Product decisions

In the context of marketing, has a much wider connotation. It is applicable to any offering to a market for possible purchase or use. It encompasses physical objects (e.g., a television), services (e.g., airlines), places (e.g.. tourist resorts), organisations (e.g., Red Cross), persons (e.g., an athlete) and ideas (e.g., flood relief aid). It also includes supporting services e.g., design, brand, package, label, price, etc

Essential Attributes of a Product Based on the above definitions, we can list out the essential characteristics of a product as follows:

Essential Attributes of a Product Based on the above definitions, we can list out the essential characteristics of a product as follows:

1) Tangible or Intangible: It may be capable of being touched, seen and felt. For example, products like a comb, refrigerator and motor cycle are tangible. At the sometime, a product need not necessarily be tangible. It can be intangible but cnpilble of providing a service. For instance, repairing, hair-dressing insurance, ' etc. are intangible but provide satisfaction to the customers.

2) Associated Attributes: A product consists or various product features and accompanying services. Thus, a product is comprised of attributes including colour, package, brand name, accessories, installation, instant to use, manufacturer's prestige, retailer's prestige, after sale service, etc. These attributes differentiate the products from each other.

3) Exchange Value: A product must be capable of being exchanged between a buyer and z1 seller at a mutually acceptance cost.

4) Satisfaction: It should be capable of providing satisfaction to the buyers both real and psychological. As far as the seller is concerned, it should provide the much needed business benefit.

CLASSIFICATION OF PRODUCTS

There are several ways of classifying products:

 I ) On the basis of the user status, products may be classified as consumer goods and industrial goods.

2) On the basis of the extent of durability, products may be classified as durable goods and non-durable goods.

3) On the basis of tangibility, products may be classified as tangible goods and non tangible goods. These non-tangible goods are referred to as services.

The following four major types, and analyse their characteristics and marketing strategies:

1 ) Consumer goods

2) Industrial goods

3) Durable and Non-durable goods

4) Services

Consumer Goods

Consumers use the product in Product Concepts and I the form in which the product is being offered i.e., no further processing is done. For Classification I example, a tooth brush, a comb, a wrist watch or a moped are all meant for personal I use of households mid are, thus, classified as consumer goods. Consumer goods may be classified into three types as :

 i) convenience goods,

 ii) shopping goods, and

iii) speciality goods.

i) Convenience Goods

 A class of consumer goods that people buy frequently with the least possible ti~ze arld e8hl.t are called 'convenience goods'. These are the products the consumers want to purchase frequently, immediately, and with minimum effort. Milk, bread, butter, eggs, soap, newspaper, biscuits, tooth pastes, etc., are some examples of convenience goods. This category of goods has a low unit price, and not greatly affected by fad and fashion. They have two significant characteristics :

 1) the consumer has complete knowledge of the products which he wants to buy and

2) the product is purchased with a minimum of effort. Convenience goods are usually sold by brand name and are low-priced. Many of them such as bread, ink and edible oil, are staple items, and the supply must be constantly replenished.

ii) Shopping Goocls

The purchaser of shopping goods lacks complete information prior to the shopping trip and gathers information during it. For instance, a woman intending to buy a new dress may visit many stores, try on a number of dresses, and spend time making the final choice. She may go from store lo store in surveying competing offerings and ultimately select the dress that appeals the most to her. In addition to women's apparel shopping goods include such items as jewellery, furniture, appliances, shoes, etc. It is important to place the shopping goods in stores located near other stores carrying competing items, as it facilitates the customers to compare the product. Shopping goods are typically more expensive than convenience goods.

iii) Speciality Goods

Speciality goods possess unique characteristics that cause the buyer to prefer that particular brand. For these products the buyer possesses complete information prior to the shopping trip and is unwilling to accept substitutes. Speciality goods are typically high-priced and are always branded. Since consumers are willing to exert , considerable effort to obtain them, fewer retail outlets are needed. Since brand is important, the manufacturers of speciality goods advertise extensively.

Industrial Goods

Industrial goods are materials used in the production of other goods, while consumer goods are finished products that are sold to and used by consumers. Industrial goods are bought and used for industrial and business use. They are made up of machinery, manufacturing plants, raw materials, and any other good or component used by industries or firms. Consumer goods are ready for the consumption and satisfaction of human wants, such as clothing or food.

Depending on how the goods enter the production process, industrial goods may be classified into following five groups.

i) Raw Materials Raw materials are those industrial goods that become part of another physical product. Raw materials include goods found in natural state such as minerals, marine products, land, products afforests, etc., and agricultural goods like cotton, fruits, milk, eggs, etc. Marketing strategies for the two categories of raw materials are different. First group of raw materials are normally bulky and have low unit value. They are produced by a few large producers. Second category of raw materials (agriculture products) is produced by a large number of small producers spread over a large area. Most of the second category products are perishable.

