THE PRODUCT

A product is anything that can be offered to

a market to satisfy a want or need.
Most important element of marketing mix
A companys best people and systems
should be devoted to developing, producing
and making products available to customers.
A product is anything that can be offered to
a market for attention, acquisition, use or
consumption that might satisfy a want or
need PHILIP KOTLER

 Products include more than just tangible

goods. Broadly defined, products include
physical objects, services, persons,
places, organisations, ideas or mixes of
these entities
Services are a form of products that
consist of activities, benefits or
satisfaction offered for sale that are
essentially intangible and do not result
in the ownership of anything. Example:
Banking, hotel, tax preparation etc.

PRODUCT LEVELS
In planning its market offering, the
marketer needs to think through five
levels of the product.
Each level adds more customer
value, and the five constitute a
customer value hierarchy.
The five levels are: i) Core product (ii)
Basic product (iii) Expected product
(iv) Augmented product and (v)
Potential product.

 (1) Core Product/ Core Benefit: the

fundamental service or benefit that the
customer is really buying.
The core product answers the question :
What is the buyer really buying. For instance,
a women buying a washing machine is buying
comfort and not just a mere collection of
drum, heater and nuts & bolts for their own
sake and a women buying lipstick is buying
hope and not a set of chemicals and colours
for their own sake.
The basic job of a marketer is to sell the core
benefits.

 2)Basic product: the marketer turns the core

benefits into a basic product.
3) Expected product: a set of attributes and
conditions buyers normally expect when they purchase
this product.
The basic and expected product makes a formal or
tangible product.
To differentiate its product from all others, the firm
names it ( branding), packs it, puts additional features
like laminated top, a stand or a water tap on the door
of the refrigerator to give a distinctive appeal. This
makes a core product a tangible or formal product.
The tangible product broadly posses 5 characteristics
comprising i) quality level (ii) features (iii) style (iv)
brand and (v) packaging.

 4) Augmented product: the marketer

prepares an augmented product that exceeds
customer expectations.
The product augmentation is a set of approaches
followed by a company in promoting its product
through effective delivery and service, incentives to
customers and dealers, warranty to seek customers
confidence on product.
In other words the intangible components of the
product along with the tangible and core components
is called augmented product
Todays competition essentially takes place at the
product augmentation level. ( in less developed
countries, competition takes place mostly at the
expected product level).
According to Levitt: The new competition is not
between what companies produce in their factories,
but between what they add to their factory output in

 5) Potential product: encompasses all

the possible augmentations and
transformations that the product might
undergo in the future.
Companies search for new ways to satisfy
customers and distinguish their offer.
(successful companies add benefits to their
offering that not only satisfy customers but
also surprise and delight them.) the best
way to hold customers is to constantly
figure out how to give them more for less.

PRODUCT MIX
The number of products carried by a firm
at a given point of time is called its product
mix.
The set of all products that an organisation
makes available to customers.
It is the total set of brands marketed by the
company.
A brand is a name, term, sign, symbol or
design or a combination of them, intended to
identify the goods and services of one seller
or a group of sellers and to differentiate
them from those of competitors.
.

 One of the realities of business is

that most companies deal with
multiple products . This helps the
firm to diffuse its risk across
different products groups. Also it
enables the firm to appeal to a much
larger group of customers or to
different needs of the same customer
group

 Product item is a specific version of a product that is

designated as a distinct offering from a company. Most
often a company brands each of its product items. Mach 3
is a product item from Gillette.
A product line is a group of product items or brands that
are closely related in terms of their functions and benefits
they provide.
A product line refers to a group of products clubbed
together by virtue of satisfying a particular class of needs,
being used together, being distributed through the same
channel or possessing common physical or technical
characteristics.
Godrej has several product lines furniture, toiletries,
locks, typewriters, refrigerators, computers etc.
Gillettes product line includes blades and razors,
toiletries, and writing instruments.

 The depth of a product line is the

number of product items or brands and
variations (like size, packaging, colors
etc) it contains.
Gillettes razor & blade product line
include brands like MACH 3, Sensor,
Trac III, Atra, etc.
Companies increase the depth i.e. add
more brands to their product lines to
attract more buyers with different
preferences and to increase sales by
further segmenting the market.

