Unit 3: Product Decisions

1. Concept and Classification of Products

Concept of a Product:

A product is anything offered to the market to satisfy a need or want. It is not just a
physical object, but can also be a service or even an idea. Products have tangible and
intangible components, both of which contribute to the overall value the product brings
to the consumer.

 Tangible products: These are physical items that can be touched, such as a car, a
book, or a smartphone.
 Intangible products: These include services or experiences that provide value,
such as consulting, education, or entertainment.

A product satisfies a specific need or desire, and companies develop products as

solutions to these needs. A product is made up of several elements, including features,
benefits, brand, design, and packaging.

Classification of Products

Products are classified based on the purpose they serve in the consumer’s life or the
market in which they are used. The main categories are consumer products and
industrial products.

1. Consumer Products:
These are products that are purchased by individuals for personal consumption. The
classification of consumer products is based on the frequency of purchase, the amount of
effort in decision-making, and the consumer’s involvement in the purchasing process.

Convenience Products:

Definition: These are frequently purchased, low-cost products that require minimal
effort and decision-making from the consumer. They are readily available at many
locations and are often impulsively bought.

Example: Everyday items like bread, milk, toothpaste, snacks, and newspapers.
 Characteristics:

- Low price.

- Frequent purchase.

- Little time spent on decision-making.

Shopping Products:

Definition: These are products that consumers buy less frequently and are willing to
invest more time and effort comparing before making a purchase. They often involve
higher price and higher involvement.

Example: Electronics (like laptops or TVs), clothing, furniture, and appliances.

Characteristics:

- Consumers compare based on features, quality, price, and style.

- Less frequent but more considered purchase.

- Higher price range.

Specialty Products:

Definition: These are unique, high-end products that have special qualities, branding,
or other distinguishing features that make them highly desired by a particular group of
consumers.

Example: Luxury cars (like Rolls-Royce), high-end watches (like Rolex), designer clothes
(like Chanel).

Characteristics:

- Unique attributes.

- High consumer loyalty.

- Higher price and effort in purchase.

Unsought Products:

Definition: These are products that consumers do not actively think about or seek
unless an urgent need arises. They often require aggressive marketing efforts.

Example: Life insurance, funeral services, emergency medical supplies.

Characteristics:

- No active demand.

- Purchased during an urgent need or crisis.

- Requires direct marketing and sales efforts.

2. Industrial Products:

These products are purchased by businesses or organizations to use in their production

processes, for resale, or for operational purposes.

Raw Materials:

Definition: Basic materials that are used in the production process. These products are
typically extracted or harvested and are not yet processed into finished goods.

Example: Crude oil, cotton, coal, and timber.

Characteristics:

- Often undifferentiated.

- Sold in bulk to manufacturers.

- Price-sensitive.

Capital Items:

Definition: These are long-lasting goods that are used in the production process or to
help in business operations.

Example: Machinery, office buildings, and equipment (like factory machinery or printing
presses).

Characteristics:

- Expensive and long-term use.

- High initial investment.

- Typically bought after thorough evaluation.

Supplies and Services:

Definition: These include products used in business operations and day-to-day

functions, such as office supplies, cleaning services, and maintenance services.

Example: Office supplies, business software, consulting services.

Characteristics

- Often low cost.

- Frequent purchase.

- Help in routine operations.

2. Levels of Product
Every product has three levels that add value and enhance its appeal to the consumer.
These levels are:

1. Core Product:

This is the fundamental benefit or need that the product fulfills for the customer. It's
the reason the product exists.

Example:

For a smartphone, the core product is the ability to communicate and access
information.

- For a hotel, the core product is a place to stay.

2. Actual Product:

This is the tangible aspect of the product that delivers the core benefit. It includes the
product’s design, features, brand, quality, and packaging.

Example:

For a smartphone, the actual product includes the brand name (e.g., iPhone), features
(camera, screen size, etc.), and the physical form (the actual phone you can hold).

3. Augmented Product:

These are the extra features, services, and benefits that surround the product. This
adds additional value and can create differentiation in the market.

Example:

- For a smartphone, the augmented product could include services like warranty,
after-sales support, software updates, and free accessories (like headphones or cases).

- For a hotel, augmented features could include room service, spa services, or loyalty
programs.

3. Product Mix
The Product Mix refers to the entire range of products a company offers for sale. A
product mix is made up of several product lines, and each product line has its own set of
products.

Dimensions of Product Mix:

1. Width of the Product Mix:

- The number of different product lines a company offers.

- Example: A company like Unilever may have product lines for food, beverages,
personal care, and household cleaning products. So, the width of their product mix is four
product lines.
2. Length of the Product Mix:

- The total number of products in a company’s product mix. It refers to the number of
items in each product line.

- Example: A company like Coca-Cola has several variations of soft drinks, such as
Coca-Cola, Diet Coke, Coca-Cola Zero, etc. These are the length of the product line.

3. Depth of the Product Mix:

- The number of variations of each product offered in the product line. This could be in
terms of size, colour, flavour, or other variations.

