CHAPTER FOUR

PRODUCT POLICY DECISION

Basic Product Concepts
Product is anything which is offered to the market to satisfy consumer needs and

want. A product is a good, service, or idea with both tangible and intangible attributes that

collectively create value for a buyer or user. A product’s tangible attributes can be assessed in

physical terms, such as weight, dimensions, or materials used. Consider, for example, a flat-

panel TV with an LCD screen that measures 42 inches across. The unit weighs 50 pounds, is 5

inches deep, is equipped with four high-definition media interface (HDMI) connections...

Intangible product attributes, including the status associated with product ownership, a

manufacturer’s service commitment, and a brand’s overall reputation or mystique, are also

important. When shopping for a new TV, for example, many people want “the best”: They want

a TV loaded with features (tangible product elements), as well as one that is “cool” and makes a

status statement (intangible product element).

Product Types

 Consumer goods  Industrial goods

4.1. Product Standardization and Modification

4.1.1 Product Standardization

Product standardization means that a product designed originally for a local market is exported to

other countries with virtually no change, except perhaps for the translation of words and other

cosmetic changes.

Standardization- deals a firm produces similar (uniform) product for all market in the world.

 Premise-- consumers share some common values, beliefs, and consumption patterns.

 Advantages: economies of scale and scope, price competitiveness, uniform image.

Factors Encouraging Standardization

1. High costs of adaptation 5. Centralized management and operating

2. Industrial products via exports
3. Convergence and similar tastes in 6. Economies of scale in production
diverse country markets 7. Economies in Research and
4. Marketing to predominantly similar Development
countries 8. Economies in marketing

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Benefits of Standardization

By its very definition, standardization is aimed at achieving maximum overall economy.

Standards provide benefits to different sectors of society. Some of the benefits of standardization

are as follows:

For manufacturers:
♥ Rationalize the manufacturing process.
♥ Eliminate or reduce wasteful material or labor.
♥ Reduce inventories of both raw material and finished products.
♣ Reduce the cost of manufacture.
♣ Are convenient for settling disputes, if any, with suppliers.
For customers:
♣ Assure the quality of goods purchased and services received.
♣ Provide better value for money.
For traders:
♪ Provide a workable basis for acceptance or rejection of goods or consequential disputes, if
any.
♪ Minimize delays, correspondence, etc., resulting from inaccurate or incomplete
specification of materials or products.
For technologists:
Ü Provide starting points for research and development for further improvement of goods and
services.
4.1.2 Product Modification/Adaptation

Product Adaptation- means company produces different products for different market

segments. Making suitable for the given market by customizing to the target market. Or

modifying product to reflect characteristics of a market.

 Premise-- consumers are not the same.

 Advantages: improved fit between product and consumer, expanded penetration.

Product adaptation is necessary under several conditions. Some are mandatory, whereas others

are optional. In addition, firm characteristics and environmental characteristics have a significant

impact on a firm’s overall performance and marketing mix strategy.

A. Mandatory Product Modification

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The mandatory factors affecting product modifications include the following: government’s

mandatory standards (i.e., country’s regulations), electrical current standards, measurement

standards, and product standards and systems.

Products must be modified to compensate for differences in electrical current standards. In

many countries there may even be variations in electrical standards within the country. The

different electrical standards (phase, frequency, and voltage) abroad can easily harm products

designed for use.

Measurement systems can also vary from country to country. Some countries employ system of

measurement (feet, pounds), most countries employ the metric system, and product quantity

should or must be expressed in metric units.

Such mandatory standards make the adaptation decision easy: a marketer must either comply or

remain out of the market.

B. Optional Product Modification

A more complex and difficult decision is optional modification, which is based on the

international marketer’s discretion in taking action. The conditions that may make optional

modification attractive are;

Ü Physical distribution, and this involves the facilitation of product transportation at the

lowest cost.

Ü Local use conditions, including climatic conditions. The hot/cold, humid/dry conditions

may affect product durability or performance.

