CHAPTER FIVE

PRODUCT MANAGEMENT
 Meaning of Product

 As consumers we buy different kinds of products so as to

satisfy our varied needs such as food grains, textile, shaving
cream, tooth paste, books, pen, pencils and many other such
items in our daily life. Commonly, these items are called as
products.
 However, our decision to buy an item is based not only on its
tangible attributes but also on a variety of associated non-
tangible and psychological attributes such as services, brand,
package, warranty, image etc.
 Product is a bundle of utilities consisting of various product
features and accompanying services.
 The bundle of utilities is composed of those physical and
psychological attributes that the buyer receives when he buys
the product and which the seller provides by selling a particular
combination of product features and associated services.
• Any thing that can be offered to a market for attention,
acquisition, use or consumption and that might satisfy a
need or want.
• Broadly defined, products include physical objects,
services, persons, places, organizations, ideas, or mixes of
these.
 Main difference b/n Goods and Services
1. Tangibility
Goods are tangible
Services are intangible
2. Services are heterogeneous/ variable
Goods are homogeneous
3. Services are inseparable
4. Services are perishable
 How do Goods differ from Services?

1. Because a good is a physical thing, it can be seen and

touched. You can try on soap, or smell Wonbera coffee as
it brews. A good is a tangible item. When you buy it, you
own it. And it’s usually pretty easy to see exactly what
you’ll get.
 On the other hand, a service is a deed performed by one
party for another. Services are products that consist of
activities, benefits or satisfactions that are offered for
sale, such as haircuts, tax preparation and home repairs.
Services are essentially intangible and do not result in the
ownership of anything.
2. When you provide a customer with a service, the
customer can’t keep it. Rather, a service is experienced,
used, or consumed. You go and see a DreamWorks
Pictures movie, but afterward all you have is a memory.
You travel with EEL, but you don’t own the equipment
(Air plane). Services are not physical—they are intangible.
You can’t “hold” a service. And it may be hard to know
exactly what you’ll get when you buy it.
• Most products are a combination of tangible and
intangible elements. Shell gas and the credit card to buy
it are tangible—the credit the card grants is not. A
Domino’s pizza is tangible, but the fast home delivery is
not.
3. Goods are usually produced in a factory and then sold. A
Sony TV may be stored in a warehouse or store waiting
for a buyer. By contrast, services are often sold first, then
produced. And they’re produced and consumed in the
same time frame. Thus, goods producers may be far away
from the customer, but service providers often work in
the customer’s presence.
• Services are perishable—they can’t be stored. This makes
it harder to balance supply and demand.
 Levels of a Product
• Product planners need to think about the product on three
levels. The core product, actual product and the augmented
product.
1. The core product
 Is the most basic level
 Which addresses the question: What is the buyer really
buying?
 Stands at the centre of the total product.
“Customers buy the holes not the drill that helps to create the
holes.”
 Thus when designing products, marketers must first define the
core of benefits that the product will provide to consumers.
 2. The Actual /tangible Product
• The product planner must next build an actual product
around the core product.
• Actual products may have as many as five characteristics:
a quality level, features, styling, a brand name and
packaging.
• For example, Sony's Handycam camcorder is an actual
product. Its name, styling, features, packaging and other
attributes have all been combined carefully to deliver the
core benefit - a convenient, high-quality way to capture
important moments.
3. The Augmented Product = supportive services
• Finally, the product planner must build an augmented
product around the core and actual products by offering
additional consumer services and benefits. Sony must
offer more than a camcorder.
• It must provide consumers with a complete solution
to their picture-taking problems.
• Thus when consumers buy a Sony Handycam, Sony
and its dealers might also give buyers a warranty on
parts and workmanship, free lessons on how to use
the camcorder, quick repair services when needed
and a free phone number to call if they have
problems or questions.
• To the consumer, all of these augmentations become
an important part of the total product.
 Therefore, a product is more than a simple set of
tangible features. Consumers tend to see products as
complex bundles of benefits that satisfy their needs.
 Classification of Product