- Example: A brand like Colgate may offer different variations of toothpaste, like
Colgate Total, Colgate Sensitive, and Whitening. These variations increase the depth of
the product line.

4. Consistency of the Product Mix:

- The degree to which the different product lines in a company’s product mix are
related. If they serve similar end-use or are produced using similar processes, the
consistency is high.

- Example: Apple has a high consistency in its product mix, as all of its products
(iPhones, iPads, Mac Books) are tech products that focus on innovation and user
experience.

Concept of Branding:
Branding is the process of creating a distinct identity for a product or company. It
includes not only the name and logo but also the overall image, personality, and
consumer perceptions. Strong branding can lead to customer loyalty, higher perceived
value, and a premium price.

Types of Branding:

1. Product Branding:

- Branding a specific product with its own name and identity.

- Example: Coca-Cola, Nike, iPhone.

2. Corporate Branding:

- The company itself is the brand, and all products carry the same brand name.
 - Example: Apple, Samsung, Microsoft.

3. Private Label Branding:

- Retailers create their own brand for products manufactured by third parties.

- Example: Great Value by Walmart, Archer Farms\ by Target.

4. Co-Branding:

- Two brands collaborate to create a new product that combines the strengths of both
brands.

- Example: Doritos Locos Taco (Taco Bell + Doritos) or Nike + Apple (Nike+ iPod).

Significance of Branding:

1. Differentiation:

Branding helps distinguish a company’s product from competitors.

- Example: The brand Apple differentiates itself by promoting innovation and quality.

2. Customer Loyalty:

Strong branding helps create an emotional connection with customers, fostering

loyalty.

- Example: People who love Coca-Cola often prefer it over other sodas.

3. Perceived Value:

Brands like Rolex and Mercedes-Benz are associated with high quality, allowing them to
command higher prices.

4. Competitive Advantage:

A strong brand can give a company a competitive edge in the market.

- Example: Nike uses branding to highlight its performance, motivating customers to

pay a premium.

Qualities of a Good Brand Name:

1. Memorability:

A good brand name should be easy to remember and recall.

- Example: Nike, Apple.

2. Relevance:

The brand name should align with the product’s core values and benefits.

- Example: Blinkit is a relevant name for an online grocery delivery service.

3. Simplicity:

A brand name should be simple and easy to pronounce.

- Example: Google, Coca-Cola.

4. Uniqueness:

A brand name should stand out from competitors and be distinctive.

- Example: Pepsi stands out from Coca-Cola.

5. Emotional Connection:

A brand name should evoke an emotional response or convey the right tone.

- Example: Tesla evokes innovation and eco-friendliness.

6. Protection:

The name should be legally protectable (trademarked) to avoid copying or confusion.

Example: Nike is a trademarked name.

Packaging and Labelling

1. Packaging: Types and Functions

Concept of Packaging:

Packaging is the process of designing and producing the container or wrapper for a
product. It is an important part of product marketing and directly affects how a product is
perceived by consumers. Packaging not only serves the basic function of protecting the
product but also plays a role in its promotion, convenience, and ease of use.
Types of Packaging:

1. Primary Packaging:

- This is the packaging that directly holds the product and is in contact with it. It is the
first layer of protection and usually the packaging seen by consumers on store shelves.

- Example: The bottle of a soft drink, a toothpaste tube, or a box of cereal.

2. Secondary Packaging:

- This packaging is used to group primary packages for convenience, storage, or retail
display. It does not usually come into direct contact with the consumer but serves
logistical and aesthetic purposes.

- Example: A carton box that holds several toothpaste tubes or a case of bottled drinks.

3. Tertiary Packaging:

- Tertiary packaging is used for bulk handling, storage, and transport. It is designed for
the safe movement of goods from warehouses to retailers and is not typically seen by
consumers.

- Example: A pallet of canned goods, cardboard boxes, or shrink-wrapped pallets.

Functions of Packaging:

1. Protection:

Packaging is meant to protect the product from physical damage, contamination,

spoilage, or tampering. This ensures that the product reaches the consumer in good
condition.

- Example: The sealed packaging of a snack bag to keep it fresh.

2. Promotion and Branding:

Packaging acts as a marketing tool to attract attention and differentiate the product
from competitors. Effective packaging uses design, color, logos, and messaging to make
the product stand out on the shelf.

- Example: The iconic *Coca-Cola bottle* design that instantly identifies the brand.

3. Convenience:

Packaging makes it easier for consumers to use or carry the product. It provides
features like easy opening, portion control, portability, and resalelability.
 - Example: Microwaveable food packaging* that can be heated easily and thrown away
afterward.

4. Information:

Packaging provides consumers with necessary information about the product, such as
ingredients, nutritional facts, usage instructions, warnings, and expiration dates.

Example: The nutritional label on packaged foods or the *instructions* on cleaning

products.

5. Environmental Responsibility:

Many modern packaging solutions are designed with sustainability in mind. Eco-friendly
packaging helps reduce environmental harm and appeals to environmentally conscious
consumers.

Example: Brands like *Unilever* or *Coca-Cola* offering packaging made from recycled
materials.

