Product
Concepts
Unit-3
By Dr. Khushboo Sahu
Objectives of the session
● Discuss the different ways in which companies differentiate their products
● Evaluate the impact of product classifications on the marketing mix
● Describe the basic concepts of product line management
● Analyse the importance of product innovations and different types of innovation
● Identify the consumers’ adoption process of new products
● Evaluate the product life cycle concept and marketing strategies appropriate at different
stages of the life cycle
INTRODUCTION
What is a Product?
● Anything that can be offered to a market for attention, acquisition, use or
consumption.
● Satisfies a want or a need.
● Includes:
○ Physical Products
○ Services
○ Persons
○ Places
○ Organizations
○ Ideas
○ Combinations of the above
Product
● Product Forms- The size, shape or physical structure of the product, which make the product more
convenient to use or consume
● Product Features: Most products can be differentiated with features that enhance the product performance or
enhance the overall product experience .
● Performance Quality: It is the level at which the products’ primary characteristics operate. Performance quality does
not necessarily imply highest quality; companies must design a performance level appropriate to the target market
and competitors’ performance levels
● Conformance Quality: It is the degree to which all the units of a particular product are identical, have a consistent
quality and meet the promised specifications .
● Durability: It is a measure of the products’ expected operating life under natural or stressful conditions and is a
valued attribute for certain products.
● Reliability: It has different connotations for different people. It could mean that a given product will perform
consistently and will not malfunction or fail.
● Reparability/Serviceability: Despite claims that companies would make about performance quality, durability or
reliability, consumers prefer products that are repairable if they malfunction or fail
● Style/Design/Aesthetics: It is not surprising that styling, aesthetics and design are key product differentiation
Product Classification
Product Classifications
Consumer Products
Convenience Products Shopping Products
> Buy frequently & immediately > Buy less frequently
> Low priced > Gather product information
> Many purchase locations > Fewer purchase locations
> Includes: > Compare for:
• Staple goods • Suitability & Quality
• Price & Style
• Impulse goods
• Emergency goods
Specialty Products Unsought Products
> Special purchase efforts > New innovations
> Unique characteristics > Products consumers don’t
> Brand identification want to think about
> Few purchase locations > Require much advertising &
personal selling
Branding, Packaging, and Labelling
Branding
A brand is a name, image, design, or symbol, or a combination of those used by a seller to
identify and distinguish its products from rivals. Branding is the collection of actions intended to
establish and position a brand in the minds of customers.
Branding is the process of providing a specific brand to a single seller’s product or set of
products. Branding is the process of identifying and establishing a method of identification. In
other words, branding is the process of designating a thing, similar to naming a newborn.
Parents have children, and manufacturers are interested in learning about the character and
capability of their goods from birth, but not in their names.
Purpose of Branding
•The brand is a huge asset.
•A brand is a marketing tool.
•The brand is a market-protection weapon.
•The brand is an antidote to middle-class survival.
•Customers use brands to identify themselves.
Labeling
A label is a product component that conveys linguistic information about the product or seller. It may be a tiny scrap
of paper or a written statement.” It may be part of the packaging or connected to a product. It provides spoken
information about the goods and the vendor. “A label is a product component that contains linguistic information
about the product or the seller (manufacturer or middlemen). A label may be a component of the packaging or a
sticker affixed directly to the product.”
It allows the manufacturer to provide clear instructions to the product’s consumers. Because prices are kept and
printed, price variations caused by intermediaries are eliminated. The manufacturer-buyer relationship has been
formed. It pushes manufacturers to create just standard goods. The goods are readily identifiable by buyers.
Classification of Labels
• Brand Labels.
• Grade Labels.
• Descriptive Illustrative Label.
Purpose of labeling in packaging
1.To emphasize the product’s features.
2.To make the exchange process easier.
3.To promote the use of self-service.
Packaging
Another set of issues to examine is the packaging, which will clearly show a brand’s
marks and identity. The packaging itself may sometimes be considered a component of
the brand.
