BASIC CONCEPT OF PRODUCT:

In a narrow sense, a product is a set of tangible physical attributes assembled in an identifiable form. Each product carries a
name, such as car, iron, building etc. But in marketing, a product is anything which can satisfy a need, want or desire of
consumers and can be offered in an exchange process. Hence, a product can be commodity, service, idea or a combination
of all these. A commodity is a tangible object such as watch. A service is an intangible which provides benefits and
satisfaction to the users such as health service or doctors or nurses service. An idea is a philosophy or concept-such as
stop smoking, use seat belt during driving, suggestion for doing physical exercises. etc.

When buyers purchase a product, they decide to buy after considering both tangible and intangible attributes of the product
for example a car is a tangible product but its after sales service, durability, colour, manufactures reputation etc. are
intangible part of product. Good products are key to market success and therefore products should be produced as per the
needs and wants of target market.

A product is a set of tangible and intangible attributes including packaging, colour, price, quality and brand plus the services
and reputation of the seller. A product may be a tangible goods, service, place, person or idea A product should be
considered as a bundle of utilities consisting of various product features and accompanying services.
W. Anderson

A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want
or need. It includes physical objectives, services, person, places, organisation and ideas.
Philip Kotler.
The product concept is a management orientation that assumes that consumer will favour those products that offer the most
quality and other features for the price and therefore producers should efforts for continuous improvement of product quality
and other features of product.

The Implicit premises of the product concept are
1. Consumers buy products rather than solutions to needs.
2. Consumers are primarily interested in product quality and other features.
3. Consumers know the quality and feature differences of the competing brands.
4. The organisations task is to keep improving product quality and other features as the key to attracting and holding
customers.
From the above explanation, you have come to know that the word product in marketing has a much wider meaning.
Product covers tangible commodity such as book, services such as nursing, places such as tourist spot, organisations such
as hospital, persons such as singer and ideas such as safety measures etc. It also covers other related features such as
design, brand, package, label, price etc.
Essential Features or Attributes of a Product:
rom the above definitions, some of essential features can be identified as given below :

(a) Tangibility: To be a product, it should have a tangibility character such as it can be touched or seen,
for example a car, building, cloth etc.
(b) Intangible Attributes: The product may also be intangible in the form of services for instance,
banking, insurance, music composition, repairing, nursing etc.

(c) Associated Attributes: A product may have number of features which differentiate it from
competitors products. Associated attributes usually cover the colour, package, brand name, installation
instruction etc. For example Hindustan Levers vanaspati ghee has a brand name DALDA and with its
package it can be identified by the consumers. It has developed an image in such a way that all kinds of
vanaspati ghee sold are being referred to as DALDA ghee.

(d) Exchange Value: A product may be tangible or intangible but it must have exchange value. It must be
capable of being exchanged between seller and buyer at mutual agreed price.

(e) Consumer satisfaction: A product should have the capacity to satisfy consumers real or psychological
needs and wants. At the same time, it must have capacity to generate profit for the satisfaction of
sellers.
CLASSIFICATION OF PRODUCT OR GOODS:
A) Products based on uses :
(i) Consumer Products : These are the products or services that are meant for final consumers for their
personal, family or house hold use. These products are used by buyer for their consumption or selling
but not for further processing. For example pen, watch, books, newspaper etc.

Consumer products are further classified as below:
(a) Convenience goods: These products or services are purchased with minimum efforts and time
consuming as the buyers have sufficient information and knowledge about these types of products. For
example bread, newspaper etc.

The marketing of these products require intensive distribution, intensive advertising and in store-
display.

Convenience products or goods are further classified as follows:
(B) Staple convenience goods or products: These items are purchased routinely with little or no
planning. For example perishable goods such as bread, fish, vegetable etc. The items should be available
close to where the consumers live. Work or pass by.

(ii) Emergency goods: Goods required meeting the urgent needs and so the purchasers do not get time
for selection. For example needs of umbrella during raining season, repairing of T.V. during world cup
cricket etc.

(c) Impulse goods: The consumer is not usually pre-planned or predetermined to purchase such goods
but during shopping all of a sudden he decides to purchase this type of goods because of product
exposure or attraction. For example chocolate, balloon, a new type of ball pen etc.

(d) Shopping Goods: These goods are consumer durable item and so he/she selects or purchases these
goods only after making comparisons on such bases as suitability, quality, price, style and durability. The
purchase decision usually takes more time as the consumers collect various information regarding the
product from various sources like friends relatives, present users etc. Examples: T.V., Furniture, mobile
hand-set etc.

(e) Specialty Goods : A good number of buyer is habitually willing to make a special purchasing efforts
for purchasing specialty products. These products are particular brands, stores and persons to which
consumers are loyal. The buyers are reluctant to purchase substitutes. The marketing emphasis for
specialty products is on maintaining the product features that makes the items so unique to loyal
customers, reminder advertising to the target market and appropriate distribution system. For Example
- Branded surgical instruments for doctors, life saving drugs, Bhupen Hazarika as a singer, Peter England
dresses etc.

(f) Unsought Products: The buyers do not know about the existence of product or they do not want to
purchase. It may be regularly unsought product such as service of life insurance company, a layers
service, safety alarm etc. or/and new unsought products which are completely new products and
unfamiliar to consumers. For example new course like B.Sc (Bio-technology), Post-Graduate Diploma in
Political Science Management etc.

(II) Industrial Products: Goods which are used for commercial production or in carrying of some business
activities are known as industrial goods. It is for commercial use not for personal use. The same product
may be consumer product as well as industrial product depending on its purpose of use. For example:
Rice when we cook and eat at home, it is consumer products and when the same is sold in a restaurant
or hotel, it is treated as industrial goods. Industrial buyers are mostly rational buyer, i.e. they are cost,
quality and standard conscious.