 The width of a product mix is the

number of product lines that a
company offers. Companies increase
the width of their product mix to
spread their risk over many product
lines rather than depend on one or a
few of them.
They also widen their product mix to
capitalize on their established brand
equity.

Product classification
Products can also be classified based on whether
they are used by consumers or businesses.
Consumer products can be further categorized into
shopping products, convenience products, specialty
products and unsought products
Consumer products: Those products purchased by
households and individuals for their own private
consumption.
Business-to-business products: Those products
purchased by individuals and organisations for use in
the production of other products or for use in their
daily business operations.

On the basis of Durability and

Tangibility
Nondurable goods- tangible goods
normally consumed in one or few
uses.
Durable goods tangible goods that
normally survive many uses.
Services intangible and perishable
products.

CONSUMER GOODS CLASSIFICATION

Convenience products (fast-moving
consumer goods): Inexpensive, frequently
purchased consumer products that are bought
with little engagement in the decision-making
process.
-further divided into STAPLES, IMPULSE
and EMERGENCY GOODS
Shopping products: Consumer products that
involve moderate to high engagement in the
decision making process, with the purchase
decision being based on consideration of
features, quality and price.

Consumer goods
Specialty products: Highly desired
products with unique characteristics that
consumers will make considerable effort
to obtain.
Unsought products: Products purchased
to solve a sudden, unexpected need. Are
those the consumer does not know about
or does not normally think of buying
smoke detectors. Known but unsought
life insurance , encyclopedia

PRODUCT STRATEGY
The conscious firm lays specific stress on the role of the
product strategy so that it can derive the maximum benefit
from its productive efforts.
The variable set under the strategy is given below:
1) Attributes & Operations of the product: the attributes
catch the attention of the customers first. In this packaging
has a good role to play. ( baby products, toys etc).
- Convenience of handling is an essential aspect of a
product. This is mostly the case with electrical goods. Here if
some aspects are complicated it is the duty of the firm to
provide the relevant information through booklets,
demonstrations, instructions etc.
2) Uniqueness of the product: it should leave an impact on
the customer and build an image in the market.

PRODUCT STRATEGY
3) How lasting the product is?
The third area in the strategy is to go for
a procedure that makes the product
long lasting. The firms should be
prepared in advance so that its products
do not retire from the market.
4) Sound management of the product
5) The innovative sprit
6) Quality

PRODUCT LIFE CYCLE

The Product Life Cycle
A new product progresses through a sequence of
stages from introduction to growth, maturity, and
decline. This sequence is known as the product
life cycle and is associated with changes in the
marketing situation, thus impacting the
marketing strategy and the marketing mix.
The product revenue and profits can be plotted
as a function of the life-cycle stages as shown in
the graph :

Product Life Cycle Diagram

 Introduction Stage
In the introduction stage, the firm seeks to build product awareness
and develop a market for the product. The impact on the marketing
mix is as follows:
Product branding and quality level is established, and intellectual
property protection such as patents and trademarks are obtained.
Pricing may be low penetration pricing to build market share
rapidly, or high skim pricing to recover development costs.
Distribution is selective until consumers show acceptance of the
product.
Promotion is aimed at innovators and early adopters. Marketing
communications seeks to build product awareness and to educate
potential consumers about the product.

Introduction Stage. . .
At the Introduction (or development) Stage market
size and growth is slight. It is possible that
substantial research and development costs have
been incurred in getting the product to this stage.
In addition, marketing costs may be high in order to
test the market, undergo launch , promotion and set
up distribution channels.
It is highly unlikely that companies will make profits
on products at the Introduction Stage. Products at
this stage have to be carefully monitored to ensure
that they start to grow. Otherwise, the best option
may be to withdraw or end the product.

Growth Stage
In the growth stage, the firm seeks to build
brand preference and increase market share.
Product quality is maintained and additional
features and support services may be added.
Pricing is maintained as the firm enjoys
increasing demand with little competition.
Distribution channels are added as demand
increases and customers accept the product.
Promotion is aimed at a broader audience.

