Chapter 1 - Product Mix - PDF

Chapter -1 Product mix SESSION ONE: MEANING AND IMPORTANCE OF PRODUCT The term Product is mostly used as a need-satisfying entity. It represents solution to customers, problems. In the words...

Chapter -1 Product mix SESSION ONE: MEANING AND IMPORTANCE OF PRODUCT The term Product is mostly used as a need-satisfying entity. It represents solution to customers, problems. In the words of Peter Drucker, the product remains mere raw material or at the best an intermediate till it is not bought or consumed. Hence mostly they comprise of both tangible and intangible benefits. It may be anything that can be offered to a market to satisfy a want or need and include physical goods, services, experiences, events, places, properties, organization, information and ideas. In most of the cases products are made up o f a combination of physical elements and services. It is observed that consumers buy products or services that they require to fulfill their needs. The products could range from tooth brush, chocolates, cars, movie tickets to life insurance at various stages of our life. The decision to make a purchase is hence dependent not only on the tangible attributes of the product but also on the psychological attributes like brand, package, warranty, image, service, number of uses, long lasting, etc. DEFINITIONS: According to Philip Kotler, “Product is anything that can be offered to someone to satisfy a need or a want”. William Stanton, “Product is a complex of tangible and intangible attributes, including packaging, color, price, prestige and services that satisfy needs and wants of people”. It means a good or service that most closely meets the requirements of a particular market and yields enough profit to justify its continued existence ROLE OF PRODUCT IN MARKETING MIX: The key element of the marketing programme is the product. Before making decisions about pricing, promotion and distribution, a firm has to determine what product it will present in the market. In other words, study of marketing ultimately leads to the study of the product. In fact, planning and development of the marketing mix normally displays a clear idea of the firm’s product or service. Product is the heart/cornerstone of marketing mix. It is the engine that pulls the rest of the programme. Without a product nothing can be priced, as the product is the cornerstone of marketing mix. Pricing a product is a very complex process. The price is the amount a customer pays for the product. It is determined by a number of factors including market share, competition, marketing costs, product identity and the customer’s perceived value of the product. MEANING OF PRODUCT FROM DIFFERENT POINT OF VIEWS: 1  To a manufacturer: Product is a number of raw materials put together so that the end result (i.e. the product) serves a useful purpose of consumption. To an Economy: The product consists of a bundle of utilities, involving various product features and accompanying features, anything that is potentially valued. To a Marketer: The products are building blocks of a marketing mix. A marketer promotes, displays product as it is a cornerstone of marketing mix. To a Society: There are two kinds of products, they are salutary and Non-Salutary. Salutary Products are those that have low appeal but may benefit consumers in the long run. E.g. Organic food. Non- Salutary products that give both high immediate satisfaction but does not benefit consumers in the long run. E.g. Junk Food. To a Consumer: The product is a bundle of expectations. The consumers have the desire for products and its accompanying satisfying experience. Therefore, for a consumer, product can be any good or service that satisfies their needs and wants. COMPONENT OF A PRODUCT Products have their own identity or a personality. Most of the users associate meaning with products, they obtain satisfaction by using them. The various features and functions built around them-the brand name, the package and labeling, the quality associated with it, the guarantees, the price, the manufacturer’s name and prestige-all contribute to the personality or the total product offering, a marketers armory for satisfying the customer. It has been often stated that a customer never just purchases the generic product but he procures something that exceeds his expectation depending on for what it is being bought. The components of the product include core product, associated features, brand name, logo, package and label. 1. The Core Product It is the basic element of the product. The core product is the actual product and includes the main usage for which it is purchased. Let’s take the example of Dove soap; the core component is the soap, (the generic constituent) as in the case of any other bathing soap, the only difference being the other components are super imposed on this basic component to develop the total personality of Dove. 2 2. The Associated Features The Product includes several associated features besides the core ingredient. The total product personality is mostly enhanced through the associated features. Further, these also aid in distinguishing the product from its competitors. For example if we take Dove Soap, its fragrance, moisturizing ability, the pristine white color, the brand name, price, the positioning as luxury soap all have gone into the marketing of product personality. All the above features can be termed as associated features. 3. The Brand Name A brand is defined as a name, term, symbol, design or a combination of them which is intended to identify the goods and services of one seller and to differentiate them from those of competitors. A trade mark is a brand with legal protection, thus ensuring its exclusive use by one seller. In the current age consumers do not just pick products but they pick brands. The brand image is developed through advertising and other promotional measures to remain etched in the consumers’ mind. E.g. In case of Dove soap the brand name “DOVE” gets registered in consumers’ mind. 4. The Logo It is the brand mark/symbol and an essential aspect of the product, extending its support to the brand effectively. Symbols and pictures ensure product/brand identification and recall with their importance being enhanced in rural markets where brands are mostly recognized by their picture in the logo. E.g. In the case of Dove soap the font used, colour and symbol of dove. 5. The Package It is another important component of the total product personality, particularly in packaged consumer products. The package performs three essential roles: Ensures protection to the product Provides information about the product Increases aesthetics and sales appeal. Conventionally packaging was used to protect the product from damage enroute and to facilitate handling at various points of distribution. Later on it also became a major tool in the promotion of the product. Currently packaging contributes to the total sales appeal of the product. Eg. In case of Dove soap, box used to pack soap, combination of colours used, logo printed on it along with other important information, all are parts of package. 6. The Label It is the part and parcel of a package. It provides written information about the product helping the buyer to understand the nature of the product, its distinctive features, its composition, its performance. 3  E.g. In case of DOVE soap, the information on package, manufacturers name & address, ingredients, brand name, logo, date of manufacture, date of expiry, batch number etc. The components discussed above make a preliminary impact on the consumer. The other P’s i.e. Price, Place and Promotion also play an important role in shaping the total product personality. Conclusion: It is observed that the total product personality is dependent on basic constituent of the product. If the product is substandard the other elements associated like features, package, label, differentiation, positioning, branding will not be of any use. Hence focus on the core product is essential. CHARACTERISTICS OF A PRODUCT: 1. Product is one of the core elements of marketing mix. 2. Various people view it differently. Consumers, organizations and society have different needs and expectations. 3. The product includes both goods and services. 4. A marketer can realize their goals by manufacturing, selling, improving and modifying the product. 5. It includes both tangible and non-tangible features and benefits offered. 6. It is a vehicle or a medium to offer benefits and satisfaction to consumers. 7. The importance lies in services rendered by the product and not ownership of product. People buy services and not the physical object. 8. Product includes the total offering, including main qualities, features and services. IMPORTANCE OF PRODUCT Product therefore, is the core of all marketing activities. Without a product, marketing cannot be expected. Product is a tool in the hands of the marketers which gives life to all marketing programmes. So, the responsibility of the marketers to know its product well is pertinent. The importance of the product can be judged from the following facts: 1) Product is the focal point: Product is the focal point and all the marketing activities revolve around it. Marketing activities like selling, purchasing, advertising, distribution, sales promotion are all meaningless unless there is product. It is a basic tool by which profitability of the firm is measured. 2) It is the starting point of planning: No marketing programme will commence if product does not exist because planning for all marketing activities distribution, price, sales promotion, advertising, etc. is done on the basis of the nature, quality and the demand of the product. Product policies thus decide the other policies. 4 3) Product is an end: The main purpose of all marketing activities is to satisfy the customers. Thus product is an end (satisfaction of customers) and the producer, therefore, must insist on the quality of the product so that it may satisfy the customers’ needs. It has been observed that the life of low quality products in the market is limited. TOTAL PRODUCT (product is more than a physical entity) Consumers are buying satisfaction in the form of product i.e. economic and mental satisfactions in the form of a bundle of product benefits. The product is a bundle of all kinds of satisfactions of both material and non-material kinds, ranging from economic utilities to satisfaction of a social-psychological nature. A product supplies two kinds of utilities: 1. Economic Utilities – in form of price and budget, depending on the purchasing power of consumers, discounts, etc. 2. Supplementary Utility - in the form of social and psychological benefits. When a consumer buys a product he buys the benefits too, basically he buys the TOTAL PRODUCT. According to P. LEVITT: “People don’t buy products, they buy expectations of benefits.” A total product is a bundle of tangible and intangible features that can be offered to a market to satisfy a want or a need. Products that are marketed include goods and services, experiences, events, persons, places, etc. to satisfy consumer wants. Total Product is more than just physical products and includes related functional and aesthetic features. PRODUCT LEVELS The marketer has to take into consideration the benefits offered by the product and present it to the customer. Further he takes it to higher levels by introducing several inputs into the basic product with inputs like advanced features, functions, unique brand name, attractive, convenient packaging, affordable price points, convenient access, meaningful communication and exclusive service from sales people. The product is enriched constantly by the marketer so as to create value, add more customer base and counter competition. According to Levitt, a product offer can be conceived at four levels: the generic product, expected product, augmented product and the potential product. Further it has been explained through a seven level approach: 1. Core Benefit (Product): This is the basic level that represents the heart of the product with a focus on the purpose for which the product is intended. For instance a car is purchased for its convenience, the ease at which one can go or the speed at which one can travel around relatively fast. 2. Generic Product: It is the unbranded and undifferentiated commodity. The products in this level are not distinguished from other brands. Unbranded pulses, rice, wheat flour are some of the examples of generic product. Even shoes or readymade garments without a brand tag, belongs to generic product. 