The various types of industrial goods are discussed below:
(a) Installations: These are capital goods which determine the nature, scope, capacity and efficiency of
production as well as company. These are non portable and heavy goods. The major marketing tasks are
direct selling from the producers to the purchasers with some sort of demonstration or presentation.
Examples are plants and machinery, major equipments, building, assembly lines etc.

(b) Raw Materials: These are the main inputs to the final products. These are the part of the final
products. Some of the raw-materials are required processing before incorporated in the final products
and there primary materials from extractive and agricultural industrials-minerals, petroleum, iron ore
etc do not require any process.

(c) Fabricated materials and parts: These are semi processed goods but they may require further
processing before being the part of final products. For example pig iron for the production of steel.
(d) Operating Supplies: These are not the part of final products but these are required to continue the
production process such as light bulbs, pen, paper, computers etc.

(e) Accessory Equipment: These are portable goods which are necessary to keep the capital goods fit for
operation. These are relatively less expensive. These neither become the part of final product nor
change its form. For example bearing of a plant, wheal of a machine etc.

B. Products based on durability:
(I) Perishable products : These are the products which have very short life and can not be stored for long
time such as newspaper, a particular service for one day or limited period.
(II) Non-durable products: When the consumers start consuming or using the products, the products last
for few uses and get depleted on consumption are non durable goods. For example, tooth paste,
powder etc. The consumers purchase these goods very frequently if they are satisfied with the products.
Hence, the marketers should be very careful about the quality of the products and services to the
consumers.

(III) Durable products: These are products which have a long life and consumers may use it for several
years. For example - T.V., watch, furniture, mobile hand-set etc. The consumers usually take long time to
take the decision of purchasing. The marketing of this type of goods require a lot of personal selling,
advertising and publicity, dealers-aids, and after sales service etc. to satisfy the consumers and to get
referral consumers.

C. Products based on Tangibility :
(I) Tangible products : It must be capable of being touched, seen, verified its quality etc. For example
pen, pencil, book. Here, the quality of the product is uniform and so sample verification is enough to a
certain the standard of the quality.

(II) Intangible products: A product may be intangible also but capable of providing satisfaction through
its service. For example repairing, consultancy service, nursing etc.
In case of intangible products or services, maintaining of uniformity is difficult task. As the service
providers are human beings, variation in service can not be eliminated, but can be reduced.
In short, product planning involves the innovation of new products and improvement in the existing
product.
Definition of Product Planning: Product planning is the act of marketing and commercialization of new
products, the modification of existing lines and the discontinuance of marginal or unprofitable items.
Karl. H. Tietjen. As per this definition product planning covers these three considerations.

(I) The development and introduction of new products.
(II) The modification of existing lines to suit the changing consumer needs and preferences and
(III) Elimination of unprofitable products.
The survival and continual growth of the enterprise demands systematic planning for the development
and testing of the new product ideas, such an approach to product development is generally called
product planning.

Some of the important objectives of product planning are given below:
(I) To Satisfy consumers needs and wants properly.
(II) To increase volume of sales.
(III) Prepare to meet competition well.
(IV) To ensure perpetual survival.
(V) To ensure the most profitable utilization of companys resources.
(VI) To analyse the strong and weak points of the company.

Components or Elements of Product Planning :
Some important components of modern product planning are:
(I) Product Development
(II) Product Diversification
(III) Product Standardization and
(IV) Product Simplification
(I) Product Development

Product development is the introduction of new products in the existing product line or introduction of
an entirely new product line. A business firm meets its social responsibility through its product. In fact,
the competitive conditions will not permit any firm to continue its business with an out-dated product
or poor product for a long-run. A good and quality product is essential to get repetitive sales. Therefore,
new and improved products should be introduced by marketers to suit the changing market conditions.
The reasons for new products developments can be stated as below:

(I) Provide opportunity to consumer for selection.
(II) When the existing products reach declining stage of product life cycle.
(III) New products generally increase the volume of turnover and amount of profits.
(IV) Introduction of new products is essential for expansion and growth.

What is a new product?
A product is said to be a new product, when the consumers consider it a new. Even if it is not a genuine
innovation and just a modification of the existing products, consumer considers it as new. Hence the
consumer is the final authority to decide whether a product is new or not. Usually, in marketing a new-
product means

(I) An entirely new products or service i.e. genuine innovation.

(II) Slight modification and adding new features in the existing products.

(III) An existing product, if introduced in new markets. The consumers of new market may considers the
old product as new product in the there geographical area.
Stages in New Product Development Process
The introduction of new product usually passes through various stages. In each stage, the management
must decide whether to move on to next stage with the product idea or not. Practically, in this process
some of the ideas will be eliminated at every step. There are six stages involved in the new product
development. The stages are given below:

(I) Idea generation: New products are produced on the basis of new ideas. Ideas may be generated from
various sources like customers, dealers, distributors, salesman, top executive, consultancy organisation,
Research and Development Department etc. The first step is to collect ideas as many as possible so that
the company can find out one of the best idea out of those ideas to convert the same in to actual
product.

(II) Screening of Ideas: All new ideas can not be converted into products as it requires heavy capital
investments. Those ideas should be screened and all unworkable ideas should be dropped. Only most
viable, feasible and promising one should be selected for further processing. The company uses the
concept testing method. In this method, consumer response to a description or picture or drawings is
measured even before the product is actually produced. The purpose is to find out few best ideas.

(III) Business Analysis: During this stage, an attempt is made to predict the economic consequences of
the product for the company. In these stages, the management should perform the following:
(a) Identify product features.
(b) Estimate market demand and product profitability.
(c) Establish a programme to develop the product.
(d) Assign responsibility for further study of the product feasibility.
(IV) Product Development or Prototype testing:
This step consists of the following:
(a) Prototype development giving visual image of the product.
(b) Consumer testing of the model or prototype product.
(c) Branding, packing and labeling of the product.

