UNIT – 1

Meaning of Product
A product is the item offered for sale. A product can be a service or an item. It can be
physical or in virtual or cyber form. Every product is made at a cost and each is sold
at a price. The price that can be charged depends on the market, the quality, the
marketing and the segment that is targeted.
Levels of product

Philip Kotler, an economist, devised a model that recognises customers have five levels of
need, ranging from functional or core needs to emotional needs. The model also recognises
that products are merely a means to satisfy customers' varying needs or wants. He
distinguished three drivers of how customers attach value to a product:

 Need: a lack of a basic requirement.

 Want: a specific requirement of products to satisfy a need.
 Demand: a set of wants plus the desire and ability to pay for the product.
Customers will choose a product based on their perceived value of it. Satisfaction is the
degree to which the actual use of a product matches the perceived value at the time of the
purchase. A customer is satisfied only if the actual value is the same or exceeds the perceived
value. Kotler attributed five levels to products:
The five product levels are:

1. Core benefit: The fundamental need or want that consumers satisfy by consuming the
product or service. For example, the need to process digital images.

2. Generic product: A version of the product containing only those attributes or

characteristics absolutely necessary for it to function. For example, the need to process digital
images could be satisfied by a generic, low-end, personal computer using free image
processing software or a processing laboratory.

3. Expected product: The set of attributes or characteristics that buyers normally expect
and agree to when they purchase a product. For example, the computer is specified to deliver
fast image processing and has a high-resolution, accurate colour screen.

4. Augmented product: The inclusion of additional features, benefits, attributes or

related services that serve to differentiate the product from its competitors. For example, the
computer comes pre-loaded with a high-end image processing software for no extra cost or at
a deeply discounted, incremental cost.

5. Potential product: This includes all the augmentations and transformations a product
might undergo in the future. To ensure future customer loyalty, a business must aim to
surprise and delight customers in the future by continuing to augment products. For example,
the customer receives ongoing image processing software upgrades with new and useful
features.

Classification of product
Consumer Products
Consumer goods can be classified on the basis of their shopping habits. They are grouped as
convenience goods, shopping goods, specialty goods and unsought goods. Consumer goods
are targeted for consumption of either individuals or family members.
Convenience Goods
These are goods frequently purchased by consumers. They often buy them in frequent
consumption situations and they are purchased immediately and with minimum efforts.
Examples include toiletries, soaps, cigarettes and newspapers.
These goods can be further classified as follows:
Staple Goods: Consumer purchases on a regular basis. There is a high level of routinised
response behaviour for this kind of products. Toothpaste and soaps fall under this category.

Impulse Goods: Consumer purchases without any planning or search effort. Purchases of a
magazine or a chocolate candy are examples of situations in which customers buy on
impulse.

Emergency Goods: Consumer purchases on urgent need. There is no previous decision to