• Marketers have traditionally classified products on the

basis of three characteristics: durability, tangibility and
use.
a. Durability and Tangibility
1. Non-durable goods: Non-durable goods are tangible
goods normally consumed in one or a few uses. For
example, soap, salt and biscuits.
2. Durable goods: Durable goods are tangible goods
that can normally be used for many years. For
example, color Tv., refrigerators, washing machines
and vacuum cleaners.
3. Services: Services are intangible, inseparable,
variable and perishable products. For example,
airline and banking services.
 b. Consumer goods classification

 Consumer products are those bought by final consumers for final

consumption. Marketers usually classify these goods further
based on how consumers go about buying them. Consumer
products include convenience products, shopping products,
specialty products and unsought products.
1. Convenience: these are goods that the customer usually
purchases frequently, immediately and with a minimum of
effort.
Examples include soaps and newspapers.
 Convenience goods can be further classified into three
categories.
– Staple goods: consumer purchases on regular basis
– Impulse goods: consumer purchases without any planning or
search effort.
– Emergency goods: consumer purchases on urgent need.
2. Shopping goods: These are goods that the
customer, in the process of selection and
purchase characteristically compares on such
bases as suitability and quality. Examples:
Furniture, electrical appliances, etc
3. Specialty goods: These are goods with unique
characteristics or brand identification for which a
sufficient number of buyers are willing to make a
special purchasing effort. For example, cars.
4. Unsought goods: These are goods the
consumer does not know about or does not
normally think of buying. The classic examples of
known but unsought goods are life insurance.
 Industrial Product Classification

1. Heavy Equipment/Capital Equipment

2. Consumable items – do not become part of
finished product
3. Component parts- purchased for the purpose of
inclusion of the final product
4. Processed materials – form indistinguishable part
of the final product.
5. Raw materials
6. Business Services
Technical- Computer repair services
Non technical- Janitorial services
 Individual Product Decisions
1. Product Attributes
2. Branding
3. Packaging
4. Labeling
5. Product–support services
 1. Product Attributes
A. Product Quality
 Stands for the ability of a product to perform its
functions, it includes the product's overall durability,
reliability, precision/exactness, ease of operation and
repair, and other valued attributes.
• Although some of these attributes can be measured
objectively, from a marketing point of view, quality
should be measured in terms of buyers' perceptions.
B. Product features: Product features include such factors
as form/appearance, color, size, weight, odor, material.
 2. Branding
• Branding is the main tool marketers use to distinguish
their products from the competition’s.
• Branding means the use of a name, term, symbol, or
design—or a combination of these—to identify a
product.
• It includes the use of brand names, trademarks, and
practically all other means of product identification.
1. Brand: a name, term, sign, symbol, design, or a combination of
these that is intended to identify the goods or services of one
seller or group of sellers and to differentiate them from those of
competitors.
2. Brand names: that part of a brand which can be vocalized.
 It is that part of a brand that can be spoken, including letters
(GM, YMCA), words (Chevrolet), and numbers (WD-40, 7-Eleven).
3. Brand mark/logo: that part of a brand which can be recognized
but is not vocalized, such as a symbol, design, or distinctive
coloring or lettering.
• It is the elements of a brand that cannot be spoken. For example,
the well-known Mercedes-Benz and Delta Air Lines symbols.
4. Trademark: a brand or part of a brand that is given legal
protection because it is capable of exclusive appropriation. It is a
legal term.
• It includes only those words, symbols, or marks that are legally
registered for use by a single company.
 Importance of a brand

1. The brand makes it easier for the seller to process orders and
track down problems.
2. The seller’s brand name and trademark provide legal
protection of unique product features.
3. Branding gives the seller the opportunity to attract a loyal
profitable set of customers and helps to increase the control
and share of the market.
4. Branding helps the seller to segment markets and expand the
product mix.
5. Good brand help to build the corporate image because it
advertises the quality of the company makes – speeding
acceptance of new product marketed under the same name.
6. Brands make it easy for customers to identify products or
services.
 Requirements of a good brand