The marketing people determine an appropriate brand name, package and price and making sure that
both tangible and intangible features are considered and included. Focus groups, target market surveys
and other market research techniques with the physical product give the marketer additional
information.

(V) Market Testing: Test marketing involves placing a full developed new product for sale in one or more
selected areas and observing its actual performance under a proposed marketing plan. In the words of
P. Kotler- Test marketing is the stage at which the product and marketing programme are introduced
into more realistic market settings. The basic purpose is to evaluate the product performance and
marketing programme in a real setting prior to the commercialization. This step provides the scope of
correction and modification of the product as well as marketing programme. Many products fail after
commercialization because of lack of test marketing. In this process, the marketers approach the trial
purchasers and first repeat purchaser to know their feelings and reaction about the product as well as
marketing programme. On the basis of their opinions the marketers make certain required modification
in the product as well as marketing programme. After the favourable result usually, products are sent
for commercialization.

(VI) Commercialization : After favourable response in test marketing, full scale production and marketing
programme are planned and then the product is launched. It may be in phased manner or the product
may be introduced simultaneously depending on the companys plan and resources available. The
phased manner introduction helps to avoid short supply of the product due to initial gaps in production
and distribution.
The new product development process may be presented through a flow chart given below -
PRODUCT DIVERSIFICATION
A company with the existing products can not meet the consumers desires and requirements all the
time. The multi-products company substitutes one for the other to the changing tastes of the
consumers. By diversification we generally mean that something new will be added. It may be new
products, new markets, new technologies or even a new company. But usually, it means adding a new
product to the existing product line or mix. For example if a cigarette producing company like ITC starts
Hotel business, then it is a product diversification. It does not, however, mean the new product should
be the product in same product line or entirely new product for a new product line. Diversification is a
policy of an operating company, so that its business and profits come from a number of sources.

Objectives of Diversification:
Some of the basic objectives of product diversification are:
(a) to use the existing selling and distribution facilities up to optimum level.
(b) to meet changing tastes and desires of consumers.
(c) to take the advantage of existing reputation.
(d) to meet new products of competitors efficiently.
(e) to increase the amount of sales and quantity of existing products also.
(f) to cope with the technological development in the process of production.
(g) to create new markets for the product etc.
(h) to expand the product line and/or product items.
(i) to enhance the amount of profit.

Forms of Diversification:
It may be of two types: (i) Related diversification and (ii) Unrelated diversification.
(i) Related Diversification: When a new product is introduced in the existing product line such
diversification is known as related diversification. For example a ball pen producer may introduce gel
pen, Face cream producer may introduce body cream etc.

Such introduction of a new product increases the length of a existing product line but it does not
introduce one new product line.

(II) Unrelated Diversification: When a new product is introduced which is not similar to its earlier
products or services and which may be sold in the same market area but with different marketing
strategy. For example if a book publishing company introduces a new face cream or a group of face
cream product then it is unrelated diversification.
This strategy bears greater risk as the marketer is new both to the product and to the market. But in
later stage after successful marketing, it reduces risk.
PRODUCT STANDARDISATION
Product standardization means the determination of the basic limits or grades in the form of
specifications to which manufactured goods must conform and classes into which the industries may be
sorted. Committee of the Journal of Marketing.

Standardization is the determining of classes or grades of a product or service that have fixed limits.
Duddy and Revzan. On the basis of above two definitions that standardization is the process of
formulating and applying rules for an orderly approach to a specific activity for the benefit of all
concerned.

Determining standard for a product is a purely technical function which requires the consideration of
the following physical properties of the product.
(I) Basic weights and measures.
(II) Size, shape and dimension.
(III) Chemical and technical properties.
(IV) Product-performance, etc.

Standardization includes various elements as Grading, Packaging, Labeling, Branding etc.

Types of Standards:
Some of the important standards are explained below:
(I) Product Standards: Product standards are essentially technical descriptions and establish physical
characteristics, quality and performance of a particular product. These standards are generally meant to
assure consumers of uniformity in quality and performance.
(II) Material Standards: It is an attempt to standardize the raw-material used in the production process.
(III) Quantity Standards: The optimal quantity to be produced with the help of pre-determined inputs.
(IV) Process Standards: The most scientific and rationalized method of production is laid down which
forms the standard process of production.
(V) Safety Standards: It means the rules and regulations formed to ensure the safety of employees
working in factory.

PRODUCT SIMPLIFICATION
Product simplification requires continuous review of the various products and discontinues those
products which are not contributing directly or indirectly to profits. However, decision should not be
taken only on the basis of present profitability. Sometimes a change in price, promotion or market
channels can make a currently unprofitable product profitable. This product simplification is to eliminate
the unprofitable grades and variations to reduce inventory expenses, to improve products, to simplify
production and marketing management.

Product Simplification Procedure: The suggested procedure has four steps.
(I) Committee formation: The committee should consist of personnel from different departments. The
product simplification should be a subject of common consent and participative venture.

(II) Design Criteria: The committee is to review periodically the performance of the various products and
recommend the product strategy including product simplification.
(III) Spell out simplification strategies: The committee is to formulate the product simplification
strategies so that it can be phased out programme. A planned action of simplification avoids the
probable errors.

(IV) Programme implementation: The programme for product planning with the dimension of timing,
parts and replacement, stock clearance etc. should be properly coordinated. A well designed
programme makes implementation easy.

Product simplification strategies :
Some of the important strategies of simplification are explained below:
(I) Product-line pruning strategy: It involves selective elimination of products. Only those products are
selected for pruning whose contribution to the sales and profits are marginal.

(II) The run-out strategy : This strategy reduces the supporting costs on a product to the minimum level
that will optimize the products profitability. The supporting costs consist of communication, physical
distribution and dealership.