3. Branded Product: The branded products get an identity through a name. It belongs to a specific company and the marketer separates this product from the competitor’s products. 5  E.g.: Nike, Adidas, Being human, Gucci, etc may have common product lines, but their products are branded. 4. The differentiated product: All the branded products are supposed to be differentiated products, but in certain cases where the brand name alone has not earned enough distinction the case may be different. Here the marketer tries to differentiate his product from the clutter created by competitor products by highlighting some of the special attributes/features /qualities his brand is endowed with. The difference could be tangible or psychological. For example Knorr Soups are tasty and healthy soups and can be prepared easily. 5. The customized product: When the product is modified to suit to the requirements/specifications of the individual customer, he is being offered a customized product. Earlier it was limited to industrial products but now the consumer goods are customized for the customers and he gets an opportunity to order and get a product/service as he desires and not just choose from mass/standardized product/service available in the outlets. Many companies manufacturing automobiles, computers, paints, shoes and garments have used this strategy to beat competition. 6. The augmented product: The augmented product aims to enhance the value of the Product/offer through voluntary improvements. These improvements may be neither suggested by the customer nor expected by him. The manufacturer/marketer adds the feature/benefit on his own. The needs of the customer are identified through market research surveys and the insights thus obtained are used to add new features/functions to the product. 7. The Potential Product: The potential product is the “future‟ product inclusive of the advancement and refinement that is possible under the existing technological, economic, competitive conditions prevailing in that category. Potential product is only limited by economic and technological resources a firm can spare. Nevertheless today’s potential product can be tomorrow’s real product. Here is where companies search for new ways to satisfy customers and distinguish their offer. In case of a car, the 7 levels of a product are: 1. Core product: Transportation from one place to another. 2. Generic Product: Parts of the car, quality of material used. 3. Branded product: Brand of the car - Mercedes, Toyota, Chevrolet, etc. 4. Differentiated Product: mileage, engine, petrol capacity, etc. 5. Customized product: big tyres, seat cover, customized colour of the car, etc. 6. Augmented Product: After-sale services, insurance policy etc. 7. Potential Product: May run more smoothly as it wears off a little, flying car (which is now a days the future product) PRODUCT MIX One of the most important elements of the Marketing Mix is the Product Mix. The product is the sum total of all physical and psychological satisfaction it provides to the buyer. Product Mix ( also known as Product Assortment) is the composite of products offered for sale by the firm, over a period of 6  time. It is the entire range of products of a company for sale. A product mix consists of various product lines. NEC’s (Japan) product mix consists of communication products and computer products. Michelin has three product lines: tires, maps, and restaurant-rating services. In case of Godrej, the product mix consists of cupboards, locks, soap, deodorants, hair care products electronic appliances, real estate and many more. In case of Tata, the product mix consists of Tata Consultancy services, salt, beverages, motors, electronic appliances, telecommunication, watches, etc. Students’ notes: (quote other examples) __________________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ Product mix need not consist of related products. The product mix of a company has 3 main dimensions: Width/Breadth: The width of a product mix refers to how many different product lines the company carries. E.g.; P&G products include detergents, toothpaste, bar soap, disposable diapers and many other additional lines. Depth: The depth of a product mix refers to how many variants of each product are offered in the line. If Tide came in two scents (Mountain Spring and Regular), two formulations (liquid and powder), and two additives (with or without bleach), it would have a depth of eight because there are eight distinct variants. This refers to the number of product items within each product line. E.g. For milk, the varieties could be half cream, full cream, low fat, full fat, or even the different measurement bottles it comes in. Consistency: The consistency of the product mix describes how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. P&G’s product lines are consistent in that they are consumer goods that go through the same distribution channels. The lines are less consistent in the functions they perform for buyers. If the firm is able to keep up the consistency it acts like an advantage since the same infrastructural facilities can be used for all the production. 7  FACTORS INFLUENCING PRODUCT MIX 1. Market demand: The demand of the product determines whether the product should be manufactured, or its production be discontinued. New products are introduced in the market after the need of the product is identified. Accordingly, the product mix will also be determined. 2. Cost of product: The Company can develop products which are low in costs and produce those products. The investment capacity of any company also plays an important role. If some product’s cost of production is in budget, companies might choose to produce them and vice versa. Nirma washing powder (one of the product line of Nirma companies), a low priced product was launched to counter Surf which was priced high. 3. Quantity of production: The Company can add more items on its product line in case the production of the new product is to be made on large scale. More the quantity, the cost of production will reduce. So, the companies may go for introducing more types of products. 4. Advertising and distribution factors: An organization does not incur any additional effort to advertise or distribute when the company adds one or more products to its product line. Already the brand image is registered in the minds of the consumers, so less advertisement and distribution expense will be incurred. In case of new companies, advertisement expense will be high, so initially, many products may not be introduced. 5. Use of residuals: Certain products generate a residual product while being manufactured. In such cases, the by-products can be developed or utilized; a company should produce such products. It will add to their product mix. E.g.: Sugar manufacturing companies use molasses as one of the product for sale, it being a by-product. 8  6. Competitor’s action: In order to meet the competition/market a firm may decide to include or eliminate a product. To get stable in the market, one has to keep an eye on competitor’s action. This factor will highly influence the product mix of any organization. For eg: Pepsi – Coke, Fanta – Mirinda, Sprite – 7 up, etc. 7. Full utilization of marketing capacity: The Company can start to produce another product to utilize the capacity completely if the existing marketing resources are not being utilized. This will give rise to the new products in the product line. 8. Goodwill of the company: When the company has good reputation in the market, new product can be launched without much difficulty. The brand image created by the company speaks here for the product. So it becomes easy for a reputed company to introduce any product. HOW ONE SINGLE PRODUCT CAN GIVE DIFFERENT EXPERIENCES TO DIFFERENT USERS? From consumers point of view what they desire are not products but satisfying experiences. People want products because they want to experience the services which they hope the product will render. Further for a single product different users gave different meanings. Different consumers gain different experience from a product. For example, a Nike / or any high brand shoe may act as shopping product for a upper middle / high class consumer whereas the same shoe for a lower middle class consumer, it may be a speciality product. For the shopping product, there is no excitement in buying, rather is has to be compared with other available brands. Whereas a speciality product gives a different feeling of status symbol. Quote examples of your own: _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ ________________________________________________________________________________ What one consumer considers a shopping good might be a convenience good to another consumer. Keep in mind that the categories are not a function of the characteristic of the offerings themselves. Rather, they are a function of how consumers want to purchase them, which can vary from consumer to consumer. For example, if you prefer Crest Whitening Expressions toothpaste and the store you’re shopping at is out of it, you might put off buying the toothpaste until your next trip to the store. Or you might go to a different store or buy a small tube of some other toothpaste until you can get what you want. Note that 9 even something as simple as toothpaste can become a shopping good for someone very interested in her dental health—perhaps after she’s read online product reviews or consulted with her dentist. That’s why companies like Procter & Gamble, the maker of Crest, work hard to influence not only consumers but also people like dentists who influence the sale of their products. PRODUCT DECISIONS PRODUCT LINE is a group of products that are closely related, either because they function in a similar manner or are sold to the same customer groups or are marketed through the same types of outlets, or fall within given price ranges. Many businesses offer a range of product lines