Among the desirable qualities for a brand following are very important. A
good brand should:
1. Easiness
 Be easy to pronounce, recognize and remember
2. Be distinctive
3. Meaningfulness
 Suggest something about the product’s benefits or characteristics (s)
 Suggest about the product qualities such as action or use.
4. Patentable
 Have a possibility of registration and legal protection.
5. Transferable
 Be large enough to be applicable to new products that may be added
to the product line.
6. Likeability
7-Eleven, Inc. was the very first convenience store open
• “around the clock”.
 3. Packaging Decisions
• Packaging includes the activities of designing and
producing the container or wrapper for a product.
Packaging performs a vital function for most products.
• It protects goods from being damaged before you buy
them, helps keep, for example, foodstuffs hygienic and
fresh, and is often necessary for labeling and
information reasons.
Packaging Functions
 The three most important functions of
packaging are
a. To contain and protect products
b. To promote products, and
c. To facilitate the storage, use, and convenience
of products
 A. Containing and Protecting Products
• The most obvious function of packaging is to contain
products that are liquid, granular/smooth, or otherwise
divisible.

• Packaging also enables manufacturers, wholesalers, and

retailers to market products in specific quantities, such
as ounces.

• Physical protection is another obvious function of

packaging. Most products are handled several times
between the time they are manufactured, harvested, or
otherwise produced and the time they are consumed or
used. Many products are shipped, stored, and inspected
several times between production and consumption.
 B. Promoting Products
• Packaging does more than identify the brand, list the
ingredients, specify features, and give directions.
• A package differentiates a product from competing
products and may associate a new product with a
family of other products from the same manufacturer.
• Packages use designs, colors, shapes, and materials to
influence consumers’ perceptions and buying behavior.
For example, marketing research shows that health
conscious consumers are likely to think that any food is
probably good for them so long as it comes in green
packaging.
 3. Facilitating Storage, Use, and Convenience

• Wholesalers and retailers prefer packages that are easy

to ship, store, and stock on shelves.

• They also like packages that protect products, prevent

spoilage or breakage, and extend the product’s shelf life.

• Consumers constantly seek items that are easy to

handle and open.
 4. Labeling Decisions
• Labels may range from simple tags attached to products
to complex graphics that are part of the package .
Typically, there are three kinds of labels
1. Brand label: simply the brand alone applied to the
product or to the package.
2. Grade label: a label, which identifies the quality with, a
letter, number or word. (Where, Who, When, ingredients,)
3. Descriptive label: it gives objective information about the
use, construction, care, performance or other features of
the product. Sometimes it is called informative label.
Labeling generally takes one of two forms: persuasive/
influential or informational.
1. Persuasive labeling
 focuses on a promotional theme or logo, and consumer.
2. Informational
 They provide different information regarding product
usage, expiry date, instruction.
 Is designed to help consumers make proper product
selections and lower their cognitive dissonance after
the purchase.
 5. Product-Support Services Decisions
• Customer service is another element of product strategy.
• A company's offer to the marketplace usually includes
some services, which can be a minor or a major part of
the total offer.
• warranties and money-back guarantees, prompt delivery,
reliable price quotations, credit, test facilities ,
demonstration capabilities, liberal return policies
 Common types of product supportive services
1. Credit and financing
 With the increased acceptance of debt by the
consumer, offering credit and/or financing has become
an important part of the total product.
• For certain market segments and certain products, the
availability of credit may make the difference between
buying or not buying the product
 2. Warranty
• It is a confirmation of the quality or performance of a
good or service.
• Just as a package is designed to protect the product, a
warranty protects the buyer and gives essential
information about the product.