(III) Contract marketing strategy : Under this strategy, the producing company market their products
through an independent marketing agency on some agreements. This strategy is very useful where
marketing costs are significant and marketing efforts are considerable.

(IV) Product License Strategy : Instead of going through any contract, a license can be granted to third
party to sell the products which company wants to drop for all.

(V) Product abandonment strategy : This strategy implies total stoppage of production and selling of
product. Generally, when all other alternative strategies fail to provide any favourable results, the
producers use this strategy.
MEANING of Product Life Cycle Concept
Every product passes through certain different or distinct stages, during its life span. Hence, the term,
product life cycle concept denotes the stages through which a product passes from its introduction to
the market, to its disappearance (obsolescence) from the market. A product usually passes through six
stages which are called introduction, growth, maturity, saturation, decline and obsolescence. These are
the stages of time through which a product passes. The length of the life cycle, the duration of each
phase and the shape of the curve vary widely for different products. But in every instance, obsolescence
eventually occurs when the need for a better, cheaper and more convenient product may suit the same
need or a competitive product due to superior marketing strategy suddenly gains a decisive edge. The
product life cycle concept indicates that a particular product is born or introduced, grows, attains
maturity and the point of saturation in that market and then sooner or later it is bound to enter its
declining stage and finally reaches the stage of obsolescence the stage when the product loses its
distinctiveness and dies out in terms of both sales and profit margin.

Definition of Product Life Cycle Concept

Different authors have defined product life cycle concept in different ways. Here we are giving few
important definitions of product life cycle:
(i) According to Philip Kotler, The product life cycle is an attempt to recognize distinct stages in the
sales history of the product.
(ii) According to Arch Patton, The life of a product has many points of similarity with the human life
cycle; the product is born, grows, attains dynamic maturity, and then enters its declining years.

Stages of Product Life Cycle Concept

Every product moves through a life cycle having the following six stages:
(1) Introduction. It is the first and the most important stage in the life of a product. The product is first
introduced in the market. In this stage the product is absolutely new and distinctive. This stage is
characterized by slow rise in sales and profit margins, few direct competitors, high production and
marketing costs, narrow product line, greater emphasis on advertisement and sales promotion, high
prices, limited distribution, frequent product modifications and above all, purchases by customers are
made cautiously on a trial basis.

(2) Growth. After the product is introduced in the market, the product enters its second stage growth
stage. In this stage, the product achieves considered and widespread approval in market. The demand
and sales increase very rapidly due to promotional efforts. Profits also increase at an accelerated rate. In
spite of competitions, we may have rising sales and profits. In this stage effective distribution,
advertising and sales promotion is considered as key factors.

(3) Maturity: In this stage, the maturity of product is reflected in terms of its capacity to face
competition. The product has to face keen competition which brings pressure on prices. Though the
sales of the product rise at a comparatively lower rate; profit margins, however, decline due to keen
competition. The product covers mass markets. Marketers have to adopt measures to stimulate demand
and face competition through additional advertising and sales promotion.

(4) Saturation. It is the fourth stage of the product life cycle. In this stage, the market is saturated with
the product and is dominated by the replacement sale. The competition is at its peak. Prices may fall
rapidly and profit margins may also reduce unless the company makes substantial improvements,
modifications and realizes cost economies.

(5) Decline. Once the peak or saturated point is reached, product inevitably enters the fifth stage. It may
be gradually displaced by some new innovation or change in consumer behaviour. Sales drop severely.
At this stage price becomes the primary weapon of competition. Cost control becomes the key factor.

(6) Obsolescence. It is the last stage of the product life cycle. In this stage, the product loses its
distinctiveness and dies out in terms of both sales and profit margins. The decline in sales is permanent
and disappears from the market. At this stage, it is advisable to stop the production of the product and
switch off to other products. Some of the examples of products in the obsolescence stage include
electric radios, gramophones etc.The stages of the product life cycle can be illustrated by the diagram
given below:






Factors Affecting Product Life Cycle

There are number of factors which affect the product life cycle. The main factors affecting product life
cycle are given below:
(1) Rate of Technological Changes: Rate of technological changes affects the product life cycle. As a
result of technological changes, the need of a product may disappear. In case the rate or speed of
technological changes is fast, the life of the product will be reduced to the same extent. On the contrary,
if the rate of technological changes is low, the life of the product will increase at the same rate. For
example, the product life cycle in developed countries like Germany, America, France and England is
small because the rate of technological changes in these countries is very fast. On the contrary, the
length of the product life cycle in underdeveloped countries is high because the rate of technological
changes in these countries is quite slow. During the last few years in India the rate of technological
changes has increased with the result that the life cycle of old products has reduced and new products
have arrived in the field of cars, scooters, coloured TV sets, electronic typewriters, communications
tools etc.

(2) Rate of Market Acceptance: Market acceptance means the tendency of the consumers to accept new
products. Rate of market acceptance also affects the product life cycle. In case if the rate of market
acceptance is fast, the product life will be small in the same ratio. On the contrary, if the rate of market
acceptance is slow, the product life cycle will be greater in the same ratio. Rate of market acceptance
depends on the economic position of the consumers, their standard of living, level of education,
religious and cultural traditions etc.

(3) Case of Competitive Entry: Case of competitive entry also affects the product life cycle. In case the
rate of competitors entry in the market is fast, the product life cycle will become short and ultimately
the old product would disappear from the market. On the contrary, if the rate of entry of competitors in
the market is slow, the life of the product will increase accordingly.

(4) Economic Forces: Economic forces also affect the product life cycle. Purchasing power of the
consumers, price level, supply of money etc., are such economic factors which decide the life of the
product.

(5) Protection by Patent: Registration and protection by patent of a product also affect its life cycle. It is
natural that the life of a product will be longer which has been provided protection by patent.