which may be unique to a single organization or may be common across the industry. E.g.; Accident, health and medical insurance premiums and income from secured consumer loans. Within the insurance industry, product lines are indicated by the type of risk coverage, such as auto insurance, commercial insurance, and life insurance. PRODUCT POSITIONING –It refers to the manner in which a product is offered to a particular customer of a particular segment for the aim to meet the customer's needs. E.g.; Wagon R is positioned as a compact car for the smart urbans, MTR’s “Ready to eat” foods are positioned as a convenient product, Coco cola’s brand is globally positioned as “Taste the feeling”. PRODUCT REPOSITIONING–It refers to the manner in which a marketer changes the whole product in order to satisfy a particular segment or customer. Mostly repositioning is done when a product is changed physically. PRODUCT DIFFERENTIATION: Product differentiation is the modification of a product to make it more attractive to the target market. This involves differentiating it from competitors product as well as own product offerings. Three things that continuously change in product differentiation are product quality, product design, and product support services. PRODUCT DIVERSIFICATION: Product Diversification refers to the product expansion either in the depth and/or in width. Depth of product-line implies the assortment of colors, sizes, designs, quality, stability, etc. It refers to adding a new product to the existing product line or mix. E.g. – Godrej Company used to manufacture cupboards, locks, safes, refrigerators etc. on a large scale but has now diversified into hair colour products like Godrej Expert Rich Hair Cream and soaps like Godrej No 1, etc. PRODUCT MODIFICATION: Product modification may be defined as a deliberate alteration in the physical attributes of a product or its packaging. It is the process by which the existing products are modified to suit the changing demand on account of changes. E.g: Television manufacturers are bringing out certain modifications in order to suit the changing demand. Eg: Samsung introduced QLED Curved Smart TV (2018) 10  PRODUCT STANDARDIZATION: Standardization implies a limitation on the number of varieties or the types of uniform quality that can be manufactured so as to reduce the unnecessary varieties. E.g. Ready-made Shirts and Trousers are manufactured in standard sizes. PRODUCT ELIMINATION: Products which cannot be improved or modified to suit the market needs, requires to be replaced by other profit generating products, this process of withdrawal is known as product elimination. E.g. Maruti 800 was replaced in the market by other cars manufactured by Maruti Suzuki such as Maruti Alto, Wagon R. Students’ notes KNOWLEDGE ASSESSMENT 1 11  Fill in the blanks 1. Product represents solution to problems. 2. Product is anything that can be offered to someone to satisfy a or a. 3. Products have their own or a. 4. A is defined as a name, term, symbol, design o r a combination of them which is intended to identify the goals & services of one seller and to differentiate them. 5. Symbols and pictures ensure identifications. 6. Product is the and all the marketing activities revolve around it. 7. is the unbranded and undifferentiated commodity. 8. The is the modified product to suit to the requirement/ specifications of the individual customer. 9. The aims to enhance the value of the product / offer through voluntary improvement. 10. The potential product is the inclusive of the advancement and refinement that is possible under the existing circumstances. Answers: (1) Customers, (2) Need & want, (3) Identity & personality, (4) Brand, (5)Product/ brand, (6) Focal point, (7) Generic product, (8) customized product, (9) augmented product, (10) future‟ product 12  SESSION TWO: PRODUCT CLASSIFICATION The nature of the product is found to have significant impact on the method of product positioning. Product classification assists the marketers to put the products in a systematic manner before the consumers. They can be segmented, targeted and positioned better. It can be undertaken on the basis of three essential characteristics namely durability, tangibility and user type. Durability implies the average life of the product available for consumption, tangibility means the physical attributes of the product and user type provides information regarding consumer products and industrial products. The following figures show a typical product classification: Classification means grouping of products of similar kind on the basis of: 1. Durability – durable, non-durable and services 2. Use / shopping habits – Industrial and consumer goods. Classification of products Basis of durability & Basis of use/ shopping habits tangibility Durable goods Consumer goods Industrial goods Non durable goods Convenience goods Materials & parts Services Shopping goods Capital items Supplies and Speciality goods Business services Unsought goods Why is classification important for marketers & consumers? Different products have different utilities and need. E.g. Bread is a perishable product and a necessity, Car is a durable product and it’s a luxury. Classifying products into groups helps to implement suitable marketing strategy with minimum cost and efforts. Consumers get a wide variety of goods under different groups. This helps them to choose the right product at the right time with the available resources. 13 Classification on the basis of Durability and Tangibility Products can be classified on the basis of durability and tangibility. On the basis of durability they can be classified as non- durable products. On the basis of tangibility, they can be classified as physical products and services Non- durable goods: Non- durable goods are tangible goods normally consumed in either one or a couple of uses. These are purchased regularly and also consumed frequently. Smooth distribution and easy availability at all possible locations makes these products successful in the market. The marketer has to advertise heavily to increase the purchase and build brand preference. Most of the fast moving consumer goods category products belong to this class. Examples include food items, toiletries, daily use items, etc. Durable goods: Durable goods are tangible goods that can normally be used for many years. They do not get consumed / exhausted / perished in one or more uses. These products need more personal selling, after sales service and are often supported by guarantee and warranty programs. Examples include LCD TVs, mobile phones, washing machines, microwave, etc. Services: On the basis of tangibility, products can be also be classified as physical products and services. Services are intangible, inseparable and inconsistent products. Service essentials include quality control, credibility of the supplier and adaptability to changing consumption behavior. Examples include hospitality service, airlines services, insurance and banking services. Consumer goods Consumer products can be divided on the basis of time and effort the buyer is willing to take out for the purchase of the product. Consumer goods are needed for final consumption and are not used for further commercial processing. Features:- 1. It is for personal and non-business use. 2. Usually, one finds an Impulsive buyer for consumer goods. 3. These goods are generally Perishable or durable in nature. 4. They are generally goods but in some cases services may also exist. Consumer goods can be classified on the basis of shopping habits. They are classified in four categories: 1. Convenience Products They are goods that a customer purchases frequently, with minimum effort and time to make a buying decision. Example being soft drinks, soaps, bread, milk etc. These can be further classified into three categories: (a) Staple Goods: These products are purchased on a regular basis. They become the daily necessity of the consumer. The decision to buy the product is programmed once the customer puts the item on his list of regular purchases. Example bread, milk, eggs, etc. 14 (b) Impulse Goods: The consumer purchases these without any planning or search efforts. The desire to buy an impulse p r o d u c t is a result of the shopping trip. This is why impulse products are located where they can be easily noticed. Example- chocolates, magazines, kids toys especially near cash counter, etc. (c) Emergency Goods: They are purchased to fulfill an urgent need. The consumer ends up paying more as no other option is left open. E.g.: consumer shopping for tooth brushes at tourist destinations, umbrellas during a rainstorm, medicines during an emergency, etc. Manufacturers of impulse and emergency goods will place them in those outlets where consumers are likely to experience an urge or compelling need to make a purchase. Main Features: 1. They are easily available and require minimum time and effort. 2. They can be obtained at low prices. 3. There is a continuous and regular demand for such products. 4. Both demand and competition for these products is high. 5. Products are easily substitutable. 6. Heavy advertising and sales promotion schemes help in marketing of these products. Marketing Strategy Of Convenience Goods: (a) Price: These products are usually low priced and widely available. (b) Promotion: Mass promotion, heavy advertising and sales promotions are done by the producer. (c) Place: These products are widely distributed (intensive distribution) and are available at convenie nt locations. Made available through vending machines in schools, offices, bus stations, etc. (d) Product: Bread, Milk, other daily use products. 