1. An express warranty is a written guarantee.

2. An implied/ultimate warranty is an unwritten guarantee
that the good or service is fit for the purpose for which it
was sold. All sales have an implied warranty under the
Uniform Commercial Code.
 3. Money-back guarantees
 The ultimate warranty is the money-back guarantee.
 To the customer, a money-back guarantee reduces risk
almost totally.
• There are certain market segments (e.g., low risk takers)
that perceive this service as very important.
• It is obvious that this service is effective only if the
product is superior and the product will be returned by
only a few people.
 4. Delivery, installation, training, and service
• Products that tend to be physically cumbersome or
located far from the customer might consider delivery
(free or a small charge) to be an integral part of the new
product.
• Very few major appliance stores, lumberyards, or
furniture stores could survive without provisions for this
service.
• Similarly, there are products that are quite complicated
and/or very technical, and whose average consumer
could neither learn how to install or use it without
assistance from the manufacturer.
Example
 Both professional and home computer companies have
been forced to provide such services.
 Product Line decisions
Product line
A group of products that are closely related because
they may:
• function in a similar manner
• be sold to the same customer groups,
• be marketed through the same types of outlets
• fall within given price ranges
• E.g. Nike produces several lines of athletic
shoes and apparel, and Marriott offers several
lines of hotels.
• The major product line decision involves product line
length- the number of items in the product line.
• It is deciding about the number of items should be
included with in a given product line.
 A company can expand its product line in two ways: by
line filling or line stretching.
• Line stretching: adding products that are higher or lower
priced than the existing line.
• Line filling: adding more items within the present price
range.
 Product Mix Decisions
A product mix, also known as product portfolio
Consists of all the product lines and items that a
particular seller offers for sale.
A company’s product mix has four important dimensions:
width, length, depth, and consistency.
1. Product mix width
 Number of different product lines carried by company.
 For example, the “Colgate World of Care” includes a fairly
contained product mix, consisting of personal and home
care products that you can “trust to care for yourself,
your home, and the ones you love.”
• By contrast, GE manufactures as many as 250,000 items
across a broad range of categories, from light bulbs to jet
engines and diesel locomotives.
2. Product mix length
 Refers to the total number of items a company carries
within its product lines.
• Colgate typically carries many brands within each line.
For example, its personal care line includes Softsoap,
liquid soaps and body washes, Irish Spring bar soaps,
Speed Stick deodorant, and Skin Bracer and Afta
aftershaves.
3. Product mix depth
 Refers to the number of variants offered for each product
in the line.
• Colgate toothpastes come in 16 varieties, ranging from
Colgate Total, Colgate Max Fresh, Colgate Sensitive,
Colgate Cavity Protection, and Colgate Tartar Protection
to Ultrabrite, Colgate Sparkling White, Colgate Luminous,
and Colgate Kids Toothpastes.
• Each variety comes in its own special forms and
formulations. For example, you can buy Colgate Total in
regular, mint stripe gel, or whitening liquid.
4. The consistency of the product mix
 Refers to how closely related the various product lines
are in end use, production requirements, distribution
channels, or some other way.
 Colgate product lines are consistent insofar as they are
consumer products and go through the same
distribution channels.
 The lines are less consistent insofar as they perform
different functions for buyers.
 These product mix dimensions provide the handles for
defining the company’s product strategy.
 Product Life Cycle

 The product life cycle is a concept that attempts to

describe a product's sales, profits, customers,
competitors, and marketing emphasis from its
beginning until it is removed from the market.
 Once the product or service reaches the market, it
enters the product life cycle Like people, goods and
services grow, mature and eventually decline.
 It serves as a conceptual base of examining product
growth and development.
 It is the pattern of demand for the product over time.
 Characteristics of PLC
1. Not every product goes through every stage. In
fact many products never get past the
introduction stage.
2. The length of a time a product spends in any one
stage may vary.
 Some products may move through the entire
cycle in weeks.
3. Products have a limited life
4. Product sales pass through distinct stages, each posing
different challenges to the seller
5. Profits rise and fall at different stages of product life
cycle.
 Products require different marketing, human resource,
production strategies in each stage of their life cycle.
 Stages in the Product Life Cycle