Packaging is “an activity concerned with protection, economy, convenience, and
promotional consideration.” Packaging may be described as “the broad set of operations
in product planning that includes designing and manufacturing the product’s container
or wrapper.”
Packaging Functions
1.It facilitates and improves product identification and differentiation.
2.Package features convey product massage and encourage consumers to purchase.
3.Changing product packaging design and massage makes it easier to execute its
product/brand repositioning plan.
4.The selling message is repeated.
5.It advertises the goods at the point of sale and generally aids in the purchasing
decision.
Product Support Services
Product support services refer to labor-based services for hardware or software, which can be
performed by the manufacturer of the product or parties other than the vendor that created the
product. These services can be provided by several types of vendors, typically including hardware
OEMs, such as Dell, HP, EMC or IBM; and software publishers, such as Microsoft, Oracle or SAP.
Formal channel partners of hardware and software vendors also provide support services.
Product support services are also delivered by additional independent service providers and third-
party support providers. An independent service provider delivers a broad range of services for
hardware and/or software products (such as consulting or support), and may have an alliance with the
product manufacturer but not as a primary means to its service business. A third-party support
provider primarily delivers break/fix technical support for hardware and/or software products and is
not typically aligned with the product manufacturer but may have a relationship in certain specific
exceptional cases.
Product - Support Services
Companies should design its support services to
profitably meet the needs of target customers.
How?
● Step 1. Survey customers to determine
satisfaction with current services and any
desired new services.
● Step 2. Assess costs of providing desired
services.
● Step 3. Develop a package of services to delight
customers and yield profits.
New Product
Development Process
PRODUCT INNOVATION
six categories of new products:
● 1. New to the world: Very innovative products that create entirely new
markets and categories.
● 2. New product lines: New products that enable companies to enter an
established market for the first time. These are new product offerings in
existing categories.
● 3. Addition to existing product lines: Variants, pack sizes, flavours and so
on.
● 4. Improvements and revisions of existing products: New products that
provide improved performance or greater perceived value and replace existing
products.
THE PRODUCT LIFE CYCLE (PLC) CONCEPT
Introduction Stage-
● Introduction Stage- The introduction stage is when a new product category, product form or
technology is brought to the market. A new product is brought to the market before there is a
proven demand for it and before it has been proven technically.
● This stage is a period of slow sales growth and may not necessarily be a smooth upward
trajectory; some sales ups and downs may be witnessed.
● 1. Offensive strategy: Firms that follow this strategy are pioneering companies with innovative
products. This strategy would only work for companies that are R&D intensive, although they
may follow the different innovation models we have discussed earlier .
● 2. Defensive strategy: This strategy is followed by firms lacking any real core competence to
innovate products or by firms that lack the resources required by a pioneering firm
● 3. Imitative strategy: This strategy is similar to the defensive strategy in many ways, except that
it focuses mainly on producing low-cost clones through licensing technologies, focusing on low-
cost manufacturing and operates in localised markets
key marketing objectives
• Market development
• “Sell the product concept” and stimulate demand
• Getting distribution
• Sorting out product performance and design issues
Product strategy: Pioneering firms usually enter the markets with basic products and very limited
product versions. As the utility of the product is yet to be understood by the customer, no market
segments exist.
Communications strategy: The key task of marketing communications is to first build awareness of
the product and more importantly prove the utility of the product to the consumer and stimulate trial
Pricing strategy: Pioneering firms use either a market skimming or a market penetration strategy
depending on the market conditions.
Marketing skimming strategy is a strategy of using a high price relative to competitive substitutes or
other benchmarks. The skimming strategy has two variants: rapid skimming or slow skimming.
penetration is the strategy of using low prices to penetrate the market, but with a slow build up on
marketing communications
Distribution strategy: Getting distribution channels to carry the product is a challenge at this stage as
distributors too need to be convinced about the utility and business viability of the product
Competitive strategy: The introduction stage is usually marked by the absence of competition
Growth Stage
● The growth stage is characterised by a sharp growth in sales, entry of competitors and
profits.