2. Shopping products: These are the goods where the customer while selecting the product for purchase makes due comparisons on the bases of quality, price, style and suitability. Examples include furniture, clothing, and major appliances. Shopping products can be homogenous or heterogeneous. a. Homogeneous Products: Homogeneous shopping goods are similar in quality but different enough in price to justify shopping comparisons. They are products which are alike, with the sellers engaging on price war. Manufacturers end up distinguishing based on design, services offered or other freebies. e.g.; automobile tires, electrical appliances 15 b. Heterogeneous Shopping Products: Heterogeneous shopping goods differ in product features and services that may be more important than price. The seller of heterogeneous shopping goods carries a wide assortment to satisfy individual tastes and trains salespeople to inform and advise customers. They are products that are considered to be unlike or non- standardized. The consumers always shop for a best quality buy. Price becomes secondary in case the focus is on style or quality. E.g.; designer clothes. Main features i. They are durable in nature. ii. They have high unit price and profit margin. iii. The customer spends adequate time and compares products before making the final purchase. iv. Purchase of such products is planned prior. v. Important role played by the retailer in the sale of shopping goods Marketing Strategy Of Shopping Goods: (a) Price: These goods are available at moderate prices. The seller must apprise the buyer with the price. (b) Promotion: Heavy advertising and personal selling by both producers and resellers. (c) Place: As consumers will spend time to shop for these goods, stores that specialize in them are located near similar stores in active shopping areas – selective distribution (d) Products: Furniture, clothes, used cars, etc. 3. Specialty Products: These are goods with unique characteristic or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. Consumers have strong convictions towards the brand, style, or type. For example Cars, High end Watches, Diamond jewelry etc. Main features: The demand for such products is relatively infrequent. Products are high priced. Sale of such products is limited to few places. Aggressive promotion is required for such products. After sales service is required for these products. Marketing Strategy Of Specialty Goods: 16  (a) Price: They are usually marked at high prices. As demand for these goods are low and Supply is also low (b) Promotion: Targeted promotion by both producer and reseller. High level of advertising (c) Place: Exclusive selling in only one or few selected outlets per market. Exclusively sold and distributed. Consistency of image between the product and the store is also a factor in selecting outlets. (d) Product: Jewellery, Rolex watches, fine crystals, etc. 4. Unsought Products These are products that are available in the market but the potential buyers do not know about their existence or there do not want to purchase them such as smoke detectors. Classic examples of known but unsought goods are life insurance, cemetery plots, and gravestones. There are two types of such product: 1.Regularly Unsought Products: The products which exist but the consumers do not want to purchase them as of now, but might eventually purchase them. Example: Life Insurance Products or Doctor’s services. 2. New Unsought Products: The marketer’s task is to inform target consumers of the existence of the product, stimulate demand and persuade then to buy the product. Example: Oral Polio Vaccine was unsought initially, but heavy promotion and persuasion by the government has led to eradication of polio. Marketing Strategy Of Unsought Goods: (a) Price: It varies from product to product. (b) Promotion: Personal selling and aggressive advertising by producer and seller. (c) Place: It depends upon the product. (d) Product: Life insurance, Red Cross Blood Donations, etc. 17  Note Keep in mind that the categories are not a function of the characteristic of the offerings themselves. Rather, they are a function of how consumers want to purchase them, which can vary from consumer to consumer. What one consumer considers a shopping good might be a convenience good to another consumer. Industrial Products The Products used as inputs to produce consumer products are known as industrial products. They are used for non-personal and business purposes. Examples being raw materials, tools, machinery, lubricants etc. Features of Industrial products: There is limited number of buyers when compared to consumer goods. Length of Channel for distribution is short. Demand for the product is concentrated in certain geographical locations and is derived from the demand of consumer goods. Product purchase is based on fulfillment of technical considerations. 18  Reciprocal buying is involved is a company may purchase the raw material from a company and may sell the finished product to the same company. In certain cases the companies may lease out the products rather than purchasing them due to high costs. Types of Industrial Products: (i) Materials and Parts: These are goods that enter the manufacturer’s product completely. They fall into two classes - raw materials, and manufactured materials and parts. (a) Raw Material: Raw materials fall into two major groups: farm products (wheat, cotton, livestock, fruits, and vegetables) and natural products (fish, lumber, crude petroleum, iron ore). Farm products are supplied by many producers, who turn them over to marketing intermediaries, who provide assembly, grading, storage, transportation, and selling services. Their perishable and seasonal nature gives rise to special marketing practices, whereas their commodity character results in relatively little advertising and promotional activity, with some exceptions. At times, commodity groups will launch campaigns to promote their product—potatoes, cheese, and beef. Some producers brand their products—Dole salads, Mott’s apples, and Chiquita bananas. Farm products are renewable as they involve agricultural production. Natural products are limited in supply. They usually have great bulk and low unit value and must be moved from producer to user. Fewer and larger producers often market them directly to industrial users. Because users depend on these materials, long-term supply contracts are common. The homogeneity of natural materials limits the amount of demand-creation activity. Price and delivery reliability are the major factors influencing the selection of suppliers. (b) Manufactured Materials and Parts: Manufactured materials and parts fall into two categories: component materials (iron, yarn, cement, wires, etc.) and component parts (small motors, tires, castings). Component materials are usually fabricated further—pig iron is made into steel, and yarn is woven into cloth. The standardized nature of component materials usually makes price and supplier reliability key purchase factors. Component parts enter the finished product with no further change in form, for example small motors are assembled in a vacuum cleaner and tires are fitted to automobiles. Most manufactured materials and parts are sold directly to industrial users. Price, quality and service are major marketing considerations with branding and advertising being less important. (ii) Capital Items: They are long-lasting goods that facilitate developing or managing the finished product. They include two groups: installations and equipment. 19  Installations consist of buildings (factories, offices) and heavy equipment (generators, drill presses, mainframe computers, elevators). Installations are major purchases. They are usually bought directly from the producer, whose sales force includes technical personnel, and a long negotiation precedes the typical sale. Producers must be willing to design to specification and to supply after sale (post sale) services. Advertising is given less importance than personal selling. Equipment includes portable factory equipment and tools (hand tools, lift trucks) and office equipment (personal computers, desks). These equipment do not become part of the finished product. They have a shorter life than installations but a longer life than operating supplies. Although some equipment manufacturers sell directly, very often they use intermediaries because the market is geographically dispersed, buyers are numerous and orders are small. Quality, features, price, and service are major considerations. The sales force tends to be more important than advertising, although advertising can be used effectively. (iii) Supplies and business services: These are short-term goods and services that facilitate developing or managing the finished product. Supplies are of two kinds: maintenance and repair items (paint, nails, brooms) and operating supplies (lubricants, coal, writing paper, pencils). Together, they go under the name of MRO goods. Supplies are equivalent to convenience goods; they are usually purchased with minimum effort on a straight-rebuy basis. They are normally marketed through intermediaries because of their low unit value and the great number and geographic dispersion of customers. Price and service are important considerations because suppliers are standardized and brand preference is not high. Business services include maintenance and repair services (window cleaning, copier repair) and business advisory services (legal, management consulting, advertising, etc). Maintenance and repair services are usually supplied under contract by small producers or from the manufacturers of the original equipment. Business advisory services are usually purchased on the basis of the supplier’s reputation and staff. The following are some of the differences between consumer goods and Industrial goods. BASIS Consumer Goods Industrial Goods Industrial goods are those Consumer goods are those which are which are not used by the meant for final consumption by the consumers directly but these MEANING consumer, or in simple words they are goods are used for the used by the consumers directly. production of consumer goods. The demand for industrial The demand for consumer goods is goods is a 'derived demand'. autonomous and direct demand as these It is derived from the demand DEMAND goods are demanded for ultimate for consumer goods, which consumption are made using the industrial goods. 20  The market size is small as MARKET SIZE and The market size is large and there are Industrial goods have only GEOGRAPHICAL many buyers who are scattered over limited number of buyers CONCENTRATION different parts of the world. who are concentrated in a few regions. ELASTICITY OF The demand for consumer goods is Industrial goods have DEMAND elastic. relatively inelastic demand. Goods are purchased by Goods are purchased by Individuals And TYPE OF BUYERS specialist buyers/ businesses households. from other businesses After sales services is important for some consumer goods. But it’s not as After sales services and SALES SUPPORT important as it is in the case of industrial support are vital. goods. Per transaction Purchase TRANSACTIONAL Per transaction value is not very high. value is often VALUE and Consumers purchase in small lots. substantial/high. Businesses QUANTITY purchase in bulk. Direct selling / shorter DISTRIBUTION Many middlemen are involved, and channels are usually used due CHANNEL marketers usually use longer channels. to the technical nature of goods. KNOWLEDGE ASSESSMENT 2 Fill in the blanks: 1.________________are goods that a customer purchases _____________with____________ time and efforts. 2. ________________________ are those goods that the consumer purchases without any planning or search efforts. 3. ___________________________ are products that are considered to unlike or non- standardized. 4. Specialty products are goods with _________________ or ______________________ for which a sufficient number of buyers are willing to make a special purchasing effort. 5._________________ are products that are available in the market, but the potential buyers do not know about their existence or there do not want to purchase them. 21 6.___________________are those which exist but the consumers do not want to purchase them as of now, but might eventually purchase them. 7. The products used as inputs to produce consumer products are known as _______________________. 8. _____________________is involved when a company purchases the raw material from a company and may sell the finished product to the same company. 9. ____________________________ are goods that are used for manufacturing the product. 