Module 1

Product
Decision

Gangadhar Mamadapur
 Objectives of study.
• Products and its Kind.
• Product Length, Width, Depth.
• Product Mix.
• New product Development and its Strategies.
• Product life Cycle.
• Stages in PLC.
• Marketing Strategies in each stage of PLC.
 What is Product?
Product is anything that can be offered to a market
to satisfy a want or need.
Product could be :
– Physical Goods : Car, Soap.
– Services : Doctor’s consultation, legal advice.
– Person : Sachin Tendulkar.
– Places : Goa.
– Organizations : Merger and Acquisition.
– Ideas : Family Planning / Safe Driving.
– Experiences: Wonderla, Disney land.
Five Product Levels
• While
planning its
market
offerings,
marketer
needs to think
through five
level of
products
 Product level: The customer value Hierarchy.
Core Benefit:-
• Fundamental service/benefit that customer is
really buying.
• Marketers must see themselves as benefit
providers.
• Example: Hotel Guest – Buys rest/sleep.

Basic Product:-
• At the second level, marketer has to turn a core
benefit into a basic product.
• Example: Hotel room includes
bed/bathroom/table/chair/closet/towels
Expected Product:-
• At the third level, marketer prepares an
expected product.
• Expected product is a set of attributes &
conditions that buyers normally expect & agree
to when they buy the product.
• Example: Hotel Guest expects:
–Clean Bed.
–Fresh Towels.
–Working Lights.
–Quiet Room.
Augmented Product:-
• At the 4th level marketer prepares an augmented
product that meets customer’s desires beyond
expectations.
• Example: Hotel provides:
–CCTV.
–Fresh flowers.
–Spa.
–Room service.
–Multi cuisine dining.
• In a competitive mkt, competition usually takes
place at the product augmentation level.
• Augmented benefits may become expected
benefits in a competitive market.
• Potential Product:- Which encompasses all the
possible augmentations and transformations the
product or offering might undergo in the future.
• Example: Hotel provides:
– Fresh fruit.
– Saloon (Haircut)
– Stocked Refrigerator.
– Personal Valet.
• Successful marketers add benefits to not only
retain customers but to surprise & delight them.
• For this normal expectations are exceeded.
2nd Example: Microsoft’s Windows
Basic – A software application that enables a PC to
function
Augmented – A well-designed, high-quality, branded,
and packaged computer operating system that
provides a variety of features that are important to
the user
Potential – An operating system software application
that offers a series of channel and consumer services.
The channel member can obtain favorable pricing
and credit terms, training, engineering support, etc.
The consumer can get online support, version
updates, access to forums and communities.
3rd Example: Lays Chips
 Product Classification Schemes
Marketers classify the product on the basis of
durability, tangibility and use (consumer or Industrial)
 Durability and Tangibility

Nondurable
goods

Durable
Services
goods
 Product Classification
Non Durable Goods:- These are tangible goods
normally consumed in one or few uses. These goods
are frequently purchased. Ex soft drinks , Shampoo’s
etc.
Durable Goods:-These are tangible goods that
normally survive many uses. These goods require
personal selling and services, command a higher
margin, and require more seller guarantees. Ex
Washing machine and clothing
Services:- Are intangible, inseparable, variable and
perishable products that normally require more
quality control, supplier creditability and adaptability.
Ex: Hair cut and Banking
Use
 Consumer-Goods Classification
There are four type of consumer-goods available
in the market. They are

Convenience Shopping

Specialty Unsought
 1. Convenience Goods
• Convenience Goods:-The consumer purchase
frequently, immediately and with less effort.
Ex soft drinks, soaps, detergents etc
 2. Shopping Goods
• Shopping Goods:-Are those the consumers
compares the products characteristically on
the basis of ability, quality, price and style. Ex
furniture, clothing , major appliances, etc.
 3. Specialty Goods
• Specialty Goods:-These goods have unique
characteristics or brand identification for
which enough buyers are willing to make a
special purchasing effort. Ex Cars, computer,
men’s suits etc.
 3. Unsought Goods
Unsought Goods:- Are those goods, where the
consumer doesn’t know about or normally think
of buying such goods as impulse buying. These
require advertising and personal selling. Ex. Life
insurance, reference books, etc.
 Industrial-Goods Classification
Industrial goods are classified in terms of their
relative cost and how they enter the production
process. They are