1. Introduction
 During 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/sample, and market tests.
 This period ends when awareness of the product is high
enough to attract wider users so sales then increases at a
steeper rate.
 This introductory (some times called pioneering) stage is
most risky and expensive one, because substantial amount
of money must be spent in seeking consumer acceptance of
the product.
 But many products are not accepted by a sufficient number
of consumers and fail at this stage.
 Conditions associated with this stage
 High product failure rate
 Relatively few competitors
 Limited distribution
 Promotional expenditure is relatively high in relation to
sales and economies of scale are not yet possible
 Marketing strategies during this stage
1. Pricing: Introductory pricing strategy will depend on the type of
products in terms of its degree of distinctiveness. Price is also
affected by competitive activity as this determines how long any
product distinctiveness is likely to last.
The company has two strategic options:
A. A skimming pricing strategy: involves the application of a high price
to a small target group of consumers (typically innovators and early
adopters).
 Whilst the product remains distinctive, growth can be encouraged
by a planned series of progressive price reductions.
B. A penetration pricing strategy: pricing the product at a lower level
and is appropriate where demand is elastic and high levels of
competitive activity.
 It is to attract the largest possible of new buyers early in the
product’s life. This pricing can help the company to discourage
competitive entry.
 2. Distribution
 Distribution decisions are determined by expected
penetration or skimming and it is important that the
product is available to the intended marketing.
3. Promotion
 Profits are negative or low in the introduction stage.
Promotional expenditures are at their highest ratio to sales
because of the need to:
 Inform potential consumers and educate potential
consumers about the product.
 Induce/make product trial, and
 Secure distribution in retail outlets.
 Promotion is aimed at innovators and early adopters at
this particular stage.
 2. Growth stage
 Is marked by a rapid climbs/increase in sales
 Product sales in the growth stage grow at an increasing rate because of
new people trying or using the product.
 Early adopters like the product and additional consumers start buying it.
 New competitors enter, attracted by the opportunities. They introduce
new product features and expand distribution.
 Profit usually peaks/higher during this stage.
 Prices remain where they are or fall slightly, depending on how fast
demand increases.
 Companies maintain 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 promotional 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 unit manufacturing costs fall faster than price declines
owning to the producers learning effect.
 Marketing strategies during this stage
1. Product
 Changes start to appear in the product during this stage.
 To help differentiate a company’s brand from its competitors, and
improved styling and quality or new features are added to the
original design, and product proliferation/creation occurs.
Different sizes, flavors, etc.
2. Promotion
 Promotional expenditure still features strongly because this is the
best time to acquire market share. It should, however, be at a
level that does not drain profits.
 The emphasis of promotional effort changes from creating product
awareness to specific brand or trade name promotion.
 Advertising shifts to stimulating selective demand, in which product
benefits are compared with those of competitors’ offerings. i.e. shift
from product – awareness advertising to, product – preference
advertising.
 3. Distribution
 The firm during this stage enters new market segments.
 It increases its distribution coverage and enters new
distribution channels. I.e. channels are added as demand
increase and customers accept the product.
4. Pricing
 The company lowers prices to attract the next layer of
price sensitive buyers.
 3. The Maturity Stage

 Characterized by a slowing of total industry sales for the

product class.
 Weaker competitors begin to leave the market
 Most consumers who would buy the product are either
repeat purchasers of the item.
 Sales continuing to grow, but at a much decreased rate
 Attempts to differentiate and re-differentiate products
 Prices falling in battles to retain market share.
 Profits falling correspondingly because of fierce
competition.
 A key task of marketing strategy during maturity is to retain
market share, promotions role should be to reinforce brand
loyalty.
 Much marketing activity is devoted to this stage.
 Marketing Strategies during this Stage

1. Market Modification
 A company might try to expand the market for its
mature brand by working with the two factors that
make up sales volume:
1. It can try to expand the number of brand users
by converting non users
by entering new market segments
winning competitors’ customers
[Link] current users to increase their brand usage
 Use the product on more occasions
 Use more of the product on each occasion
 Use the product in new ways.
 2. Product Modification

 Managers also try to stimulate sales by modifying the

products characteristics through
1. Quality improvement –aims at increasing the product’s
functional performance.
2. Feature improvement-aims at adding new features (for
example, size, weight, materials, accessories)that
expand the product’s performance, safety, or
convenience.
3. Style improvement – aims at increasing the product’s
aesthetic appeal. The periodic introduction of new car
model is largely about style competition, as is the
introduction of new packaging for consumer products.
 3. Modifying Marketing Mix
 Marketers also can try to improve sales by changing one
or more marketing mix elements.
1. They can cut prices to attract new users and
competitors' customers.
2. They can launch a better advertising campaign or use
aggressive sales promotion-trade deals, cents-off,
premiums, and contests. Company can also offer new
or improved services to buyers.
 4. The Decline Stage

The decline stage occurs when sales begin to drop.