10._______________________ are the goods used in producing the finished goods. ANSWERS (1) Convenience Products, frequently, minimum (2) Impulse Goods (3) Heterogeneous shopping products (4) Unique characteristics, brand identification (5) Unsought products (6) Regularly Unsought products (7)Industrial products (8) Reciprocal buying (9) Materials and parts (10) Capital items 22  SESSION THREE: PRODUCT LIFE CYCLE Each product goes through a life cycle which includes the following stages of introduction, growth, maturity and decline. The product life cycle indicates the sales and profit of the product over a period. Most of the products follow the “S‟ shaped curve with certain products deviating showing a sharp growth followed by a sharp decline or remain in the maturity phase for a long time, and may not face a decline. Trends and Fashion can be grouped in the first category; products in closed economies or in a monopolistic market represent the second type. In this category one may also have commodities like steel, cement, and food products, where the demand remains inelastic, relative to other manufactured products. In India, cars, refrigerators, and television sets etc. did not experience a decline until 1991 as they were operating in the pre-liberalization era with less competition. But things started to change after 1991 with opening of the markets and increase in competition. In the current scenario the product life cycles are also shortening with high competition and changing demands. As we move through the product life cycle, it is observed that profits are rarely a part of the introduction stage; the growth stage brings profits with an onset in decline in profits being observed in the maturity stages Meaning and Definition: The Product Life Cycle is a conceptual representation of a product’s aging process. It is simply a graphic portrayal of the sales history of a product from the time it is introduced to the time when it is withdrawn. According to Philip Kotler: “An attempt to recognize distinct stages in the sales history of the product” PLC IMPLICATIONS 23  1. Though most of the literature on PLC states that each and every product follows the 4 phase of PLC not all products introduced in the market essentially follow this. It is quite possible that a product may go through the first and second stage and die a premature death. 2. One cannot have a definite line of demarcation between one and the subsequent stage. 3. No two products have identical life cycles. The length of each phase varies from product to product depending on the nature of the product the marketing policies adopted, change in technology, competition and loss of the land. 4. At a given point of time the same product might reach different stages in different market segments. In segment one it might have touched the peak of Maturity but in segment to it may still be in growth stage. Stages of PLC: “The product life cycle (PLC) depicts a products sales history through 4 stages: 1. Introduction 2. Growth 3. Maturity 4. Decline Adjustment and modifications need to be made in the product’s marketing mix as the product moves through its life cycle because of changes in the environment, buyer behavior, and the composition of the market. The PLC concept can be applied to a product category (soaps), to a product form (soap bars, liquid soaps) or to a particular brand (Lux). The life cycle of the product category is the longest and that of the brand is shortest usually. It is useful most directly to product forms. Product forms like soaps, gel pens and televisions and mobile phones go through a sales history of introduction, growth, maturity and decline. Product categories often tend to stay in the maturity stage for longer duration, while the life cycles of individual brands can be extremely inconsistent depending on the effectiveness of their marketing programs. As a concept, it means three things 1. Products move through the cycle of Introduction, Growth, Maturity & Decline. 2. Both sales volumes and unit profits rise correspondingly till the growth stage. However, in the period of maturity stage sales volume rises but the profits fall. 3. The successful product management needs dynamic functional approach to meet the unique situations of sales and profitability. The four stages include: Introduction Stage 24 In this stage a new product (from brand or category) is introduced and it is called the introductory stage. Introducing a new product is always a risky proposition, even for a skillful marketer. A new product category requires a long introductory period because primary demand i.e. demand for the product category must be aroused. Ex. When “All out” in 1990 introduced liquid vaporizers as mosquito repellent, it was a pioneer in the product category as till 1990 mosquito coils were prevalent. This is true for those brands which have achieved acceptance in other markets and require introduction in new markets. This is followed by the selective demand i.e. a demand for a specific brand within a product category. Ex. Once the product category was tapped competition followed. The other brands within the same product category include Mortein, Good night which were competitors for Al lout. This phase marks the launch of the product in the market. It is characterized by Inducing acceptance and attaining initial distribution. Low and slow sales due to delay in expansion of production capacity, due to lack of acceptance by the retail outlets. High operational costs, arising out of inefficient production levels or bottlenecks, high learning time, unwillingness of the trade to deal in the product, demand of higher margins or extended credit terms. I High promotion costs on the expectation of future profits and distribution is limited. It is so because the sales are of smaller volume on one side and high level promotion efforts to create demand on the other. Customers have low awareness and those who are willing to try the product do so in small quantities called trial purchase. Competition is limited to few firms and is from indirect or substitute products. Profits will be negative on account of low sales volume MARKETING STRATEGIES IN INTRODUCTION STAGE 1. Products are promoted to create awareness and develop market for the product. 2. The pricing of the product may be low to increase penetration and expand the market share or high priced to recover the development costs. 3. Distribution can be selective till consumers show acceptance of the product. 4. Marketing communication (promotion) seeks to educate and enhance the product awareness Growth Stage The growth stage is the second stage where the product has been launched successfully with the sales beginning to increase rapidly in this stage, as new customers enter the market and old customers make repeat purchases. This stage is characterized by 25  Reduced costs because of economies of scale. Increase in competition with the customer having greater choices in form of different types of product, packaging and prices. Market expansion is evident with new customers being added. Dominant position created by focusing on increasing selective demand Increase in profits. Costs i n c u r r e d o n i d e n t i f y i n g n e w u s e s , developing the product, promotion, and distribution. The mobile handsets are in the growth stage, with new models being continuously launched. Apple launched its iPhone 7 recently. MARKETING STRATEGIES IN GROWTH STAGE There is an increase in competitors who offer similar in the market features. In this stage, the firm seeks to build brand preference and increase market share. 1) Product quality is maintained, and additional features and support services may be added. 2) Pricing may remain same as the firm enjoys increasing demand with little competition. 3) Distribution channels are added as demand rises and customers accept the product. 4) Promotion is aimed at a broader audience. Maturity Stage The third stage is the maturity stage. The products that withstand the heat of competition and customer’s approval enter the maturity stage. Rivals copy product features of successful brands and become more alike. The price wars begin along with heavy focus on unique brand features that still exist. Industry sales peak and decline as the size of potential markets begins to shrink and wholesaler and retailer support decreases because of declining profit margins. Middlemen also introduce their own brands, which makes the competition even tougher further lowering profits in industry. During this stage the marketers are focusing effort on extending the lives of their existing brands. Product managers must play a very important role for carving a niche within a specific market segment through increase in service, image marketing and by creating new value image and strengthening through repositioning. They should also consider modifying the market, product and marketing mix to fight competition and take it closer to the customer so as to register adequate profits to remain in the business. The characteristics of this stage are Costs would be decreased as a result of increase in production volumes There is little growth in the market as there is deceleration in sales growth leading to market saturation. Competitors entering the market increase, prices tend to fall and selling efforts become aggressive. There is drop in prices due to entry of competing products. 26  During this period, the promotional expenses reach a normal ratio to sales. Efforts are made to rationalize the existing budget. Advertising emphasizes the difference between one brand and those of competitors. The prices charged by the producers are quite lower and uniform with a very narrow difference except for the real product differentiation. The price is charged just to cover the special costs in addition to the usual manufacturing expenses plus a low margin for the investment. Product feature diversification is emphasized to maintain or enhance market share. The industrial profits decrease during this period, hence, leading the firms to employ extension strategies to retain their market share. MARKETING STRATEGIES IN MATURITY STAGE 1. Product- Product managers must play avital role for carving a niche within a specific market segment through enhanced service, image marketing and by creating new value image and strengthening through repositioning. They should also consider modifying the market, product and marketing mix to fight competition and take it closer to the customer to register adequate profits to remain in the business 2. Prices – List price can be lowered, or prices be lowered through price specials or volume or earlier purchase discounts, or easier credit. 3. Distribution – The company can obtain more product support and display in the existing outlets; new channels of distribution can be added. 