Materials and parts

Supplies/
Capital items
business services
 1. Materials & Parts
Material and Parts ( These goods enter the
product directly)
–Raw Material
–Manufactured Materials
–Components Parts(Subassemblies)
 Raw Materials
• Raw Materials- These are basic products that
enter the production process with little or no
alterations.
• Example: iron ore, crude oil, Rubber, Leather
 Manufactured Materials
• Manufactured Materials -- Manufactured
materials include those raw material that are
subjected to some amount of processing
before entering the manufacturing process.
• Example: Acids ,fuel oil, steel, chemicals
 Component Parts
• Component Parts – These parts can be
installed directly into products with little or no
additional changes.
• Example: semi finished parts like bearings ,TV
Tubes , small motors , tyres
 2. Capital Goods
• A capital good is a durable good (is a good that
does not quickly wear out) that is used in
production of goods or services. These goods are
used in production process.
• Light equipment or accessories ( Hand tools,
computer terminals.)
• Installations or heavy equipment's ( machines ,
turbines)
• Plant and building ( Offices ,plants, warehouses,
parking lots , housing, which are real estate
property)
 3 .Supplies and Services
These goods /services support the operations
• Supplies – These are operating
maintenance supplies like fuels , packaging
materials, lubricants, paints, electrical items
• Services – Companies need a wide range of
services like Legal ,auditing, advertising,
courier, marketing research agency
 Product Mix.
A product mix is the set of all products and
items a particular seller offers for sale.
PEPSICO Product Mix
United Beverages product mix
Product Line:
• A group of closely related
product items
• They function in a similar
manner
• They are sold to the same
customer groups
• They are marketed through the
same types of outlets
• fall within given price ranges

Example: Personal Care from HUL

Product Mix:
• A group of
Product lines
offered by the
company
Example:
Personal care,
Food,
Beverages
from HUL
Any company’s product mix has four dimension :
1. Width- Number of different product lines
carries by the company.
2. Length - Total number of items in the product
mix of the company.
3. Depth - Assortment of size, colour and models
offered in each item of a product line.
4. Consistency - It refers to the relationship of
various product line either in their end use,
production requirement, distribution channel
or other way
Unilever products
 Consistency
Product Line - 1 Product Line -
2
Product Mix Width

PERSONALCARE FOOD &

DRINKS

Product Mix Length

Soap Shampoo Cream Toothpaste Ice Tea
Lux Clear Ponds Close up cream
Cornetto Lipton
Product
Mix Dove Dove Dove Pepsodent Magnum Supreme
Depth
Lifebuoy Lifebuoy Fair
& Lovely

Product Line Length Product Line

Length
 PRODUCT WIDTH Apple

Mac Software I-Pad I-Pod I-Phone

Mac book
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Mac book R
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Mac pro Iphone 5
Grage band

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 Product Line
Depth
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(Late 2013)
 FACTORS DETERMINING THE
PRODUCT MIX
1. Changes in Demand
2. Cost of Production
3. Advertising & Distribution Costs
4. Competitive Action and Reaction
 BENEFITS OF PRODUCT MIX
These four product mix dimensions permit the
company to expand its business in four ways,
1. New Product lines.
2. Widening in product mix.
3. Lengthen each product line.
4. Add more product variants in each products
and deepen its product mix.
1. Sales Growth
2. Sales Stability
3. Profits
 New Product Development.
In offering a new product line, the following are
to be analysed.
• Sales & profit.
• Market profile.
Sales & Profit:-
 New Product Development
The earlier figure shows a sales & profit report
for a five item products. The first items accounts
for 50% of total sales and 30% of total profit.
The first two items account for 80% of total sales
and 60% of total profit. If these two items are
suddenly hit by competitors, the lines sales and
profit could collapse. At the other end, the last
item delivery only 5% of the product lines sales
& profit. The product line manager has to
consider all these things and may consider
dropping this item unless it has strong growth
potential.
 New Product Development
Market Profile:-
The product line manager must review how the
line is positioned against competitors product.
These kinds of analysis can be done of product
utility and features like quality, weight etc.