(6) Personnel Strategy: Personnel strategy is also an important factor which affects product life cycle. If
the management is efficient, the decline of the product may be reversed and its life prolonged by some
innovation or modification in production or innovation in packaging, branding or marketing techniques.
The product can be successfully marketed again though it has reached the stage of its decline.
The concept of three levels of a product actually comes in play when you are finalizing a product for
your business or when you want to analyze a product. Just like any business, a product too has its
hierarchy. A product can be divided into three levels which are a series of different features and
benefits which helps in its segmentation targeting and positioning. Thus the three levels of a product
are the ones which help to define the product in a better manner. These three levels are

1) Core product
2) Actual product
3) Augmented product
The terms Core product and Actual product have a very slight differentiation between them but
it is vital that marketers understand this difference. Only by defining your core product clearly, you
can achieve marketing excellence. Core product is also known as benefits and is general intangible in
nature. Lets take an example.
Supposing you are planning on launching your own car manufacturing unit. What would be your
core product? Would it be the car itself? NO. The core product would be convenience to your
customers. Your customers can also travel by bus or taxi. But they prefer cars because of convenience
as well several times because of status symbol. Thus the core product in case of Tata cars will be
convenience and value for money whereas in case of BMW it will be Status symbol.
Thus the concept of core product is simple. The Actual product is the one which is manufactured
after a decision has been taken on what your core product is going to be. Thus, from the above
example, if your core product is a status symbol, your actual product will be a very high quality
product with high pricing. On the other hand if the product is a convenience product, the production
would be on the basis of Value for money. Actual products are quantifiable in nature and have
properties like color, branding, quality etc.
The Augmented product, as the name suggests, arise by themselves and are by products of the
core and actual products. These might be complete products within themselves. Again taking the
above example, if you are manufacturing a car, it needs regular servicing, warranty etc. Thus these
become tertiary products or augmented products. There are business which are dedicated completely
in providing augmented products such as service centers, AMC centers etc.
Also remember that the three levels of product are not only useful for Tangible products but for
Intangible product like services as well. For example If an IT company makes a software, the core
product could be better operations and management for their customers. The actual product may be
dedicated to multiple facets of the organization for which the software needs to be programmed, and
the augmented product may be the maintenance of this software and regular up gradation. Thus
even the service products have their own three levels.
These three levels of a product play a vital part in product management and are also important while
deciding the marketing mix of a company. This is mainly because, if there was an augmented product
attached to the actual product, then the promotions, placing and pricing of even these augmented
products needs to be decided. Thus product decisions are generally the primary decisions of the
marketing mix

Example (1): Lets consider a Car.
The core product: the benefit is convenience i.e. the ease at which you can go where you like,
when you want to. Another core benefit is speed since you can travel around relatively quickly.
The actual product: it is the vehicle that you test drive, buy and then collect.
The augmented product: the warranty, the customer service support offered by the car's
manufacture, and any after-sales service.
Example (2): Lets consider a Cell Phone.
The core product: to make phone calls.
The actual product:
Brand name - The name of the brand whether or not its popular.
Quality - Is it good or bad, won awards etc.(usually based on the brand).
Features - Such as looks and special features.(the functions of the product).
Style and design - Colour of the cell phone, width and length, slim/bulky.
Packaging - (when a customer purchases it) Is it in a box, wrapped in bubble wrap etc.
The augmented product: one-year warranty guarantee.
Five product levels (Kotler)
Posted by: Vincent van Vliet in Marketing, Theories and methods 15 October 2013 16,968 Views
According to Philip Kotler, who is an economist and a marketing guru, a product is more than a
tangible thing. A product meets the needs of a consumer and in addition to a tangible value this product also
has an abstract value. For this reason Kotler states that there are five product levels that can be identified
and developed.
In order to shape this abstract value, Kotler uses five product levels in which a product is located or seen from the
perception of the consumer. These five product levels indicate the value that consumers attach to a product. The
customer will only be satisfied when the specified value is identical or higher than the expected value.
Five product levels by Philip Kotler

1. Core Product
This is the basic product and the focus is on the purpose for which the product is intended. For example, a warm
coat will protect you from the cold and the rain.
2. Generic Product
This represents all the qualities of the product. For a warm coat this is about fit, material, rain repellent ability, high-
quality fasteners, etc.
3. Expected Product
This is about all aspects the consumer expects to get when they purchase a product. That coat should be really warm
and protect from the weather and the wind and be comfortable when riding a bicycle.
4. Augmented Product
This refers to all additional factors which sets the product apart from that of the competition. And this particularly
involves brand identity and image. Is that warm coat in style, its colour trendy and made by a well-known fashion
brand? But also factors like service, warranty and good value for money play a major role in this.
5. Potential Product
This is about augmentations and transformations that the product may undergo in the future. For example, a warm
coat that is made of a fabric that is as thin as paper and therefore light as a feather that allows rain to automatically
slide down.
What is a product? ion
A product can be defined as a bundle of attributes that satisfies a consumer.
mind consumers can be called as a product as it is formed with an intension to satisfy consumers needs.
Essentials of a product:
entity View slide
A product has its total product personality which includes the following component:
hed to the product View slide
For example: Refrigerator Cold Storage Chilling effect Multiple preservation Storage Add on
features-colour, appearance, design, energy efficiency, Brands identification
Definition Of product Philip Kotler: A product is anything that can be offered to a market for
attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects,
services, persons, places, or organizations, and ideas. William Stanton: A product is a set of tangible
attributes including packaging, colour, price, quality and brand plus the services and reputation of the
seller. A product may be a good, service, place, person or idea.
What constitutes of a product? [Component/Levels of product] ner should think about
- identify the core consumer needs the product will satisfy.
satisfy consumers.
mple Digital Camera Core Benefits activity of photography Actual product Price: Rs. 27500/-
Quality: Instant camera, Polaroid lenses, high zoom & resolution, can be JPEG, GIF, TIFF format, Camera
SLR (Single Lens Reflect), Style: image display-LCD, Touch screen function, Packaging: light-proof box
(camera body), System lenses, The lighter portrait (shutter) Brand name: Sony well known brand, icon
recognizable, Features: USB connector, modes, flash, stored can vary the type,, memory card storage,
Movie camera, user friendly Augmented product: Discounts: Available special retail outlets only
Guarantee:2 yrs lenses & 1yr on parts Sales promotion :Deepika Padukone, ads, new series launches,
After sales services: at sony specialized outlets spread across country. Carry packaging Future Product:
Projector Long hours recording
Future Augmented Actual Core Core product Wrist watch Package Brand ColorAttributes Mannual
Warranties After sales Installation Complain managementPayment options Replacement & Return
policies Delivery pt & system Total product concept: Source Marketing management by Rajan Saxena
Adaptation from Theodore Levitt, ibid
characteristic of a product remains the same only its utility differs from one customer to another.
tangible offer made to the target audience keeping with their requ
product with well perceived characteristics of the product attributes.
refers to add on services provided along with the
product to retain and attract consumers. Future product:
everything that might be done to attract and hold customers.
Product mix duct carried by a firm at a given point of time i.e.
composition of products offered for sale by a firm. -television, music system,
-household name in India, has almost 90 product
ranging from low value products like bulb to high price consumer durables like mixer, bikes-scooters,
etc.
similarity bwt product line with respect to end use,
technology, production techniques, & distribution channel.