4. Promotion – Promotional expenditures can be increased or the advertising message or the media be changed. Decline Stage This is the phase where sales decline as the customer’s preferences have changed in favor of more efficient and better products. Product forms and brands enter into decline stages while product categories last longer. The number of competing firms also gets reduced and generally the industry has limited product versions available to the customer. Sales and profits decline rapidly, and competitors become more cost conscious. Brands with strong loyalty by some customer segments may continue to produce profits. There are hidden costs in terms of management time, sales force attention, frequent stock re-adjustments and advertising changes. For these reasons, companies need to pay attention to their products. At times management may decide to maintain its brand without changes in the hope that some competitors will leave the market, or it may decide to re-position the product in the hope of moving it back to the growth phase in a new image or eventually prune the product from the line. When nothing can be done to revive the product, it is eliminated. This stage is characterized by: There will be a rapid fall in sales, as the product is very old and new ones are available. People are interested in buying something new. For instance, the number of companies manufacturing calculators is much less than what it was in 1960s and 1970s. 27  There will be further fall in prices as rapid reduction in sales creates a fear and there will be intense competition to liquidate the stock at the earliest. No promotional expenses are incurred as prices reduces for fast stock liquidation. MARKETING STRATEGIES IN DECLINE STAGE 1. Product- The product can be maintained by either by adding new features or finding new uses. 2. Price- The costs can be reduced and it can be offered to loyal segment. 3. Place- The product can be discontinued or sold to another firm that is willing to continue the product. 4. Promotion-cut promotional expenses. Examples: Colgate was the first toothpaste in tube in 1896, it went to capture the market world over and became the highest selling brand in the world in 1999, has diversified into oral care range and still a force to reckon with. 28 Diffusion (Adoption) of Innovations In a sense the diffusion (consumer adoption) process as developed by E.M. Rogers is the same as the product life cycle. However, the diffusion process looks at what is happening in the market (buyer behavior), whereas the product life cycle merely depicts the flows of revenues and profits to the business unit on account of the diffusion process. The diffusion process is described in the form of the normal distribution curve (the bell shaped curve). 29  The life cycle concept derives its logical base from the diffusion process. Adoption and diffusion of any new product (innovation) slowly develops because of resistance to change and the time taken for communication of the new innovation. When early adopters follow the lead given by innovators, adoption process gains momentum and grows rapidly. The peak point arrives when most of the potential buyers have tried the new product. 1. Innovators: They are first two and a half percent of the market. They are risk takers and act forerunners. They are willing to take risk in many respects. They show different life style and personality. They are young, educated, well-informed and richer consumers. They are very important to the success of a new product. 2. Early Adopters: The next thirteen and a half percent using the products are the early adopters. They are the opinion leaders and taste makers in their circles of connection and friends. They are also social leaders in the community. They are educated, rich and more successful than average. They are considerably exposed to information from all sources, particularly from mass media. 3. Early Majority: The next 34% are the early majority to adopt the new product bringing the total adopters to 50%. They are average people with regard to income, occupation, age, education. They make the innovation legitimate and is no longer a luxury or a novelty. They do not hold leadership position. They form a bridge between the new and the old values of the society. They are shrewd buyers and more thoughtful about themselves and their behavior. 4. Late Majority: The next 34% are the late majority buyers to adopt the innovation. They are older and less educated buyers. They have limited purchasing power. Hence, they are skeptical in their purchases. They are more conservative and less responsive to change. Their adoption of the new product is an indication that it is now a clear necessity. They buy the product only when public opinion is clearly in favor of the product. They depend more on the word of mouth and personal guidance by their reference groups. They are less exposed to mass media. 5. Laggards: It is the last category of buyers (16%). They tend to be older, with less education, poorer and traditional in their outlook on life. Caution, conservatism and price- consciousness characterize the laggards. They have little contact with mass media particularly newspapers. They rely only on radio, TV and reference groups. Rural buyers tend to exhibit the laggards due to illiteracy and poverty. Prospects of product life cycle: This concept of product life cycle is so significant that it can be used as a major tool by marketing manager in market forecasting, planning and control. though it helps us in having highly competitive marketing strategies, its specific uses can be seen in its application in the following areas. 30 PROSPECTS 1. Sales forecasting: one of the most dramatic uses of PLC in sales forecasting is, its application to explain the violent rise and fall of sales in case of a given product. A sales forecaster, having perfect knowledge about the PLC, will be able to establish cause and effect relations and helps to arrive at concrete conclusions. Under changing business conditions with changing life-cycle, some definite solutions can be suggested, as sales forecasting is essentially a problem solving area of managerial process. 2. Product planning: A product is the outcome of the research and development. At what stage it is to be improved, remodelled or discarded is dependent on PLC. It is very clear that during the infancy, original issue works, during growth, defects are rectified, during maturity sophistication comes in and at last the product is discarded. 3. Product pricing: Though the manufacturer is so decide at the very outset, whether he is to go in for 'high price' and skim the market with the risk of attaching too much competition or to go in for 'low price' and to aim at greater and more rapid market penetration, he is to do it in consonance with the changes in PLC. If he follows lower prices, he has the advantage of keeping away the competitors; however, the profit may not allow him to go in for the extension strategies during the period of maturity. That is why; he is to start with high prices so that he can reduce in course of time to take advantage of price competition, in addition to non-price competition such as branding. 4. Product control: PLC concept is an effective control tool in case of those firms which have multi- product base. Such a firm when it offers simultaneously number of products in a market, it is but natural that all products so offered may not have same degree of success. Some might be doing exceedingly well, others so, and still others below expectations. It is PLC that can be used to monitor the product position so that the nature and extent of change required in marketing strategy can be sought to exploit the product potentially in enjoying maximum possible market share. 5. Advertising: The process of persuasion is known as advertising if done in impersonal way. The major aim of advertising is to create, maintain and extend demand for a product or a service or an idea. The same policy followed in the different stages of PLC may not fetch rich dividends. The role of advertising is to must chance phase wise to get the best rewards for the efforts put in terms of talent, time and treasure in advertising. Thus, the role of advertising is to kill the consumer resistance in the introduction stage, extending the demand for the product in growth stage, maintaining the demand in the period of maturity. The role of advertising is dormant in the last stage of decline. In other words, in the first stage it speaks of product availability, in the second stage product differentiation, in the third stage product improvement and in the fourth stage grand clearance sale. While assessing the strengths of PLC as marketing tools, one should not turn deaf ears to the problems because; some very serious doubts and problems are raised about the relevance and the use of this concept. 31 Problems of PLC 1. Absence of absolute conformity: Though we are informed, in general, that every product conforms to the traditional life-cycle pattern, it is not so always that all products have this conformity. Thus, products like steel, coal, cement, gold, silver, aluminum, patent medicines, bicycles and the like have economic fluctuations rather than pattern fluctuations. 2. Stage span fluctuates: Length and pattern of product life-cycles can vary significantly from product to product. There is no reason to believe that all products inevitably pass through all the four stages; some might proceed, for example, straight from growth into decline because of, say, the introduction of some superior new product. Other products may have a prolonged introduction stage before coming into wide acceptance. That is, real products histories do not go hand in hand with the statement that products pass from one to the successive stages as a matter of course. FAILURE OF PRODUCTS WHY NEW PRODUCTS FAIL? 1. NO PRODUCT POINT-OF-DIFFERENCE For a new product to win initial trials and then ongoing repeat business, it needs to bring something new to the marketplace. Potential customers need an incentive – such as additional benefits or some form of variety – to be persuaded to try and buy a new product. Without any real point of difference, the new product is likely to fail. 2. POOR PRODUCT DESIGN Virtually all products that are put to development and launch sound good on paper. However, during the development phase when final design decisions are made and the product is actually developed and produced, this may not go exactly to plan. The end result is a poorly designed or poor-quality product, which is unlikely to generate a large number of repeat sales. 3. ESTABLISHED CUSTOMER LOYALTY IN THE MARKET The success of new products will rely upon existing consumers being willing to switch from their current purchases OR entering a market where there are a significant proportion of first-time customers without any established brand loyalty. In many cases, existing customer inertia – the unwillingness to switch brands – will limit the potential success of a new product. Clearly this phenomenon will vary by type of product – for example, many basic supermarket products are bought by consumers who follow simple habitual loyalty and are less likely to switch as a result. 4. WEAK LAUNCH OR POORLY EXECUTED LAUNCH Most new products require a reasonable degree of promotional support to build brand awareness and to access distribution channels and retailers. With a limited launch budget or a poorly executed launch, then the success of a new product is less likely. 5. AGGRESSIVE COMPETITOR ACTIONS 32 Virtually all new products are designed to take market share away from established competitors. Therefore, some form of competitor reaction should be expected. In some cases competitors will increase their level of promotion, reduced prices, leverage retail relationships to discourage their partners from supporting a new product from a competitor, or even launch a similar product themselves. All of these initiatives are designed to protect their market share and try to hinder the success of the new product. 