The product line analysis provides information

for two key decisions areas
1. Product line length.
2. Product mix pricing
 New Product Development
Product line length:- A company lengthens its
product line in two ways,
• Line Stretching.
• Line filling.
Line Stretching:-
Line stretching occurs when a company
lengthens its product line beyond its current
range. It can be down by the following,
1. Down market Stretch.
2. Up-market Stretch.
3. Two way Stretch.
 New Product Development
Line filling:-
A firm can also lengthens its products line by
adding more items within the present range.
Motives for line filling include reaching for
incremental profits satisfying dealers who
complain about lost sales because of items
missing from lines, utilising excess capacity,
trying to become the leading full-line company,
and plugging holes to keep out companies.
 NEW PRODUCT DEVELOPMENT
• A product introduce to the market as
new –whether they are genuine
innovation or slight modifications of the
existing products.
• In most cases, the newness of the
product is the result of combining
characteristics of products already in
existence.
NEW PRODCT DEVELOPMENT PROCESS /STAGES

1. Idea Generation
2. Idea Screening
3. Concept Testing and Analysis
4. Product Development
5. Test Marketing
6. Commercialization
Product Life Cycle
Meaning
•All products have certain length of life during which
they pass through certain identifiable stages.
•The PLC is a conceptual representation of product
ageing process. Like your life is divided into stages
same as life of a product is also divided.
•Product start with introduction in the market for the
purpose of sale.
• The demand of that product is gradually increases in
the market & it reach to its maximum, from where it
start decline.
• It is effective lifespan of a product.
 The Product Life Cycle Concept is
Based on Four Premises

Profits from a product

Products have a
vary at different stages
limited life.
in the life cycle.

Product sales pass through

Products require different
distinct stages, each with
strategies at different
different marketing
life cycle stages.
implications.
Stages of Product life cycle
 Introduction Stage
• It is the 1st stage, wherein the product is launched in the
market with full scale production & marketing
programme.
• The product is a new one. It means “ a product that opens
up an entirely new market, replaces an existing product or
significantly broadens the market for an existing product.”
• In this stage sales grow at a very lower rate because it is
not an effective demand.
 characteristics
• Low & slow sales.
• High product price.
• Heavy promotional expenses.
• Lack of knowledge.
• Low profits.
 Growth stage
• Once the market has accepted the product, sales
begin to rise & product enter its 2nd stage.
• The product achieves considerable & widespread
approval in the market. The sales & profits
increases at an accelerated rate.
• In this effective distribution, advertising & sales
promotion are considered as the key factors.
 characteristics
• Rapid increase in sales.
• Product improvements.
• Increase in competition.
• Increase in profits.
• Reduction in price.
• Strengthening the distribution channel.
 Maturity stage
• Market becomes saturated because the
household demand is satisfied & distribution
channels are full. The product has to face keen
competition which brings pressure on prices.
Though the sales of the product rises but at a
lower rate. Profit margin however decline due to
keen competition.
 characteristics
• Sales decrease.
• Normal promotional expenses.
• Uniform & lower prices.
• Product modifications.
• Dealer’s support.
• Profit margin decreases
 Decline stage
• This is the finial stage, sooner or later actual
sales begin to fall under the impact of new
product competition & changing consumer
behavior. The sales & profits fall down
sharply & the promotional expenditure has
to be cut down drastically.
 characteristics
• Rapid decrease in sales.
• Further decrease in prices
• No promotional expenses.
• Suspension of production work.
 Product Life Cycle.
Not all products have bell shapes curve for its PLC.
Three common alternate patterns are shown below.

Growth–Slump-Maturity Pattern. Cycle-Recycle Pattern.

Scalloped Pattern
 Growth-Slump-Pattern
• Sales grow rapidly when the product is first
introduced and then falls & stabilizes
 Cycle–Recycle Pattern.
Initially the seller
promotes the product
aggressively, producing
the first cycle. Later
,sales start declining and
another promotion push
a second cycle. Ex new
drugs.
 Scalloped Pattern
• succession of life-cycles based on
discovery of new characteristics, uses or
users.
Fashion, Style & Fad Life Cycles.
 Fashion
• Something that is current and popular with the
buying public.
• First, a small number of consumers will take an
interest in the design because they feel it sets
them apart from everyone else (leaders of
fashion are often TV celebrities, pop stars or
sporting personalities).
• After some time the fashion will become
mainstream when the major manufacturers
adapt the design for the high street.
• Finally the fashion begins to fade in popularity as
the consumers move on to the next ‘must have’
design.
 Style
• Style refers to the characteristics that
distinguish one particular item of
clothing from another.
• Some styles may be very fashionable
today.
• Others may be outdated this year, but
‘in’ the next.
 Style
• For example, jeans are a specific style of pants.
• Jeans vary in style: boot-cut, flare, skinny, baggy,
etc.
 Style of Mobile Phone