Ü Space constraint. For instance: Sears’ refrigerators were redesigned to be smaller in

dimensions without sacrificing the original capacity, so that they could fit into the compact

Japanese home.

Ü Consumer demographics as related to physical appearance can also affect how products are

used and how suitable those products are. Local use conditions include users’ habits.

C. Environmental Characteristics

 Examples are endless. Detergents should be reformulated to fit local water conditions.

 Price may often influence a product’s success or failure in the marketplace. This factor

becomes even more crucial abroad because of difference of foreign consumers’ incomes.

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 One reason that international marketers often voluntarily modify their products in individual

markets is their desire to maximize profit by limiting product movement across national

borders.

 Perhaps the most arbitrary yet most important reason for product change abroad is because of

historical preference, or local customs and culture, and so forth.

4.2 Branding and Its Types, Brand Piracy

In 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 a

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

advertising, promotion, and packaging.

The American marketing association defines a brand as follows: -

"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 of competitors". A brand is essentially a seller's promise to consistently deliver a specific

set of features, benefits, and services to the buyers.

A 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, trademark is a legal

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

The best brands convey a warranty of quality. But a brand is even a more complex symbol. A

brand can convey up to six levels of meaning. Apple requires 1 Billion from Samsung, because

Samsung copied three design of apple

i. Attributes:-A brand first brings to mind certain attributes. Thus, Mercedes suggests

expensive, well built, well-engineered, durable, high prestige, high resale value, fast, and so

on.

ii. Benefits:-A brand is more than a set of attributes, customers are not buying attributes; they

are buying benefits. Attributes need to be translated into functional and/or emotional benefits.

The attribute "durable" could translated into the functional benefit, "I won't have to buy a

new car every few years". The attribute "Expensive" might translated into the emotional
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 benefit, "The car helps me feel important and admired". The attribute "Well Build" might

translated into the functional and emotional benefit, "I am safe in case of an accident".

iii.Values:-The brand also says something about the product values. Thus, Mercedes stands for

high performance, safety, prestige, and soon. The brand marketer must figure out the specific

groups of car buyers who are seekinnng these values.

iv.Culture: The brand may represent a certain culture. The Mercedes represents German culture.

Organized, efficient, high quality.

v. Personality: - The brand can also project a certain personality. If the brand were a person, an

animal, or an object, what would come to mind? Some time it might take on the personality of

an actual well-known person or spokesperson.

vi.User: - The brand suggests the kind of consumers who buys or uses the product. The users

will be those who respect the product's values, culture, and personality.

4.2.1 Types of Branding

Table 4.1: Branding Decisions

Types of Branding Advantages Disadvantages

♪ Lower production cost. ♪ Severe price competition.
No Brand ♪ Lower marketing cost. ♪ Lack of market identity.
♪ Lower legal cost.
♪ Flexible quality control.
Vs  Better identification and  Higher production cost.
awareness.  Higher marketing cost.
Branding  Better chance for production  Higher legal cost.
differentiation.
 Possible brand loyalty.
Possible premium pricing.
Private Brand  Possibility of larger market  Severe price competition.
share.  Lack of market identity.
 No promotional problems.
Vs ♥ Better price due to higher price ♥ Difficult for small manufacturer
inelasticity. with unknown brand.
Manufacturer’s ♥ Retention of brand loyalty. ♥ Requires brand promotion.
Own Brand ♥ Better bargaining power.
♥ Better control of distribution.