2. Labelling: Types and Functions

Concept of Labelling:

Labelling refers to the process of placing printed information on a product’s packaging. It

provides details about the product's contents, usage, branding, and legal requirements.

Types of Labels:

1. Brand Label:

- The label that displays the brand name, logo, and trademark. Its purpose is to identify
the brand and make it easily recognizable to consumers.

- Example: The Nike swoosh on shoes.

2. Descriptive Label:

- Contains detailed information about the product, such as its ingredients, usage
instructions, and potential risks.

- Example: A shampoo label that lists ingredients and provides instructions for use.

3. Grade Label:

- Indicates the quality or grade of the product, usually based on standards set by a
governing body or industry.

- Example: The USDA Grade A label on meat or organic certification labels.

4. Warning/Instructional Label:

- Provides safety instructions or warnings related to product use. It informs consumers

about potential hazards or precautions.

- Example: Warnings on *cleaning products or medicine bottles.

Product Support Services

Definition:

Product support services refer to the after-sales assistance provided by companies to

ensure that customers have a smooth experience with the product after purchase. These
services help enhance the customer’s satisfaction, improve the product's longevity, and
resolve issues if they arise.

Types of Product Support Services:

1. Customer Service:

- Involves general assistance to customers with inquiries or issues. This can include
answering questions, providing troubleshooting support, and handling complaints.

- Example: A call center or online chat support offered by companies like Amazon or
Apple.

2. Technical Support:

- Specialized help for customers facing technical issues with a product. This is
particularly relevant for products like electronics, software, or appliances that require
more in-depth knowledge.

- Example: Apple’s Genius Bar provides technical support for MacBook, iPhone, and
other Apple products.

3. Warranty and Guarantees:

- Offering a warranty or guarantee ensures that the company will repair, replace, or
refund the product if it fails under certain conditions or within a specified time frame.

- Example: Samsung’s 1-year warranty* on smartphones or Sony’s guarantee for

electronic products.
4. Installation Services:

- Certain products require professional installation, especially those that are complex or
heavy, like appliances, electronics, or machinery.

- Example: Dishwashers or television sets often come with installation services.

5. Training and Tutorials:

- Many companies provide training resources, such as manuals, video tutorials, or

online courses, to help customers better understand how to use their products.

- Example: Fitbit offers video tutorials and tips to help users set up and use their fitness
tracker effectively.

6. Maintenance and Repair Services:

- Regular maintenance and repair services are offered to extend the life of a product,
especially for items that require periodic servicing like cars, home appliances, or
electronics.

- Example: Car dealerships offering regular maintenance services, or HVAC companies

providing regular servicing of air conditioners.

Product Life Cycle (PLC)

Definition:

The Product Life Cycle is the process that every product goes through from its
introduction to the market to its eventual decline or discontinuation. It is important for
marketers to understand each stage of the PLC to tailor marketing strategies
accordingly.

Stages of the Product Life Cycle:

1. Introduction Stage:

- Characteristics:

- The product is newly launched, and sales grow slowly.

- High marketing and promotional expenses to create awareness.

- Little to no competition as the product is new to the market.

- The company might sell at a loss initially due to high launch costs.

- Strategies:

- Heavy promotion to inform and attract customers.

 - Skimming or penetration pricing strategies to establish market presence.

- Extensive distribution efforts.

- Example: The *first iPhone* release or *electric vehicles* when they first emerged.

2. Growth Stage:

- Characteristics:

- Sales increase rapidly as the product gains acceptance and more consumers adopt
it.

- New competitors may enter the market, but the product still enjoys high demand.

- Profit margins increase due to economies of scale.

- Strategies:

- Product differentiation to stand out from new competitors.

- Expansion of distribution networks.

- Pricing strategies to capture market share.

- Example: The *smartphone* market in the early 2010s when Android and iPhones
gained widespread adoption.

3. Maturity Stage:

- Characteristics:

- Sales growth slows as the product reaches its peak market penetration and most
potential customers have already purchased it.

- Intense competition leads to price cuts or increased marketing efforts.

- Profit margins start to decrease due to increased competition.

- Strategies:

- Product modifications, new features, or variations to maintain interest.

- Focus on retaining customer loyalty and extending the product's life.

- Price adjustments to combat competition.

- Example: The *candy industry, where products like **chocolate bars* have seen slow
but steady sales and product innovations to stay relevant.

4. Decline Stage:

- Characteristics:

- Sales and profits decline due to new technologies, changing consumer preferences,
or market saturation.

- The product may be phased out or discontinued.

- The company may reduce marketing expenses or scale down production.

 - Strategies:

- Discontinue the product or sell it off to another company.

- Offer discounts to clear out remaining inventory.

- Minimize costs related to the product.

- Example: DVD players or VHS tapes, which have been replaced by streaming services.

Key Points to Remember:

- Product Life Cycle (PLC) affects marketing strategies, pricing, distribution, and
promotion at each stage.

- Products may experience a rapid or slow decline, and companies can extend the
product life by modifying the product or entering new markets.

- Innovation and differentiation can help products avoid the decline phase for a longer
period.