Growth Stage...
The Growth Stage is characterised by rapid
growth in sales and profits. Profits arise due
to an increase in output (economies of
scale)and possibly better prices.
At this stage, it is cheaper for businesses to
invest in increasing their market share as
well as enjoying the overall growth of the
market. Accordingly, significant
promotional resources are traditionally
invested in products that are firmly in the
Growth Stage.

Maturity Stage
At maturity, the strong growth in sales diminishes.
Competition may appear with similar products.
The primary objective at this point is to defend
market share while maximizing profit.
Product features may be enhanced to
differentiate the product from that of competitors.
Pricing may be lower because of the new
competition.
Distribution becomes more intensive and
incentives may be offered to encourage
preference over competing products.
Promotion emphasizes product differentiation.

 Maturity Stage
The Maturity Stage is, perhaps, the most
common stage for all markets. it is in this stage
that competition is most intense as companies
fight to maintain their market share. Here, both
marketing and finance become key activities.
Marketing has to be monitored carefully, since
any significant moves are likely to be copied by
competitors. The Maturity Stage is the time
when most profit is earned by the market as a
whole. Any expenditure on research and
development is likely to be restricted to product
modification and improvement and perhaps to
improve production efficiency and quality.

 Decline Stage
As sales decline, the firm has several options:
Maintain the product, possibly rejuvenating it by adding
new features and finding new uses.
Harvest the product - reduce costs and continue to offer it,
possibly to a loyal niche segment.
Discontinue the product, liquidating remaining inventory or
selling it to another firm that is willing to continue the
product.
The marketing mix decisions in the decline phase will
depend on the selected strategy. For example, the product
may be changed if it is being rejuvenated, or left
unchanged if it is being harvested or liquidated. The price
may be maintained if the product is harvested, or reduced
drastically if liquidated.

 Decline Stage
In the Decline Stage, the market is shrinking,
reducing the overall amount of profit that can be
shared amongst the remaining competitors. At this
stage, great care has to be taken to manage the
product carefully. It may be possible to take out some
production cost, to transfer production to a cheaper
facility, sell the product into other, cheaper markets.
Care should be taken to control the amount of stocks
of the product. Ultimately, depending on whether the
product remains profitable, a company may decide to
end the product.

EXAMPLES

INTRODUCTION
Third generation mobile phones
E-conferencing
All-in-one racing skin-suits
iris-based personal identity cards
GROWTH
Portable DVD Players
Email
Breathable synthetic fabrics
Smart cards

 EXAMPLES

MATURITY
Personal Computers
Faxes
Cotton t-shirts
Credit cards

DECLINE
Typewriters
Handwritten letters
Shell Suits
Cheque books

DECLINE
Typewriters
Handwritten letters
Shell Suits
Cheque books

 Strategies for the differing stages of the Product Life Cycle.

Introduction.
The need for immediate profit is not a pressure. The product is promoted to
create awareness. If the product has no or few competitors, a skimming price
strategy is employed. Limited numbers of product are available in few channels
of distribution.
Growth.
Competitors are attracted into the market with very similar offerings. Products
become more profitable and companies form alliances, joint ventures and take
each other over. Advertising spend is high and focuses upon building brand.
Market share tends to stabilise.
Maturity.
Those products that survive the earlier stages tend to spend longest in this
phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to
differentiate products and brands are key to this. Price wars and intense
competition occur. At this point the market reaches saturation. Producers begin
to leave the market due to poor margins. Promotion becomes more widespread
and use a greater variety of media.
Decline.
At this point there is a downturn in the market. For example more innovative
products are introduced or consumer tastes have changed. There is intense
price-cutting and many more products are withdrawn from the market. Profits
can be improved by reducing marketing spend and cost cutting.

 Problems with Product Life Cycle.

In reality very few products follow such a
prescriptive cycle. The length of each stage
varies enormously. The decisions of
marketers can change the stage, for
example from maturity to decline by pricecutting. Not all products go through each
stage. Some go from introduction to decline.
It is not easy to tell which stage the product
is in. Remember that PLC is like all other
tools. Use it to inform your gut feeling.

New product development

The new product development process:
1.
2.
3.
4.
5.
6.
7.
8.