Frequently, a product enters this stage not because
of any wrong strategy on the part of the company
but because of environmental changes.
1. Technological innovation often comes before the
decline stage as newer technologies replace older
ones.
Example The word-processing capability of PCs pushed type
writers into decline
2. Sales also decline because of shifts in consumer
tastes, and increased domestic and foreign
competition. All lead to over capacity, increased
price cutting, and profit erosion.
 Marketing Strategies during this Stage

A company will follow one of two strategies to handle declining products:

1. Deletion: product deletion, or dropping the product from the company’s product
line, is the most drastic strategy.
– Because a residual core of consumers still consume or use a product even in the decline
stage. Product elimination decisions are not taken lightly. For example, Gillette
continues to sell its liquid paper correction fluid for use with type writers in the era of
word-processing equipment.
2. Harvesting: is when a company keeps the product but reduces marketing costs.
 It calls for gradually reducing a product or business’s costs while trying to
maintain sales.
 The first step is to cut R & D costs and plant and equipment investment.
 The company might also reduce product quality, sales force size,, and advertising
expenditures.
 It would try to cut these costs without letting customers, competitors, and
employees know what is happening.
 It is difficult to execute. Coca-cola still sells Tab, its firs diet cola, to a small group
of die-hard fans. According to cok’s CEO, “it shows you care we want to make
sure those who want Tab, get Tab.”
 New Product Development Strategy

 A firm can obtain new products in two ways.

1. Acquisition- by buying a whole company, a patent, or a
license to produce someone else’s product.

2. The firm’s own new-product development efforts.

 original products,
 product improvements,
 product modifications, and
 new brands that the firm develops through its own R&D
efforts.
 The New-Product Development Process
1. Idea Generation
 It is the systematic search for new product ideas.
 A company typically generates hundreds of ideas, even
thousands, to find a few good ones.
Major sources of new-product ideas
 Internal sources and
 External sources such as customers, competitors,
distributors and suppliers, and others.
 2. Idea Screening
 The purpose of idea generation is to create a large
number of ideas. The purpose of the succeeding stages
is to reduce that number.
 The first idea-reducing stage is idea screening, which
helps spot good ideas and drop poor ones as soon as
possible.
 3. Concept Development and Testing

 An attractive idea must be developed into a product

concept.
1. A product idea is an idea for a possible product that the
company can see itself offering to the market.
2. A product concept is a detailed version of the idea
stated in meaningful consumer terms.
3. A product image is the way consumers perceive an
actual or potential product.
 4. Concept Testing
 Is about testing new-product concepts with groups of
target consumers. The concepts may be presented to
consumers symbolically or physically.
5. Marketing Strategy Development
 Designing an initial marketing strategy for introducing the
product to the market.
The marketing strategy statement consists of three parts
1. Describes the target market; the planned value proposition;
and the sales, market share, and profit goals for the first
few years.
2. Outlines the product’s planned price, distribution, and
marketing budget for the first year.
3. Describes the planned long-run sales, profit goals, and
marketing mix strategy.
6. Business Analysis
 Involves a review of the sales, costs, and profit
projections for a new product to find out whether they
satisfy the company’s objectives.
 If they do, the product can move to the product
development stage.
 7. Product Development
 Here, R&D or engineering develops the product concept
into a physical product.
8. Test Marketing
 The stage at which the product and its proposed
marketing program are introduced into realistic market
settings.
 Test marketing gives the marketer experience with
marketing a product before going to the great expense of
full introduction.
 It lets the company test the product and its entire
marketing program—targeting and positioning strategy,
advertising, distribution, pricing, branding and packaging,
and budget levels.
9. Commercialization
 Test marketing gives management the information needed to
make a final decision about
 whether to launch the new product. If the company goes
ahead with commercialization-introducing the new product
into the market-it will face high costs.
 The company launching a new product must first decide on
introduction timing and where to launch the new product-in
a single location, a region, the national market, or the
international market.