Chapter 3- Product decisions

Product meaning, classification of products, Levels of products, Product mix decisions,

Product life cycle, New product development, Reasons for failure of product, Branding of
product, Types of branding.

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.
Classification of products:
Products can be classified into two categories; viz., Consumer Products and Industrial
Products.
1. Consumer Products
The products which directly satisfy the wants and needs of a consumer are known as
Consumer Products. For instance, soap, clothes, bread, jam, butter, etc. Consumer products
are used by consumers for their personal needs. These products can be further classified into
two categories: Based on Durability and based on Shopping Efforts.
A. Based on Durability
Based on Durability there are three types of consumer products; namely, Non-Durable
Products, Durable Products, and Services.
i) Durable Products
The goods that can be used for a long period of time are known as Durable Products. For
example, sewing machines, washing machines, refrigerators, air conditioners, etc. The
durable goods include higher profit margins for the producer and needs greater personal
selling efforts and various after-sales service by the organisation.
ii) Non-durable Products
The goods that can be consumed for a short period of time (one or few uses only) are known
as Non-durable Products. For example, soap, shampoo, toothpaste, biscuits, etc. These
products need heavy advertising and have less profit margin.
iii) Services
The activities, satisfaction, or benefits offered by an organisation for sale are known as
Services. For example, services offered by a CA, teacher, doctor, etc. Services are intangible
in nature, which means that we cannot see, touch, or feel them. They are also inseparable
from their source and cannot be stored because of their perishability. Another feature of
services is that they are highly variable because the quality and experience gained by a
consumer vary with the person providing them.
B. Based on Shopping Efforts
Based on Shopping Efforts there are three types of products; namely, Convenience Products,
Shopping Products, and Speciality Products.
i) Convenience Products
The products which are purchased immediately, frequently, and with the least effort and time
are known as Convenience Products. Convenience goods require minimum shopping effort.
For example, newspapers, salt, matchbox, medicines, etc. Convenience goods are purchased
in small numbers. Generally, they are of low price. These products are usually purchased at
convenient locations with the least time and effort. The price of convenient products is
standardised, as they are branded products. As these are essential products, they have
regular and continuous demand.
ii) Shopping Products
The products in which consumers devote considerable effort and time in shopping are known
as Shopping Products. For these products, the buyer first compares the price, style, quality,
etc., of different brands at different stores before making the final decision of purchase. For
example, shoes, clothes, mobile phones, jewellery, etc. Shopping products are usually
durable. The unit price as well the profit margin of the shopping products is high. Consumers
usually plan to purchase these products. Before making the final decision of the purchase, the
consumers first compare products of different companies and at different stores. The retailers
help the manufacturer in the sale of shopping products, as they play a crucial role in
persuading the consumers in buying the product.
iii) Speciality Products
The products with some special features for which the consumers make special efforts, while
purchasing them are known as Speciality Products. Demand for speciality products is
relatively inelastic. It means that even though the price of speciality products rises, their
demand does not reduce. For example, antique paintings, exotic perfumes, expensive
watches, branded sneakers, etc. speciality products are usually expensive and are available at
a few selected places. Because of their high cost, only a few people purchase these products
which make their demand limited. An organisation needs to perform aggressive promotion
activities for these products. The job of the marketer of speciality products does not end with
the sales. They must provide after-sales services to the consumers also.
2. Industrial Products
The products used by the organisations as inputs to produce other products are known as
Industrial Products. For example, lubricants, tools, equipment, machines, introduction of
other products are known as Industrial Products. For example, lubricants, tools, equipment,
machines, etc.

Classification of Industrial Products

Industrial Products can be classified into three categories; namely, Materials and Parts,
Capital Items, and Supplies and Business Services.
i) Materials and Parts
The goods which enter the products of a manufacturer completely are known as Materials
and Parts. These goods are of two types; namely, Raw Material and Manufactured Material
and Parts.
Raw Material: It consists of farm products such as sugarcane, cotton, etc.
Manufactured Material and Parts: It consists of component materials such as iron, glass, etc.,
and other components parts, such as batteries, tyres, etc.
ii) Capital Items
The fixed assets which are used by an organisation for the production of finished goods are
known as Capital Items. For example, fax machines, laptops, etc.
iii) Supplies and Business Services
The goods and services which are used by organisations to facilitate the development and
management of the finished products are known as Supplies and Business Services. For
example, maintenance items such as paint, nails, etc., and operating supplies, such as writing
paper, lubricants, etc.

Levels of 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 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.

Product mix decisions

What Do You Mean by Product Mix?
Product Mix, another name as Product Assortment, refers to several products that a company
offers to its customers. For example, a company might sell multiple lines of products, with the
product lines being fairly similar, such as toothpaste, toothbrush, or mouthwash, and also
other such toiletries. All these are under the same brand umbrella. Whereas, a company may
have varied and distinct other product lines that may be in good contrast to each other, such
as medicines and clothing apparel. Product mix can also be understood as the complete set
of products and services that are offered by a firm. A product mix consists of the product lines,
which are associated items that a consumer purchases.
Dimensions of a Product Mix
1. Width: Width or breadth, that refers to the number of product lines which is offered
by a company to its customers.
 2. Length: The length refers to the total number of products in a firm’s product mix
strategy.
3. Depth: Depth refers to the number of variations that exist in a product line.
4. Consistency: This refers to how closely the products in a product line are related to
each other.
Example of a Product Mix
A popular and classic example of Product Mix is the brand Coca-Cola. For simplicity, let us
assume that Coca-Cola oversees only two product lines that are soft drinks and juice (Minute
Maid). The Products that are classified as soft drinks are Coca-Cola, Fanta, Sprite, Diet Coke,
Coke Zero, and the products that are classified as Minute Maid juice are Guava, Orange,
Mango, and Mixed Fruit. The product mix or the consistency of Coca-Cola would be high, as
all the products within the product line fall under this beverage. In addition, these production
and distribution channels remain similar for each of these products. The product mix of Coca-
Cola in the example is illustrated as follows:

New product development

1. Idea Generation: The first step is knowing customer’s requirement through market
research by taking feedback, conducting surveys and going through the competitor’s
product. From this research, a product idea is developed.
2. Idea Screening: The product idea is to be well studied and investigated to find out the
need for introducing the new product, the requirement of additional machinery,
selection of marketing channel and its break-even point.
3. Concept Testing: The next stage is enquiring about the product feasibility by
conducting concept testing. The new product idea is revealed to a group of
consumers, and they are asked to share their response over it. If the majority is in
favour of the product, then further steps are to be taken.
4. Business Analysis: In this step, the organization decides whether the product is
financially viable for it or not. Product’s demand, cost, competitiveness, profitability,
expected sales, overheads, etc. are analyzed.
5. Product Development: At this stage, the manufacturing of a new product, it’s
financing, marketing and distribution as well as advertisement and promotion takes
place. However, initially, a small quantity is produced as a test batch.
6. Test Marketing: The product is then launched in the market on a small scale. If it
attains success and can generate customers, the large-scale production is planned.
If the product is rejected in the market, the company finds out the shortcomings and
rectifies it. If the product fails again in the market, the company tends to dump it.
7. Commercialization: At this point, the company executes large-scale production and
distribution of the successful new product. It advertises and markets the product on a
massive scale to acquire a considerable customer base.
8. Review Market Performance: Lastly, the company keeps track of the product’s
performance in the market to know customer satisfaction level, demand, profitability,
sales volume, competitor’s strategy, the satisfaction of the middlemen involved, etc.
Reasons for failure of new product
1. Lack of Product Originality
If your product lacks originality, it will likely fall behind similar products that already exist in
the market. Therefore, you need to offer something new and exciting to be able to be
different and appealing.
2. Inefficient Timing
In most cases, when the timing is wrong, the product might not get the attention it needs to
survive. Therefore, it is crucial to consider the time factor before launch.
3. Poor Planning & Poor Execution of Marketing Plan
Poor planning or poor execution of a marketing plan will almost guarantee your product’s
failure. But, on the other hand, a proper planning will not only help you create a clear strategy,
but it will also help your product stick around for a long time.
4. Product Flaws
Flaws might be one of the top factors in a product’s failure. As soon as the consumers start to
realize and have a personal experience with your flawed product, they immediately have a
negative opinion about it. In most cases, there’s no turning back from there.
5. Wrong Market Research
Market research is essential since it allows you to have a clear understanding of your
audience’s needs. If you do it correctly, it also plays a significant role in keeping an eye on
your competitors.
6. Incorrect Pricing
When your product is incorrectly priced, it becomes impossible for it to reach out to an
average customer. Therefore, you won’t be able to sell much, and most people won’t be able
to recognize your product or be familiar with it.
7. Weak Launch
Your product’s launch is important because it enables you to get feedback from early users,
and this will help you create opportunities to strengthen your product.

Branding:
Brand marketing is the process of establishing and growing a relationship between a brand
and consumers. Rather than highlighting an individual product or service, brand marketing
promotes the entirety of the brand, using the products and services as proof points that
support the brand's promise.
Types of branding
1. Personal branding
At first, it can feel kind of strange to think of a person as having a brand. After all, we’re not
products, we’re people. And we have inborn personalities, not cultivated brands. That is true.
But when we talk about personal branding, we’re not talking about creating a personality for
yourself. We’re talking about building a public persona that accurately communicates your
unique personality. Personal branding happens on social media and in face-to-face
environments where others’ perception of you can have a massive impact on your
professional and social reputation.
2. Product branding
Product branding is the action of branding a specific product. Just like personal branding
involves cultivating a public vocabulary and aesthetic for yourself, product branding shapes
how the world perceives your product through deliberate aesthetic choices.
3. Service branding
Unlike products, which are easy to brand in visible and tangible ways, services are a little more
challenging to brand. But that doesn’t mean brands can’t do it effectively—they just have to
be willing to think outside the box. Often, service branding comes in the form of “extras”, like
an insurance company sending all their customers rebate checks at the end of the year or a
hotel offering free cookies at the concierge desk.
4. Retail branding
When you walk into a brick-and-mortar store, its physical appearance has a look and feel
specific to that brand. That is retail branding in action. Deliberate design choices like its layout,
the light fixtures, the decor, the music played, the display fixtures and even the type of
flooring are all carefully selected to build a living brand experience for every shopper who
enters the store. Retail branding is a must-do for any business operating in a physical location.
Ecommerce has seen immense growth in the past few years and that trend isn’t changing any
time soon. So, to keep shoppers coming through the doors, retailers need to up their branding
game and turn their stores into experiences that shoppers want to come back and relive.
5. Corporate branding
If a company is a person, their corporate branding is how they express their personality.
Corporate branding, just like other kinds of branding, is the series of design choices and
actions that communicate key points about the brand, like its:

• Values
• Mission
• Price point
• Exclusivity
• Ideal consumer