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 o Marketing efficiency. o Assumes market homogeneity.
o Permits more focused o Existing brand’s image harmed
Single Brand marketing. when trading up/down.
o Eliminates brand confusion. o Limited shelf space.
o Good for product with good
Vs reputation (halo effect).
♣ Market segmented for varying ♣ Higher marketing cost.
needs. Creates competitive ♣ Higher inventory cost.
Multiple Brands spirit. ♣ Loss of economies of scale.
♣ Avoids negative connotation of
existing brand.
♣ Gains more retail shelf space.
♣ Does not harm existing brand’s
image.
Local Brands  Meaningful names.  Higher marketing cost.
 Local identification.  Higher inventory cost.
 Avoidance of taxation on  Loss of economies of scale.
international brand.  Diffused image.
 Allows variations of quantity
Vs and quality across markets.
 Maximum marketing  Assumes market homogeneity.
efficiency.  Problems with black and grey
Worldwide Brand  Reduction of advertising costs. markets.
 Elimination of brand  Possibility of negative
confusion. connotation.
 Good for culture-free product.  Requires quality and quantity
 Good for prestigious product. consistency.
 Easy identification/recognition  LDCs’ opposition and resentment.
for international travellers.  Legal complications.
 Uniform worldwide image.

4.2.2 Brand Strategy

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

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i) Line Extension: 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 ingredients, package sizes, and so on.

ii) Brand Extension: 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 the new product instant recognition and earlier acceptance. It enables the

company to enter new product categories more easily. That is, Sony puts its name on most of its

electronic products and instantly establish a connection of the new products high quality.

iii) Multi Brands: A 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 features and/or appeal to different buying motives. A 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.

iv) New Brand: When a company launches products in a new category, it may find that none of

its current brand names are appropriate.

v) Co-brands: A 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 other brand 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 other brand.

4.2.3 Advantages of Branding

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

Furthermore, the seller find it easier to trace the order if it is misshaped, or to determine why

the product was rancid if consumer complain.

Ü The seller's brand name and trademark provide legal protection of unique product features,

which competitors would otherwise be likely to copy.

Ü Branding gives the seller the opportunity to attract a loyal and profitable set of customers.

Brand loyalty gives sellers some protection from competition and greater control in planning

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 their marketing program.

Ü Branding helps the seller segment markets.

Ü Strong brands helps build the corporate image, making it easier to launch new brands and

gain acceptance by distributors and consumers.

Brand names makes the product 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 them identify quality differences and shop more efficiently.

4.2.4 Brand/Product Piracy

Product piracy is one of the downsides that marketers with popular global brand names face. Any

aspect of the product is vulnerable to piracy, including: the brand name, the logo, the design, and

the packaging. The impact on the victimized company’s profits is twofold. Obviously, there are

the losses stemming from lost sales revenues. The monetary losses due to piracy can be

staggering. Even more worrisome than the monetary losses is the damage that pirated products

could inflict to the brand name. Pirated products tend to be of poor quality. As a result, the piracy

scourge often jeopardizes the brand’s reputation built over the years. Such risks are especially

big in emerging markets where consumers have only recently been exposed to premium branded

products and counterfeits often outnumber the real thing by a significant factor.

Strategic Options Against Product Piracy

MNCs have several strategic options at their disposal to combat counterfeiters.

♪ Lobbying Activities. Lobbying governments is one of the most common courses of action

that firms use to protect themselves against counterfeiting. Lobbyists pursue different types of

objectives. One goal is to toughen legislation and enforce existing laws in the foreign market.

However, improved intellectual property rights (IPR) protection is more likely to become

reality if one can draw support from local stakeholders.

♪ Legal Action. Prosecuting counterfeiters is another alternative that companies can employ to

fight product piracy

♪ Customs. Firms can also ask customs for assistance by conducting seizures of infringing

goods. IP owners could also pinpoint broader concerns to the customs officials such as risks

to consumers of fake goods or to the reputation of the host country.

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♪ Product Policy Options. For instance, software manufacturers often protect their products by

putting holograms on the product to discourage counterfeiters. Holograms are only effective

when they are hard to copy.

♪ Distribution. Changes in the distribution strategy can offer partial solutions to piracy.

♪ Pricing. Marketers can also fight counterfeiters on the price front.

♪ Communication Options. Companies also use their communication strategy to counter rip-

offs. Through advertising or public relations campaigns, companies warn their target audience

about the consequences of accepting counterfeit merchandise.

4.3 Packaging and Labeling

4.3.1 Packaging
Even after a product is developed and branded, strategies must still be developed for other
product related aspects of the marketing mix.
Thus, packaging is a business function and a package is an item. Packaging can be defined as

follows:

"Packaging is the activities of designing and producing the container or wrapper for a product.”