buy them but the consumer is forced to buy due to the emerging situation. These include the
purchase of umbrella, antiseptic creams like Burnol or knife to cut down trees during the
rainy season.
Shopping Goods
Shopping Goods are goods that the customer purchases by undergoing a comparative process
of selection and purchase on such bases as price, psychological fitment, suitability, style and
quality.
Examples include furniture, electrical appliances, home furnishings and clothing.
Shopping goods can be classified as follows:
Homogeneous: Shopping Goods which are the goods that are similar in quantity but differ in
price levels, justifying a pricing comparison by the buyer.
Heterogeneous: Shopping Goods which are the goods, which differ in product features, and
services and these differences, are more important than price for a decision.
Specialty Goods
These are goods with unique characteristics or brand identification for which the buyers need
to make a special purchasing effort.
Examples include music systems, televisions, cars and men’s clothing. There is hardly any
comparison in speciality goods as each brand is unique and different than others. The buyer is
ready to spend more time and effort while making a purchase decision for this kind of goods.
Unsought Goods
These are goods the consumer does not know about or does not normally think of buying.
These goods need advertising and more of personal selling efforts for making a sale.
Examples include life insurance products, coffins and fire alarms.
Business Products
Many of the goods coming out of a firm enter another firm’s production process, so that the
final goods can be made ready for consumption by individual or family consumers.
Many of these products go to the production process as raw materials and spare parts; some
of them also enter as capital items for augmenting the finished goods and the rest as
consumables or supplies. These are ably supported by services targeted towards business
class customers.
Following is the classification of industrial goods applicable for the purpose of product
management.
Materials and Parts
These are goods that enter the manufacturer’s product completely. They are of two types
namely raw materials and manufactured materials and component parts.
Raw materials can be of farm products like rice, maize, cotton, starch or natural products
like fish, petroleum, gas, iron and aluminium ore.
Farm products are renewable as they involve agricultural production.
The natural products are very often limited and often available in great bulk and low unit
value. There are a few but large producers and marketers supplying natural products.
Long-term supply contracts are a common phenomenon in these categories, as the industry
needs an uninterrupted supply of products and services for running their business process.
Manufactured materials can be classified as component materials like iron, steel, zinc and
component parts like motors, printed integrated circuits.
The component materials are further fabricated like from alumina to aluminium, pig iron to
steel and cloth from yarn. Components enter the final product without being changed or
modified. In this case price, quality and service are important factors while making a
decision.
Capital Items
Capital Items are long-lasting goods that facilitate developing or managing the finished
product.
They include two groups: installations and equipment.
Installation includes buildings, shades, offices and shop floors and heavy equipment like
earthmovers, trucks, drillers, servers and mainframe computers. Installations are major
purchases for the organisation.
Equipment includes hand tools and office equipment like personal computers, laptops. This
equipments are not permanent and they need to be replenished at different period of time.
Supplies and Business Services
These are short-term goods and services that facilitate managing or developing the finished
product supplies.
They can be of two kinds namely maintenance and repair items and operating supplies.
Maintenance supplies include painting, nailing and operating supplies include writing
papers, consumables for computer, lubricants and coal.
Business services can be classified as maintenance service like copier repair, window and
glass cleaning and business advisory services include consultancy, advertising and legal
services.

Product Personality
Product personality refers to the set of personality characteristics that people use to describe a
specific product. Product personality can affect users' interaction with and evaluation of a
product. Accordingly, it may be desirable to design products with a predetermined
personality.
Dove, for example, chooses sincerity as its brand personality, to attract feminine consumers.
Luxury brands, such as Michael Kors and Chanel, aims for sophistication. Their brand
personality focuses on an upper-class, glamorous, and trendy lifestyle, which attracts a
high-spending consumer base.
This soft-drink brand is the perfect combination of sincerity and excitement, funnelling the
cheerful joy and honesty of sincerity through its social media campaigns and advertisements,
such as the “Share a Coke” campaign.

Product Line
According to Philip Kotler, a product line can be defined as “a group of products that are
closely related because they function in a similar manner, and sold to the same customer
groups, are marketed through these same types of outlets, fall within given price range.”
In the above definition, Philip Kotler emphasizes a few points, which I want to discuss
below:

Closely Related Products. In any product line, the products are closely related. For example,
Pepsi has a Beverages product category which includes Pepsi, Dew, Aquafina, Brisk, and
many more. These products are related and target a specific group of people and preferences.

Same Customer Groups. Every product category target the same customer group. For
instance, 7 UP, Pepsi, Marinda, Mountain Dew target young people, while Gatorade is a
PepsiCo brand that targets athletes. Similarly, Quaker Oat is another Pepsi brand that focuses
on health-conscious people.

Product Mix
The Product Mix also called as Product Assortment, refers to the complete range of
products that is offered for sale by the company. In other words, the number of product
lines that a company has for its customers is called as product mix.
The product mix has four dimensions: Breadth, Length, Depth, and Consistency. 
The Breadth of a product mix shows the different kinds of product lines that firm carries.
Simply, it shows the number of items in the product line. This dimension of the product mix
represents the extent to which the activities of the firm are diversified. In the example below,
there are 4 product lines that show the width of the ITC.

The Length of a Product mix refers to the number of items in the product mix. In the
example below the length is 11. As in the foods line, the number of items is 3, in cigarettes is
3 and so on.. On adding all the items, we get the length of a product.
The Depth of a product mix refers to the variants of each product in the product line. For
example, in the example below, curry, pastes, biryanis, conserves, etc. shows the depth of the
foods product line.

The Consistency of a product mix shows the extent to which the product lines are closely
related to each other in terms of their end-use, distribution requirements, production
requirements, price ranges, advertising media, etc. In the above example, it is clear that ITC’s
product lines are less consistent as these perform different functions for the buyers.