6. POOR PRICING OR COST STRUCTURE New products may suffer from a poor pricing and cost structure. Sometimes companies will design products with many features to bring something new to the market. As a result, these products are often more costly to produce, but the firm expects the marketplace to have a willingness to pay more for a better product. This may or may not be the case and this product strategy may be quite successful or be perceived as poor value in the market. In line with this concern, an expensive development process, along with an expensive launch, may necessitate the need to charge a higher price – which again may or may not be accepted by the marketplace. 7. SMALL TARGET MARKET In today’s marketing world, market segments are fragmenting and a number of companies now pursue niche markets. While niche markets provide a suitable and possibly attractive market if there is no or little competition, they have the danger of being relatively small. Clearly a small target market will generate less sales volume and is less financially viable as a consequence. 8. INSUFFICIENT TIME FOR SUCCESS Because new product success relies upon consumers being willing to switch and trial new products and then become a repeat and loyal purchaser, there are several steps phases involved in the customer’s journey. This process obviously takes time. Some companies are willing to wait and invest in a new product, whereas others seek and expect almost instant success in the marketplace. KNOWLEDGE ASSESSMENT 3 33  1. The -----------indicates the sales and profit of the product over a period. 2. Products also follow the---------curve with certain products deviating showing a sharp growth followed by a sharp decline. 3. A new product category requires a long introductory period because ----------------for the product category must be aroused. 4. ---------------a demand for a specific brand within a product category. 5. In the ----------the profits are negative because the sales volume is low, distribution is limited, and promotional expenses are high. 6. The --------------is the second stage where the product has been launched successfully. 7. In the growth stage the company faces a trade-off between ----------and----------. 8. Products that withstand the heat of competition and customers approval enter the------ --------. 9. In the maturity stage the marketer should also consider entering ----------, product and marketing mix to fight competition. 10. --------and brands enter decline stages while product categories last longer. Answers: 1. Product life cycle, 2. “S” shaped 3. Primary demand, 4. Selective demand, 5. Introductory stage, 6. Growth stage, 7. High market share, high current profit, 8. Maturity stage, 9. New market, 10. Product forms SESSION 4: PACKAGING, LABELLING AND BRANDING 34  INTRODUCTION Packaging can be defined as an art, science and technology of preparing goods for transport and sale. Packaging as an industry has two sectors – those who prepare the packaging material and those who convert these materials into packages. New packaging materials are fast replacing the old ones. A good packaging conveys the quality of the product: which is distinct from the value of the product. Attractive packaging is an also an efficient point of purchase (POP), and stimulates publicity for sales. It has been observed that packaging is an important advertising means helping in carrying messages from the marketer to the consumer. Packaging as a function has two separate dimensions – the physical aspects related to the science and technology and the behavioral aspect related to the art of product design associated with buyer behavior. Terms: Package is advertising on the shelf, a means of attractive display in the retailer’s shop. Package is important to the buyer’s recognition of the product. Aesthetically pleasing package can assure higher sales & profits. It is an invaluable aid to decision making to the consumers. Packing is the process of covering, wrapping or crating goods into package. This is done for the purpose of delivering the articles to the consumer or for the purpose of transport. Packaging is defined as the group of activities in product planning which involve designing or producing the container or wrapper for a product. Packaging is a broad activity that requires careful consideration by the management. Packaging is next to grading and branding. According to Philip Kotler, “packaging is an activity which is concerned with protection, economy, convenience, and promotional considerations.” PACKAGING CONCEPT In most cases, marketers define packages as the fifth „P‟ of marketing. It provides an enhanced value to the product and there are three levels of packaging: A. A primary package B. A secondary package C. The transportation package Packaging may be “primary‟ which refers to the product’s immediate container, such as the PET bottle, tetra pack, can. Secondary, which refers to additional layers of protection that could be the large multipack bag containing individual packets of crisps, the shrink wrap that hold together multiple drinks. Tertiary or transportation packaging is third level of packaging used to protect manufactured goods during transportation. Tertiary packaging is not seen by consumers since it is usually removed by retailers before products are displayed for sale. Example: brown cardboard boxes, wood pallets. The different levels of packaging, type and importance would vary with the nature of product, whether FMCG, durable consumables, industrial and liquid product. It would also differ on the distance over which it has to be transported. It should be regarded as one of the important 35 requirements for a manufactured product. The quality control of a product would be meaningless if the package designed to carry the product from the factory to the ultimate consumer is not adequate. ROLE OF PACKAGING Packaging is an important element in the formulation of the marketing plan as it aids with promotion & performs the role of passive salesman, in addition to protecting the product. In the absence of salesman, the package should be able to grab the eyeballs of the buyers. Good packaging may lead to improved consumer acceptance. The product package has an important promotional function, establishing meaningful communication with the consumer. Designing the product package according to changing customer preferences and attitudes will enable the marketers to push the product. Consumer packaging is also intended to offer better convenience to the consumer and protect the product from pilferage and damage. It has been estimated that unit value realization can increase with good packaging. IMPORTANCE OF PACKAGING Initially Packaging was considered a production-related function and activity. While in the current context packaging has completely changed due to competition. New developments in packaging, have forced marketing managers to focus on packaging design. The following aspects highlight significance of packaging in marketing: It provides information about the product It helps in identifying brand name It contributes to the safety of a product and protects the product It helps in product handling It aids in promoting the product It helps in offering customer convenience and satisfaction It helps increase in the sales of the product. It adds to the use of a product. It helps in storage of the product It helps in product differentiation PACKAGING DECISIONS (These are the elements of packaging decisions) Packaging is an important component of a product as an attractive pack is the most important factor in impulse purchases. The basic functions of a pack are to attract the potential customer’s attention, protect the product that is packed and reveal its identity. It is an essential tool for 36 two categories of people – first, end-users of a product: and second, retailers. The material used may vary from metal to paper to plastic etc. The useful packaging decisions include: 1. Packaging design: It is not easy to design a package for various items. For example, all “Hand wash” come in bottles, but different brands of hand wash differ in their packaging. The high costs of packaging lead to bringing out refill packs too. 2. Attractive Color: Color plays an important role for determining customer acceptance or rejection of a product. The use of appropriate colors in packaging also assists marketers reap huge advantage. Packaging color should be attractive so that it may aid in promoting sales. 3. Packaging the product line: A company must decide whether to develop a family or similar kind of the packaging of its several products. It involves the use of identical packages for all products or the use of packages with some common feature. Importance of packaging decisions Protection – Packaging is used to protect the product from damage during shipping and handling, and to lessen spoilage if the product is exposed to air or other elements. Visibility – Packaging design is used to capture customer’s attention as they are shopping or glancing through a catalog or website. This is particularly important for customers who are not familiar with the product and in situations, such as those found in grocery stores, where a product must stand out among thousands of other products. Packaging designs that standout is more likely to be remembered on future shopping trips. Added Value – Packaging design and structure can add value to a product. For instance, benefits can be obtained from package structures that make the product easier to use while stylistic designs can make the product more attractive to display in the customer’s home. Distributor Acceptance – Packaging decisions must not only be accepted by the final customer, they may also have to be accepted by distributors who sell the product for the supplier. For instance, a retailer may not accept packages unless they conform to requirements, they have for storing products on their shelves. Cost – Packaging can represent a significant portion of a product’s selling price. For example, it is estimated that in the cosmetics industry the packaging cost of some products may be as high as 40% of a product’s selling price. Smart packaging decisions can help reduce costs and possibly lead to higher profits. Expensive to Create - Developing new packaging can be extremely expensive. The costs involved in creating new packaging include graphic and structural design, production, customer testing, possible destruction of leftover old packaging, and possible advertising to inform customer of the new packaging. Long Term Decision – When companies create a new package it is most often with the intention of having the design on the market for an extended period. In fact, changing a product’s packaging too frequently can have negative effects since customers become 37  conditioned to locate the product based on its package and may be confused if the design is altered. Environmental or Legal Issues – Packaging decisions must also include an assessment of its environmental impact especially for products with packages that are frequently discarded. Packages that are not easily bio-degradable could draw customer and possibly governmental concern. Also, caution must be exercised in order to create packages that do not infringe on intellectual property, such as copyrights, trademarks or patents, held by others. FUNCTIONS OF PACKAGING Packaging should perform the following basic functions: 1. Protection The basic function is to protect the products from the vagaries of weather the product can be exposed to, in transit from the manufacturer’s plant to the retailer’s shelves and issues related to handling the product while on display on the shelves. The reasons for protection for products through packaging are: Control pilferage during transit or storage Prevent the absorption of moisture Avoid breakage/damage due to rough mechanical or manual handling during transit. Protect liquid from evaporation. 