• Candy bar (brick)

• Clam shell (flip)

• Sliding (flick)

• Touchscreen
 Fad/Craze
• A product that becomes fashionable very
quickly and is adopted with great enthusiasm
by certain market groups and declines in
popularity after a short time.
• Young people in particular are attracted to this
type of product.
• Do not fulfil any real need or offer any benefit
to the consumer.
Ripped jeans/Torn Jeans
 Typical Life Cycle
• The following illustrations give an indication of
how the life cycle of a product might appear if
it were an item of style, fashion or just a fad.

comes, goes, comes come, goes away Comes and goes away
back slowly quickly
 Conclusion
• FASHION
– A fashion is something that is current and popular
with the buying public.
• STYLE
– A style is more distinctive and can be classed as a
form of expression. A style will have recognisable
features.
• FAD / CRAZE
– The term fad denotes a product that becomes
fashionable very quickly and is adopted with great
enthusiasm. Fads do not survive long because
they do not fulfil any real need or offer any benefit
to the consumer
 What is Marketing strategy ?
• Marketing strategy is a long-term course of
action designed to optimize allocation of the
scarce resources at the disposal of a firm in
delivering superior customer experiences
and promote the interests of other
stakeholders.
• Scarce resources include monetary capital,
human capital, technology and time.
 Introduction Stage of PLC
• Sales: low
• Costs: high cost per customer
• Profits: negative
• Marketing Objective: create product
awareness and trial
• Product: offer a basic product
• Price: use cost-plus formula
• Distribution: build selective distribution
• Promotion: Build product awareness among
early adopters and dealers
 Marketing strategy in the
introduction stage
• Rapid-skimming strategy
- launching the new product at a high price and
a high promotional level
• Market conditions
- large part of the potential market is unaware
of the product
- those who become aware are eager to have
the product and able to pay the asking price
- the firm faces potential competition and
wants to build up brand preference.
 Marketing strategy in the
introduction stage
• Slow-skimming strategy
- launching the new product at high price and
low promotion
• Market conditions
- the market is limited in size
- most of the market is aware of the product
- buyers are willing to pay a higher price
- potential competition is not imminent
 Marketing strategy in the
introduction stage
• Rapid-penetration strategy
- launching the product at a low price and
spending heavily on promotion
• Market conditions
- the market is large
- the market is unaware about the product
- most buyers are price sensitive
- strong potential competition
 Marketing strategy in the
introduction stage
• Slow-penetration strategy
- launching the new product at a low price and
low level of promotion
• Market conditions
- market is large
- market is highly aware about the product
- demand is price sensitive
- there is some potential competition
 Growth Stage of PLC
• Sales: rapidly rising
• Costs: average cost per customer
• Profits: rising
• Marketing Objective: maximize market share
• Product: offer extension, service, warranty
• Price: penetration strategy
• Distribution: build intensive distribution
• Promotion: Build awareness and interest in
the mass market
Marketing Strategies in Growth Stage
• Improve product quality and add new product
features and improved styling
• Add new models and flanker products
• Enter new market segments
• Increase distribution coverage and enter new
distribution channels
• Shift from product-awareness advertising to
product-preference advertising
• Lower prices to attract next layer of price
sensitive buyers
 Maturity Stage of PLC
• Sales: peak
• Costs: low cost per customer
• Profits: high
• Marketing Objective: maximize profits while
defending market share
• Product: diversify brand and models
• Price: Price to match or best competitors
• Distribution: build more intensive distribution
• Promotion: Stress brand differences and benefits
 Marketing Strategies in
Maturity Stage
• The strategies for the managers to
face this situation is to adopt
1. Market modification
2. Product modification and

3. Marketing mix modification

 Marketing Strategies in
Maturity Stage
1) Market Modification:
– Increase the consumption of the current
product.
• How?
– Look for new users and market segments.
– Reposition the brand to appeal to larger or
faster-growing segment.
– Look for ways to increase usage among present
customers.
 Marketing Strategies in
Maturity Stage
2) Product Modification:
– Changing characteristics such as quality,
features, or style to attract new users and
to inspire more usage.
• How?
– Improve durability, reliability, speed, taste.
– Improve styling and attractiveness.
– Add new features.
– Expand usefulness, safety, convenience.
 Marketing in Action