carries.
Product line: ted to each other by virtue of satisfying a
particular class of needs, being used together, distributed through same channel or processing common
physical or technical characteristics. a group of products offered by a single firm that have similar
uses. Example- shoes(BATA)

following situations may suggest that the firm has a sub-optimal product mix: a. Excess capacity in a
firms manufacturing, warehousing, or transportation facilities b. High proportion of profits from a small
percentage of product items c. Insufficient use of sale force contacts & skill d. Steadily declining sales/
profit
PRODUCT MIX HLL SKIN CARE FAIR N LOVELY SUNSCREEN LIRIL TALC PEARS FACE WASH SOAP BREEZE
DENIM DOVE FAIR N LOVELY HAMAN JAI LIFE BUOY LIRIL SOAP LIRIL SHOWER GEL LUX INTERNATIONAL
MOTI PEARS REXONA SAVLON DETERGENTS RIN SUPREME RIN CAKE SUPER 501 SURF SURF BOX SURF
INTERNATIO NAL TOOHT PASTE CLOSE UP PEPSODENT PRPSODENT 2IN1 SHAMPOOS CLINIC ALL CLEAR
CLINIC PLUS LUX SUNSILK Product Line
Product line consist of LCDW
similarity bwt product line with respect to end use, technology, production techniques, & distribution
channel.
Width: Different product line( different models offered) firm carries.
Product mix of Cadbury
Product mix decision:
involved are: 1. Expansion of product mix -increase number of product lines or depth 2. Contraction of
product mix -reduce the product line 3. Alteration of existing product -Improve the existing products 4.
New uses of the existing product -show more uses than the core use 5. Trading up and trading down -
Trading up: adding a higher priced prestige value to existing lower priced product; Trading down: Adding
lower priced product to its prestige product 6. Product differentiation
Product life Cycle
of environ.
comparison
Philip Kotler the product life cycle is an attempt to recognize distinct stages in the sales history of the
product
heart of marketing strategy
Growth iii. Maturity iv. Decline v. Withdrawal
planning & Development 3. High operational cost 4. Lack market support 5. Consumer-trail basis
approach 6. low / no awareness of the product 7. Strategies: PRICE PROMOTION Rapid Skimming Slow
Skimming Rapid penetration Slow penetration HIGH LOW LOWHIGH
selective demand-focus on Covered market 2. Increase in competition
3. Softening of pricing / competition oriented pricing 4. Operation on economical levels 5. Gaining
market support 6. Strong service network & distribution 7. Product modification & improvement 8.
Entry of substitutes
competition 4. Enjoy economies of scale 5. Saturation stage 6. Pricing intensified 7. Increase in
marketing cost 8. Product mix- product line altered
ine stage: 1. Sales gradually fall 2. Reduction demand 3. Consumer switch over to competitor 4.
Expenditure brought down 5. Consumer attitude-old product 6. Vacuum 7. Reduce pricing to survive
2. Existence without much returns 3. Introduce new product and
withdraw old ones 4. No demand
New product development
efits of initial demand fferent
from product modification or innovation Why New product development needed? 1. Meeting growing &
changing needs 2. Pressure from environment change 3. Earning more profit 4. Extending product line
Steps/ stage in New Product Development Process