Idea generation
Screening
Concept evaluation
Marketing strategy
Business analysis
Product development
Test marketing
Commercialisation

The new product development (NPD) process is generally

characterised as consisting of eight steps viz:
1. Idea generation
Use of various brainstorming activities as well as
speaking to customers, company staff, distributors and
the use of R&D and market intelligence.
2. Idea screening
New ideas must be screened to determine how promising
the ideas are. Criteria used to evaluate ideas include:
i. does the market care? (identify consumer benefits and
market potential)
ii. is it important to the organisation? (does it fit company
strategy and goals?; will it create shareholder value?;
how much market share will it achieve?; does it provide a
competitive advantage?)
iii. does it fit with organisational capabilities?

3. Concept development
Sound ideas need to be developed into product
concepts and then tested with the appropriate
target group
4. Marketing strategy development
Consists of three elements:
i. analysis of the target markets size, structure
and behaviour; the planned product positioning;
and the sales, market share and profit goals in the
early years;
ii. the products planned price, distribution
strategy and marketing budget for the first year;
iii. the long run sales and profit goals and
marketing-mix strategy over time.

5. Business analysis
Analyses whether the strategy will be a good fit with
companys overall business objectives and the profit
potential.
6. Product development
At this stage the product requires a large increase in
investment as it continues to go through functional
and consumer tests.
7. Market testing
The product will go through a variety of testing: sales
research and controlled test marketing.
8. Commercialisation
Assuming the product has made it thus far,
management can now decide whether to launch the
product.

Product innovation and

Diffusion
Diffusion of Innovations is a theory that seeks
to explain how, why, and at what rate new ideas
and technology spread through cultures.
It describes the behaviour of consumers as they
purchase new products and services.
It is the process by which an innovation is
communicated through certain channels over
time among the members of a social system.
The individual categories of innovator, early
adoptor, early majority, late majority and
laggards are described below.

Innovators
Innovators are the first individuals to adopt an
innovation. Innovators are willing to take risks,
youngest in age, have great financial lucidity, very
social and have closest contact to scientific sources and
interaction with other innovators. Risk tolerance has
them adopting technologies which may ultimately fail.
Financial resources help absorb these failures
Innovators display behaviour that demonstrates that
they likely to want to be ahead, and to be the first to
own new products, well before the average consumer.
They are often not taken seriously by their peers. The
often buy products that do not make it through the
early stages of the Product Life Cycle (PLC).

Early Adopters
This is the second fastest category of individuals who
adopt an innovation. These individuals have the highest
degree of opinion leadership among the other adopter
categories. Early adopters are typically younger in age,
have a higher social status, have more financial lucidity,
advanced education, and are more socially forward than
late adopters. More discrete in adoption choices than
innovators. Realize judicious choice of adoption will help
them maintain central communication position.
Early adoptors are also quick to buy new products and
services, and so are key opinion leaders with their
neighbours and friends as they tend to be amongst the
first to get hold of items or services.

Early Majority
Individuals in this category adopt an innovation
after a varying degree of time. This time of
adoption is significantly longer than the innovators
and early adopters. Early Majority tend to be slower
in the adoption process, have above average social
status, contact with early adopters, and seldom
hold positions of opinion leadership in a system
The early majority look to the innovators and early
majority to see if a new product or idea works and
begins to stand the test of time. They stand back
and watch the experiences of others. Then there is
a surge of mass purchases

Late Majority
Individuals in this category will adopt an
innovation after the average member of the
society. These individuals approach an
innovation with a high degree of skepticism
and after the majority of society has adopted
the innovation. Late Majority are typically
skeptical about an innovation, have below
average social status, very little financial
lucidity, in contact with others in late majority
and early majority, very little opinion
leadership

Laggards
Individuals in this category are the last to adopt an innovation.
Unlike some of the previous categories, individuals in this
category show little to no opinion leadership. These individuals
typically have an aversion to change-agents and tend to be
advanced in age. Laggards typically tend to be focused on
traditions, likely to have lowest social status, lowest financial
fluidity, be oldest of all other adopters, in contact with only
family and close friends, very little to no opinion leadership
laggards tend to very late to take on board new products and
include those that never actually adopt at all. Here there is
little to be made from these consumers.
There are a number of examples of products that have gone
through the adoption process. They include Ipods or DVD
players (or even video players and digital watches).