Modifying the Product

Gillette’s Fusion razor
combines a precision
trimmer blade (on back)
with a five blade shaving
surface (on front). The
flexible comfort guard and
Enhanced Indicator
Lubrastrip (containing
vitamin E and aloe)
enhance shaving comfort.
 Marketing Strategies in
Maturity Stage
3) Marketing Mix Modification:
– Improving sales by changing one or more
marketing mix elements.
(a) Prices
- would a price cut to attract new users?
- if so, should the list price be lowered or
should price be lowered through price
specials, early purchase discount, volume
related discounts or easier credit terms
 Marketing Strategies in
Maturity Stage
(b) Distribution
- exploring new distribution channel
(c) Advertising
- changing advertising message, timing,
frequency
(d) Sales promotion
- step up sales promotion through rebates,
gifts, and contests
 Marketing Strategies in
Maturity Stage
• Modifying the Marketing
Mix:
– Improving sales by
changing one or more
marketing mix elements.
• How?
– One method is to launch
aggressive sales
promotion programs,
such as rebates.
 Decline Stage of PLC
• Sales: declining
• Costs: low cost per customer
• Profits: declining
• Marketing Objective: reduce expenditures
and milk the brand
• Product: phase out weak items
• Price: cut price
• Distribution: selective : phase out
unprofitable outlets
• Promotion: Reduce to level needed to
retain hard-core loyal customers
 Marketing Strategies in Decline Stage
1. Increase firm’s investment (to dominate the market
and strengthen its competitive position)
2. Maintain the firm’s investment level until the
uncertainties about the industry are resolved.
3. Decrease the firm’s investment level selectively by
dropping unprofitable customer groups, while
simultaneously strengthening the firm’s investment
in lucrative niches
4. Harvesting (“milking”) the firm’s investment to
recover cash quickly
5. Divesting the business quickly by disposing of its
assets as advantageously as possible.
 Introduction of Maggi
2-minutes Noodles
• It’s a Brand of instant Noodle made by Nestle
India Ltd.
• It was found by the Maggi family in Switzerland
in the 19th century.
• Nestle launched Maggi for the first time in
India in the year 1982.
• Now it enjoys around 90% market share in this
segment.
• Over the years Maggi has launched several
products under its Brand Name.
 Introduction
Full-Scale Launch of New
• No competition Products
• Limited distribution
• High marketing and production costs
• Promotion focuses on awareness and
information
• Nestlé India Ltd. (NIL), the Indian subsidiary
of the global FMCG major, Nestlé SA,
introduced the Maggi brand in India in
1982, with its launch of Maggi 2 Minute
Noodles, an instant noodles product
 Market Penetration Strategies
• Promotional campaigns in school.
• Advertising strategies: - focusing on kids.
• Conducting regular market research
 Growth Stage
• Increasing rate of sales Offered in more
sizes,
• Entrance of competitors flavors, options
• Initial healthy profits
• Promotion emphasizes brand ads
• Development costs are recovered
• With the launch of Maggi noodles, NIL created an
entirely new food category - instant noodles - in the
Indian packaged food market.
• Because of its first-mover advantage, NIL
successfully managed to retain its leadership in the
instant noodles category
 Many consumer
Maturity Stage products are in
Maturity Stage
• Declining sales growth
• Saturated markets
• During the 1990s, the sales of Maggi noodles declined,
due to growing popularity of Top Ramen , another
instant noodles product.
• In order to improve sales , NIL changed the formulation
of Maggi noodles in 1997.
• Product modification according to need of consumers:
• Veg. Atta Noodles. Dal Atta Noodles. Cuppa Mania.
• Availability in different packages:
• 50 gms.,100 gms.,200 gms.
• family packs (400gms.).
 Decline Stage If no product
innovation brought
• Long-run drop in sales
• Large
inventories of
unsold items
• Elimination of all
nonessential
marketing expenses
Rate of decline depends on
change in tastes or
adoption of substitute products
 Extending the PLC

• Change product

• Change product use

• Change product image

• Change product positioning