Product Differentiation
As discussed in a previous article, a product is made up of three levels. The Core product, the actual
product and the augmented product. Product differentiation deals with making changes in the
marketing mix of a product so as to differentiate it from whatever the competition is offering OR to
offer a product which stands out in the market.
To make it simple, compare two products of completely unrelated categories. Coca Cola and Apple.
Coca cola has had numerous competitors, direct or indirect, in the cola market over years (Pepsi
being strongest amongst them). But the reason it is still the top brand is because of the value it
provides, its brand equity along with its distribution network. This becomes an example of a product
which wants to differentiate itself from its competition. On the other hand we have a company like
Apple. Apple too has direct and indirect competition. But apple is known to make innovative
products such that it has a completely unique selling proposition. Apples product are differentiated
directly at the core level. This is the reason why Apple receives so much respect in the technology
market and so much love from its users.
Thus you can differentiate a product on any level. Core, actual or augmented. With the markets
evolving, each sector is slowly showing saturation in the number of products it has, be it consumer
durables, IT, FMCG or any other. Thus to come out of this saturation level, companies generally opt
for Product differentiation. There are several ways to achieve product differentiation.
Form A product can be differentiated based on the form of the product. The physical structure,
size and shape of the product can be used to differentiate it from others. Take an example of any
medicine. A medicine can be differentiated from that of its competition by the means of its potency,
its usability, the way it can be taken (intravenous or oral) so on and so forth. Thus the way the
product is made can be a type of product differentiation.
Features Any additional features being offered on top of the product becomes a plus point for the
customer. The best example for differentiation based on features is Mobile phones, handsets or any
technology product. They are differentiated mainly by the number of customizations or the
additional features that they offer. Thus features can be a form of Product differentiation.
Performance quality Why is a BMW costlier than other cars? Because it has superior
performance. Why is a formula 1 racing car costlier than a BMW? Because an F1 car has an even
higher performance as compared to a BMW. Thus performance increases price. Similarly, your
competition can present a product which does not perform as well but is available at half the price.
Naturally, some of your customers might shift to the competition. This is not true for all customers.
Some customers will be looking out for the superior quality products only. Thus you can do product
differentiation on the basis of the performance of your product.
Durability In the tough and competitive laptop market, there are some laptops which stand out.
These are the ones made for mountaineers and harsh environment researcher. Their cost is very high
as compared to normal laptops. But by producing such a product, they have completely
differentiated themselves from the market. Kitchen equipments, vehicles, sometimes even the shoes
you wear, people want things which are durable and can be used for a long term.
Reliability Do you know why a Volvo sells in the market? The name of Volvo is almost
synonymous with safety. Volvo manufactures the most safe and reliable vehicles in the world. That is
why their buses are so famous. Therefore it is not surprising that Volvo also sells at a premium. This
is because, here the product differentiation is on the basis of Reliability, one of the most valued
assets a brand can have.
Style Harley Davidson. Gucci. Tommy hilfiger. Lamborghini. Ferrari. Longines. Omega. when i
take these names, you know what quality i am talking of. Each brand has a style of its own and that is
why each brand has a differentiation of its own. You will never find a Harley davidson guy wearing a
tommy hilfiger. Its not that they arent rich. Its just that the two brands dont go together in style.
This is where these brands are able to achieve product differentiation.
Service In all the above examples i have been talking of tangible products. But what about the
intangible ones. Well even the services need to be differentiated. This is mainly done by the use of
People, physical evidence and the processes used in a service organization. For more knowledge on
these, read my article on service marketing mix. The bottom line is this have the right people with
the right ambiance and the right kind of service and you are sure to do well and differentiate yourself
from the crowd.
Thus overall there are several ways you can differentiate a product. Based on this differentiation, a
suitable strategy can be followed. Market penetration, Market skimming and other such marketing
strategies are derived only after product differentiation is achieved.

Market evaluation:
Product Portfolio:
A product portfolio is comprised of all the products which an organization has. A product portfolio
may comprise of different categories of products, different product lines and finally the individual
product itself. Management is needed on all the three levels of a product portfolio. You need
managers for managing individual products, managing product lines and finally the top level
management which manages the complete portfolio.
Lets look at an organization from a macro angle. An organization is comprised of a number of
different departments, all focused towards one goal the betterment of the organization. In the same
manner, your product portfolio should be such that each and every product in the portfolio is focused
towards one goal Bringing the organization on top by optimally using the resources available.
As an organization is comprised of different products, it becomes difficult to manage all of them.
Thus there needs to be a hierarchy. This is where product portfolio management steps in.
How do we classify the products in a product portfolio?
Product classification is done on the basis of the BCG matrix. The BCG matrix classifies products on
the basis of the market share of the product as well as the growth rate which a product may have. On
the basis of this classification, a product manager can decide what level of investments a particular
product might need and what would be the returns from such a product. As the other goal of product
portfolio management is cash flow management, the BCG matrix propagates balancing the cash flow
between all products equally. In harsh words no extra revenue should be given to products which
cant give the revenue back to the organization.
The number of products you have today determines the strength of your organization tomorrow.
This is why the field of product portfolio management is gaining importance. Although product
portfolio management is not an important task for small businessmen, portfolio management is a
must for enterprises and it leads to a strong organization with planned goals and optimum resource
allocation.
Further reading on Product portfolio