2. Appeal The emergences of self-service outlets have forced manufacturers to have attractive packaging. The following characteristics have been identified to help a package perform the self-selling tasks: It helps in attracting attention of the customer It helps to enhance the product image It helps in the product looking and hygienic 3. Performance This is the third function of a package. It should perform the task for which it is designed. Bottled water has been introduced in 500 ml to 20 litres bottles. The purpose and place of use is the deciding factor in the purchase of various packs. A package must be made to consistent and rigid quality standards as the consumer demands uniformity each time he purchases a product. 4. Packaging for convenience It provides convenience to distribution channel members, such as wholesalers, retailers and consumers. The convenience will relate to handling and stocking of packages. It helps in the following ways: The package must be convenient to stock 38  The package must be convenient to display The package must not waste shelf-space. The package can be easily carried. It should be easy to dispose off. 5. Cost-effectiveness The package finally must be cost-effective. Packaging cost as a percentage of product cost differs from one industry to another. It is essential to understand that while analysing packaging costs, the other costs like handling, storage, insurance and transit costs are also added. QUALITIES OF GOOD PACKAGING Attractive appearance Convenient for storage and display Shield against damage or pilferage Product description displayed on the package Package should be as per the specifications Types of Packages There are four types of packages: (i) A consumer package (ii) A Bulk package, (iii) An Industrial package and (iv) A Dual usage package. They are as discussed below: (1) A consumer package is one which holds the required volume of a product for ultimate consumption is economical and can be easily purchased by the consumer. He has the option to purchase the pack size which he considers adequate for the consumption for his family over a length of time and does not involve additional investment during that period. (2) A bulk package is either for the consumer whose consumption is large or is bought to save cost. Example: oil cans etc. The consumer package itself very often requires an outside package in which it is transported, and which is sometimes referred to as transit package or an out container. (3) An industrial package can be a bulk package for durable consumer goods. These are the basic package types although many sub-divisions can be listed, e.g., strip package, multiple package, etc., which can all be broadly listed under these basic headings. (4) A dual use package is one which possesses a secondary usefulness after its contents have been consumed. Drinking glasses, boxes of jewellery or cigarettes, plastic containers, refrigerator dishes, bags from flour and feed sacks are the examples. Advantages of packaging are: Protection of goods against damage 39  Adds to the attractiveness of the item with often brightly coloured or artistically presented packaging Advertises the company with its design Can be designed to suit the theme Can be designed to appeal to target market Can be made to fit in the point of sale Disadvantages of packaging: Packing is often costly, sometimes just applied to hide a poor product, increasing the overall cost without increasing the value of the goods It adds to the burden of recycling, and often parts of the packaging cannot be recycled, leading to an increase in the overall waste problem. Takes a while to be made which might slow down the production of the product as a whole Time consuming to design Might accidently offend certain ethnic groups if used offensive symbols or designs PACKING STRATEGIES At or a given point of time, a company had alternative packaging policies or strategies, once it develops an agreeable packaging concept. The various strategies are: 1. Family packaging – It is a packaging option in which packages of the entire product line closely resemble one another. The major plus point of this strategy is that any new product in identical package enjoys the same market reputation and acceptance as the others. This also reduces the packaging costs. There is one disadvantage too, that is if the old product was a failure, the new product is likely to fail because of the same product package or resemblance. For eg: Camlin stationery products and packages have a black tiny camel on items – be it a compass, ink bottle, gum bottle, colours, etc. 2. Multiple packaging – It is a kind of strategy wherein numbers of closely related but heterogeneous products used by one consumer are placed in a single package. Such a package conveys the idea of an ideal matching set that one should possess. It facilitates acceptance of a new product idea by a consumer who may normally not like to venture into buying it. This policy is a success when the items in the package are in different stages of life cycle. For eg: Johnson And Johnson packs varieties of baby products in a single pack namely baby powder, baby lotion, baby shampoo, baby shower gel, etc. In case of men, it can be a shirt, tie, pant, kerchief, cuff-links packed together. In case of women, it can be all types of cosmetics in one. 3. Reuse/ innovative packaging – This is one wherein the manufacturers offer their products in such packages which can be reused after the consumption of the contents of it. Reuse packaging stimulates repeat purchases as it offers the added benefit for the same price. 40  For eg: Nescafe coffee jars can be used for storage purposes, kissan jam bottles are also reusable, assorted biscuits, sweets and toffees are packed in attractive tin boxes, which are also reusable. 4. Ecological packaging – Use of the resources of the environment results in pollution problems. It is the responsibility of every business house to reduce the extent of pollution of any kind. To do so, companies are now designing a matching packing strategy. Many companies have already introduced eco-friendly packaging for its products. It can be in the form of reusable/ returnable bottles, use of paper and card boxes, materials that decompose over a reasonable period of time, etc. Give examples for the above mentioned packing strategies: _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ LABELLING Introduction & Meaning LABELLING is regarded as part of marketing as packaging decisions involve the labelling requirements. It provides the customers with the requisite information about the product. The buyers also have complete information about the quality, features, standards, grade, price quantity etc. This helps them in making better and informed decisions. It is also helpful to the sellers as they can differentiate their products from their competitors. Attractive labelling also assists in encouraging the customers to pick the products off the shelf. In most countries across the globe, labelling is mandatory and they have specifications for labelling. For example in India, all the pre-packaged foods sold in the country are required to comply with the Food and Safety Standards (Packaging and Labelling ) Regulations 2011 issued by the Food Safety and Standards Authority of India functioning under the Ministry of Health and Family Welfare. The important ones include information regarding the nutritional values, vegetarian and non- vegetarian symbols, information related to food additives or flavours, name and complete address of the manufacturer, net quantity, lot identification of batch identification, date of manufacture or packing, instructions for use, country of origin for imported products apart from the general labelling requirements. The CE marking or the estimated sign used in European Union weights and measures accuracy regulations. The Green Dot is the example of environmental symbol. According to the regulations labelling of food items should disclose information about a number of aspects like date of manufacturing, expiry date or optimum storage period for the product which do not have an indefinite storage period, composition, storage conditions, necessary method of use, if 41 necessary, precautions to be taken, contra-indications etc. Labels are part of the printed material on the package. The label is a strong sales tool and an integral part of purchase advertising. Products may be adequately identified by giving the name of the product and the producer; most require somewhat more extensive descriptions of their nature and use. For example, processed foods, patent drugs, some cosmetics, etc. legally are bound to carry a complete detail about their ingredients. Several products must give instructions for their use, as in the case of commercial plant food. Safety warnings should also be mentioned on labels of all potentially hazardous products or packages. For example “To be used under the direction of a medical practitioner” or keep out of reach of children or “Cigarette smoking is injurious to health”. Environmental awareness among the consumers has promoted the introduction of “eco-label” awarded based on a product’s environment friendliness. A good label is one which helps a potential buyer to take decision with relevant and correct information. Apart from the information which must be given, the label should provide: i. Picture of the product accurate as to size, color and appearance. ii. Description of ingredients used along with methods of processing. iii. Directions for use, including cautions against misuse. iv. Brand names v. Dates of manufacture and expiry vi. Statutory warning, if any. vii. Contra-indications and adverse effects, if any. In all packaging is an important component of marketing and manufacturers are coming with innovative packaging to attract the customer and labelling enables them to comprehend the materials used in the product. Role of Labelling (i) Provides description of the product and specifies its content: The label provides detailed information of the products, its ingredients, usage, care to be administered, caution, batch number, manufacturing place, helpline number in certain cases, date of manufacturing and expiry etc. (ii) Identifies the product or brand: Labelling enables to identify the product amongst the multiple brands. SUNFEAST brand of biscuits can be easily identified from the other brands based on their labelling. (iii) Aids in product grading: If a company manufactures different qualities of product,