investment in lucrative niches. groups, while simultaneously strengthening the firms investment in lucrative niches.

Harvesting ("nuking") the firm's investment to recover cash quickly. Harvesting ("nuking") the firm's investment to recover cash quickly.

Directing the business quickly by disposing of its assets as advantageously as possible.Directing the business quickly by disposing of its assets as advantageously as possible.

The appropriate decline strategy depends on the industry's relative attractiveness and theThe appropriate decline strategy depends on the industry's relative attractiveness and the

company's competitive strength in the industry.company's competitive strength in the industry.

Check Your Progress ExerciseCheck Your Progress Exercise

1. Discuss in detail the Adopter categories.1. Discuss in detail the Adopter categories.

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2. Explain in detail the stages of the PLC?2. Explain in detail the stages of the PLC?

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3. Discuss in detail the levels of the product?3. Discuss in detail the levels of the product?

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4. Explain the steps involved in product planning and development?4. Explain the steps involved in product planning and development?

………………………………………………………………………………………………………………………………………………………………………………………………………………

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5. Explain the marketing strategies used on each stage?5. Explain the marketing strategies used on each stage?

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6. What is a product? Discuss the product classification?6. What is a product? Discuss the product classification?………………………………………………………………………………………………………………………………………………………………………………………………………………

…………………………………………………………………………………………………………………………………………………………………………………………

2.12 2.12 SUMMARYSUMMARY

Product is any thing that can be offered into the market is exchange for a value that satisfied aProduct is any thing that can be offered into the market is exchange for a value that satisfied a

human needs and wants.human needs and wants.

Product is the first and most important element of the marketing mix. Product strategy calls forProduct is the first and most important element of the marketing mix. Product strategy calls for

making coordinated decision on product mixes, product lines, brands, packaging and labeling.making coordinated decision on product mixes, product lines, brands, packaging and labeling.

Products can be classified in several ways. In terms of durability and tangibility, products can beProducts can be classified in several ways. In terms of durability and tangibility, products can be

non-durable goods, durable goods or services. In consumer goods category, products are eithernon-durable goods, durable goods or services. In consumer goods category, products are either

convenience goods, shopping goods, specialty goods or unsought goods.convenience goods, shopping goods, specialty goods or unsought goods.

In the industrial good category, products fall into one of the three categories; materials and parts,In the industrial good category, products fall into one of the three categories; materials and parts,

capital items and supplies. capital items and supplies.

Much strategic decision must be made to manage a company's assortment of productsMuch strategic decision must be made to manage a company's assortment of products

effectively. To start, a firm must select strategies regarding its product mix.effectively. To start, a firm must select strategies regarding its product mix.

Another strategic decision is whether how to expand the product mix by adding items to a lineAnother strategic decision is whether how to expand the product mix by adding items to a line

and/or introducing new line. Alternatively, management may elect a trade up or trade downand/or introducing new line. Alternatively, management may elect a trade up or trade down

relative to existing products. Altering the design, packaging, or other features of existingrelative to existing products. Altering the design, packaging, or other features of existing

products is still another option among the strategies of selecting the mix. products is still another option among the strategies of selecting the mix.

The product mix also can be changed by eliminating an entire line or by simplifying theThe product mix also can be changed by eliminating an entire line or by simplifying the

assortment within a line.assortment within a line.

Executive need to understand the concept of a product lifecycle, which reflects the total salesExecutive need to understand the concept of a product lifecycle, which reflects the total sales

volume for a generic product category. Each of the cycle's four stages – introduction, growth,volume for a generic product category. Each of the cycle's four stages – introduction, growth,

maturity and decline has distinctive characteristics that have implications for marketing.maturity and decline has distinctive characteristics that have implications for marketing.

Effective product management involves developing and then maintaining the various features ofEffective product management involves developing and then maintaining the various features of

a product – its brand, package, labeling, design, quality, warranty and post sales service.a product – its brand, package, labeling, design, quality, warranty and post sales service.

A brand is a means of identifying and differentiating the products of an organization. PackagingA brand is a means of identifying and differentiating the products of an organization. Packaging

is becoming increasingly important as sellers recognize the problems, as well as the marketingis becoming increasingly important as sellers recognize the problems, as well as the marketing

opportunities, as created with the information about the product and the seller. opportunities, as created with the information about the product and the seller.

2.13 ANSWER TO CHECK YOUR PROGRESS EXERCISE2.13 ANSWER TO CHECK YOUR PROGRESS EXERCISE

1.1. Refer 2.10.2Refer 2.10.2

2.2. Refer 2.11.1Refer 2.11.1

3.3. Refer 2.2Refer 2.2

4.4. Refer 2.6Refer 2.6

5.5. Refer 2.11.2Refer 2.11.2

6.6. Refer 2.5Refer 2.5