BCG Matrix or BCG analysis


BCG analysis is mainly used for Multi Category / Multi Product companies. All
categories and products together are said to be Business portfolio. Thus, the various
entities of your business portfolio may move forward by a different pace and with a
different strategy. The BCG analysis actually helps you in deciding which entities in your
business portfolio are actually profitable, which are duds, which you should concentrate
on and which gives you a competitive advantage over others.
Once you know which businesses stand where in your business portfolio, you also come
to know which businesses need investments, which needs harvesting (making money),
which needs divesting (reducing investment) and which needs to be completely taken
out of the business portfolio. For a major organization like HUL, ITC etc which have
multiple categories and within the categories, they have multiple lines of products, the
BCG analysis becomes very important. At a holistic level, they get to make a decision on
which product to continue and which product to be divested. Which product can give
new returns with good investment, and which products are reaching the apex of market
share.
BCG Growth Share Matrix The BCG growth share matrix was developed by
Henderson of the BCG group in 1970s. The matrix classifies businesses / SBUs by
1) Relative Market Share The market share of the business / SBU / Product in the
market as compared to its competitors and overall product / category.
2) Market growth rate The growth rate of the industry as a whole is taken into
consideration from which the growth rate of the product is extrapolated. This growth
rate is then pitched on the graph.
Thus by having 2 basic but at the same time very important factors on X axis and Y axis,
the BCG matrix makes sure that the classifications are concrete. Calculating the Market
growth rate comprises of both industry growth and product growth rate thereby giving a
fair knowledge of where the product / SBU stands in comparison to the Industry. The
market share on the other hand comprises of the competition and the product potential
in the market. Thus when we consider growth rate and market share together, it
automatically gives us an overview of the competition and the industry standards as well
as an idea of what the future might bring for the product.
Once the businesses have been classified, they are placed into four different quadrants
of the matrix. The quadrants of the matrix are divided into
1) Cash Cows High market share but low growth rate (most profitable).
2) Stars High market share and High growth rate (high competition)
3) Question marks Low market share and high growth rate (uncertainty)
4) Dogs Low market share and low growth rate (less profitable or may even be
negative profitability)
On the basis of this classification, strategies are decided for each SBU / Product. Lets
discuss the characteristics and strategies of each quadrant in detail.
1) Cash Cows The cornerstone of any multi product business, cash cows are
products which are having a high market share in a low growing market. As the market
is not growing, that cash cow gains the maximum advantage by generating maximum
revenue due to its high market share. Thus for any company, the cash cows are the ones
which require least investment but at the same time give higher returns. These higher
returns enhance the overall profitability of the firm because this excess revenue can be
used in other businesses which are Stars, Dogs or Question marks.
Strategies for cash cow The cash cows are the most stable for any business and hence
the strategy generally includes retention of the market share. As the market is not
growing, acquisition is less and retention is high. Thus customer satisfaction programs,
loyalty programs and other such promotional methods form the core of the marketing
plan for a cash cow product / SBU.
2) Stars The best product which comes in mind when thinking of Stars is the telecom
products. If you look at any top 5 telecom company, the market share is good but the
growth rate too is good. Thus because these two factors are high, the telecom companies
are always in competitive mode and they have to juggle between investment and
harvesting vis investing money and taking out money time to time. Unlike cash cows,
Stars cannot be complacent when they are top on because they can immediately be
overtaken by another company which capitalizes on the market growth rate. However, if
the strategies are successful, a Star can become a cash cow in the long run.
Strategies for Stars All types of marketing, sales promotion and advertising strategies
are used for Stars. This is because in cash cow, already these strategies have been used
and they have resulted in the formation of a cash cow. Similarly in Stars, because of the
high competition and rising market share, the concentration and investment needs to be
high in marketing activities so as to increase and retain market share.
3) Question Marks Several times, a company might come up with an innovative
product which immediately gains good growth rate. However the market share of such a
product is unknown. The product might lose customer interest and might not be bought
anymore in which case it will not gain market share, the growth rate will go down and it
will ultimately become a Dog. On the other hand, the product might increase customer
interest and more and more people might buy the product thus making the product a
high market share product. From here the product can move on to be a Cash Cow as it
has lower competition and high market share. Thus Question marks are products which
may give high returns but at the same time may also flop and may have to be taken out
of the market. This uncertainty gives the quadrant the name Question Mark. The
major problem associated with having Question marks is the amount of investment
which it might need and whether the investment will give returns in the end or whether
it will be completely wasted.
Strategies for Question marks As they are new entry products with high growth rate,
the growth rate needs to be capitalized in such a manner that question marks turn into
high market share products. New Customer acquisition strategies are the best strategies
for converting Question marks to Stars or Cash cows. Furthermore, time to time market
research also helps in determining consumer psychology for the product as well as the
possible future of the product and a hard decision might have to be taken if the product
goes into negative profitability.
4) Dogs Products are classified as dogs when they have low market share and low
growth rate. Thus these products neither generate high amount of cash nor require
higher investments. However, they are considered as negative profitability products
mainly because the money already invested in the product can be used somewhere else.
Thus over here businesses have to take a decision whether they should divest these
products or they can revamp them and thereby make them saleable again which will
subsequently increase the market share of the product.
Strategies for Dogs Depending on the amount of cash which is already invested in this
quadrant, the company can either divest the product altogether or it can revamp the
product through rebranding / innovation / adding features etc. However, moving a dog
towards a star or a cash cow is very difficult. It can be moved only to the question mark
region where again the future of the product is unknown. Thus in cases of Dog products,
divestment strategy is used.
Sequences in BCG Matrix

Success Sequence in BCG Matrix The Success sequence of BCG matrix happens
when a question mark becomes a Star and finally it becomes a cash cow. This is the best
sequence which really give a boost to the companies profits and growth. The success
sequence unlike the disaster sequence is entirely dependent on the right decision
making.
Disaster sequence in BCG Matrix Disaster sequence of BCG matrix happens
when a product which is a cash cow, due to competitive pressure might be moved to
a star. It fails out from the competition and it is moved to a question mark and finally it
may have to be divested because of its low market share and low growth rate. Thus the
disaster sequence might happen because of wrong decision making. This sequence
affects the company as a lot of investments are lost to the divested product. Along with
this the money coming in from the cash cow which is used for other products too is lost.
Strategies based on the BCG Matrix.
There are four strategies possible for any product / SBU and these are the strategies
which are used after the BCG analysis. These strategies are
1) Build By increasing investment, the product is given an impetus such that the
product increases its market share. Example Pushing a Question mark into a Star and
finally a cash cow (Success sequence)
2) Hold The company cannot invest or it has other investment commitments due to
which it holds the product in the same quadrant. Example Holding a star there itself
as higher investment to move a star into cash cow is currently not possible.
3) Harvest Best observed in the Cash cow scenario, wherein the company reduces the
amount of investment and tries to take out maximum cash flow from the said product
which increases the overall profitability.
4) Divest Best observed in case of Dog quadrant products which are generally
divested to release the amount of money already stuck in the business.
Thus the BCG matrix is the best way for a business portfolio analysis. The strategies
recommended after BCG analysis help the firm decide on the right line of action and
help them implement the same.