● The sharp growth in sales is not only because of the success of the product, but because of
the combined efforts of all firms present in the market to develop and grow the market.
● As customers get familiar with the product, different need levels and motivations emerge
which is the right time to segment markets.
● Companies need to plan for the growth stage well in advance.
● The pioneer should visualise the various product markets that it can enter, segmenting
markets as they develop.
Key marketing objectives (early
growth
• Build selective demand
• Market segmentation
• Build market share through market penetration
• Incremental innovations
• Product strategy
● Pricing strategy: The overall price levels of the product categories drop, as all firms aim for market
penetration. Price levels also drop as volumes drive down cost of production and firms pass on partially
the benefits of economies of scale
● Communications strategy: Since the key marketing objective is to build selective demand and brand
preference, communications strategy is directed towards establishing brand awareness and brand
preference through heavy media use for advertising, sampling and promotion programs.
Advertisement spends as a percentage of sales continue to be high, but absolute advertisement spends
go up significantly at his stage.
● Distribution strategy: As the rate of consumer adoption of the product increases, it is generally easier to
expand the distribution channels as the trade channels become convinced about the business viability of the
product
Maturity Stage
● The first sign of the advent of the maturity phase is market saturation.
● Most prospects own the product; therefore market growth rates, sales and profits
begin to level off.
● In fact, a decline in profits seems imminent now. Price competition now becomes
intense, and with rapid commoditisation of products, all competitive attempts to
achieve and hold brand differentiation now involve making finer and finer
differentiations in the product or customer services, image etc.
● This phase is marked by intense competition, as it seems that firms can now only
grow by taking away market share from a competitor.
● Price wars, distribution wars and communications wars become commonplace
now.
Key marketing objectives
. Rationalisation of product lines to maintain profitability
• Finding new avenues for growth
• Improved efficiency of marketing operations
• Product strategy
● Communications strategy: Ironically, when marketing spends and specifically advertisement
spends are under greatest pressure, it is the time when marketers need to communicate with
their target markets the most. There is heavy reliance on sales promotions and below the line
promotions at this stage. The communication strategy is to optimise marketing spends
through maintenance advertising.
● Distribution strategy: Distribution channels and processes need to be rationalised at this
stage. There is fierce competition for shelf space and point of sale merchandising. Companies
rely heavily on trade promotions to increase presence at point of sale. Companies can also
innovate by looking for newer channels of distribution or new distribution formats as opposed
to expanding existing channels
● Pricing strategy: The maturity stage is marked by intense price competition and pressure on
margins, irrespective of the pricing strategy that the company follows. The challenge is not to
abandon the existing pricing strategy, but to continue to provide better value to the customers
and at the same time maintaining margins
Decline Stage
● As stated earlier, products can remain in indefinite maturity.
● The advent of the decline is marked by the introduction of newer
technologies or products that will replace the old.
● The decline phase for an existing product sets in gradually only when the
newer technology or product gains market acceptance.
● This phase is marked by falling sales, absolute decline in profits and a shift
in consumer tastes and preferences.
Key marketing objectives
.Exit strategies from the category
• Maintain support for existing customers
• Reduce investment levels
• Improve short-run profitability
1. Exit unprofitable segments and strengthen position only in select segments. Some
products through product modifications can stay on in the market by occupying a
market niche. For instance, black and white photography became popular as an
artistic expression, so equipment manufacturers exited consumer segments and
created a range of high-end professional equipment for professional photographers
and serious hobbyists.
2. Selectively decrease investment levels in all aspects of marketing. Cut back on
production, advertising and distribution.
3. Alternatively, companies may choose to divest their businesses well before the decline
phase of the product sets in; this frees the firm’s resources which it may deploy in other
critical areas.
End of the session