The container or wrapper is called the package. The package might include up to three levels of

material. 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-dozen

boxes of old spice. In 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

Packaging Functions

For most packaging applications, marketers should keep in mind that foreign consumers are

more concerned with the functional aspect of a package than they are with convenience. A good

design should have impact, visibility, legibility, simplicity, consistency, versatility and honesty.

Packaging does not have to be dull. Novel shapes and designs can be used to stimulate interest

and create excitement.

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

i) Protect the product on its way to the consumer: A package protects products during

shipment. Furthermore, it can prevent tampering with products, notably medications and food
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products, in the warehouse or the retail store.

ii) Provide protection after the product is purchased: Compared with bulk (that is

unpackaged) items, packaged goods generally are more convenient, cleaner, and less susceptible

to losses form evaporation, spilling and spoilage.

iii) Be part of a company's trade marketing program: A 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 in the store.

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

Packing Problems

There are four common packaging problems; same of them are in direct conflict with one

another. They are:

a. Weight: Over packing not only directly increases packing cost but also increases weight

and size of cargo. Any undue increases in weight or size only serves to raise freight changes.

Moreover, import fees or customs duties may also rise when import duties are based on gross

weight. Thus overprotection, of the cargo can cost more than it is worth.

b. Breakage: Although over packing is undesirable, so is under packing because the latter

allows a products to be susceptible to breakage or damage. The breakage problem is present in

every step of ocean transport.

In order to protect the breakage, cargo should be unitized or palletized whenever possible.

Palletizing is the assembly of one or more packages on a pallet base and the securing of the

load to the pallet. Unitizing is the assembly of one or more items into a compact load secured

together and provided with acids and cleats for ease handling. These two packing methods

force cargo handlers to use mechanical handling equipment to move cargo.

c. Moisture and temperature: Certain products can easily be damaged by moisture

and temperature. Such products are subject to condensation even in the hold of a shipped

equipped with air conditioning or dehumidifying equipment. Another problem is that the cargo

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 may be unloaded in the rain. Many foreign parts do not have covered storage facilities, and the

cargo may have to be left in the open subject to heat, rain, cold or adverse elements. One very

effective means of eliminating moisture is shrink wrapping, which involves sealing

merchandise in a plastic film. Waterproofing can also be provided by using waterproof inner

lines or moisture absorbing agents and by coating finished metal parts with a preservative or

rust inhibitor.

d. Pilferage and theft: Cargo should be adequately protected against theft. One method

to discouraging theft is to use shrink wrapping seals, or strapping. Gummed sealing tapes with

patterns when used, will quickly reveal any sign of tampering. Also, only well-constructed

packing in good condition should be used i.e. containerization.

Another area of concern is marking. The main purpose of marking is to identify the shipment

so that the carrier can forward the shipment to the designated consignee. Container can take

care of most of the four packing problems. Because of a container’s construction, a product

does not have to have heavy packing. A container is a large box made of durable material such

as steel, aluminum, plywood and glass reinforced plastics.

4.3.2 Labeling

Labeling is closely related to packaging and is another product feature that requires managerial

attention. A 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 close relationship among labeling, packaging, and branding.

Types of labels:-Labels fall into three primary kinds:-

i) A brand label:-It is simply the brand name applied to the product or package.

ii) A descriptive label: It gives objectives information about the products' use construction,

care, performance, and/or other pertinent features ingredients and nutritional contents.

iii) A grade label: It 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.

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

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

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Functions of Labeling

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

♪ The label identifies the product or brand.

♪ The 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.

♪ The label might promote the product through attractive graphics.

4.4 After Sales Service

The support services component includes repair and maintenance, instructions, installation,

warranties, deliveries, and the availability of spare parts. Many otherwise successful marketing

programs have ultimately failed because little attention was given to this product component.

Repair and maintenance are especially difficult problems in developing countries.

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