Durable Goods and Non-Durable Goods

Durable goods are consumer goods that have a long-life span (e.g. 3+ years) and are used over time. Examples include bicycles and refrigerators. Nondurable goods are consumed in less than three years and have short lifespans. Examples of nondurable goods include food and drinks. Services include auto repairs and haircuts.

Consumer goods are also called final goods, or end products, because they are the ultimate output of a productive process that occurs over time. Entrepreneurs and businesses combine capital goods (such as machinery in a factory), labor from workers, and raw materials (such as land and basic metals), to produce consumer goods for sale. Goods that are used in these production processes, but not themselves sold to consumers are known as producer goods.

Services

Services are specially mentioned here because it is generally thought that marketing is related to products alone. It should be remembered that marketing ideas and practices are equally applicable to services with slight adaptations in certain decisional areas. Services in content are different from products.

PRODUCT MIX

A company's product inix consisting of different product lines has a certain width, length, depth and consistency. These concepts are illustrated in Figure 7.2 for select%d Hindustan Lever Limited (HLL) products: i) Product Line: A product line is an expression generally used to describe a group of closely related products. A group of products may be referred to as a product line either because they cater to the needs of a particular group of buyers, or they function in similar manner or they are sold through identical marketing facilities or fall within the same price range. The crux of the situation is that such reasoning may be consistently used for referring to a product group as a product line. A seller may identify a number of product lines to be offered to buyers by keeping in view the buyer's considerations, economy of production, distribution, etc.

ii) Product Mix Width: This refers to how many different product lines the company carries

 iii) Product Mix and Product Line Length: The length of the product mix refers to the total number of items in the mix. The length of the product line refers to the total number of product items offered in a product line. For example

iv) Depth: The depth of a procluct mix refers to how Inany variants are offered of each product in the line

 v) Consistency: The consistency of the product mix refers to how closely related the various product lines are in terms of end-use, production requirements, distribution channels, etc

PRODUCT MIX AND PRODUCT LINE STRATEGIES

the companies always attempt to maintain an optimal product mix with a view to maintain a balance between current profitability and future growth and stability. Towards this end, a company alters or modifies the existing product line in any of the following ways: 1) Contraction of the Product Line: When a company finds that some of its products are no more profitable, it may decide to suspend their production. Similarly, changes in the marketing environment inay also necessitate withdraw1 of a product. A product may also be dropped froin the product line if it is found that tlie same resources used for the production of the product can be put to more profitable use by producing another product. Decisions relating to these aspects are termed as "Contraction of tlle Product Line". Thus, thinning out the production either by eliminating an entire line or simplifyirig the product items within the line is called contraction of product line. This is also called Contraction of Production Mix or Product Line Simplification. This strategy is adopted mainly to eliminate low-profit products and to get more profit from fewer products

2) Expansion of Product Mix: To cash on available opportunities, a company  decides to expand its present product line. It may also increase the number of product lines and the depth within a line. Such new lines may be related or unrelated to the existing product mix. For example, a company dealing in drugs and chemicals may add products in a relatively new area like computers.

 3) Changes in Quality Standards: When the market expectations undergo a change, a film may have to react by altering quality standards of the existing products. Such changes call be brought about through Trading Up and Trading Down.

 i) Trading Up : When we add a higher priced prestige product to the existing low-priced product line, it is termed as trading up. This strategy is adopted with the hope of increasing the sales volume of the existing low-priced products. If conditions so demand in future, the company may increase promotional efforts for the new product and thus add overall sales volume through the new product, thereby improving profitability of the firm. In this manner a company known for low-quality products tries to raise its image of dealing in high-quality goods on the one hand and offering an alternative to buyer to choose from. We often hear such terms as "Jaita Model" and "Deluxe Model" and this illustrates the point.

 ii) Trading Down: It is the reverse of trading up. When a firm adds low quality products at relatively lower price to its line of high priced prestige products, it is termed as trading down strategy. It helps in widening he marketing base and results in expanding overall sales volume. Introduction of moped by a company manufacturing motor cycles is a case of trading down.

 4) Affecting Change in Modern style of an Existing Product: The desire of the consumer varies with varying times. To cope with such change in the consumer mood, a company can react by offering new models of a product or changing the style of an existing product

5) Product Differentiation: Under this strategy, a firm tries to differentiate its products from the competitor's products or other products within the same product line offered by the company by highlighting quality or design. This strategy is aimed at avoiding competition on price basis. The competition is then met at non-price front and a price war is avoided. The firm, thus, promotes awareness of the good attributes of the product offering. In view of the fact that this strategy involves large promotional effort with huge financial outlays, it is also known as promotional strategy.

 6) Product Positioning: As an integral part of product segmentation, after the market is segmented, it becomes necessary to pinpoint the needs of each segment and offer products to satisfy the needs of specific segments. This process is referred to as product positioning. It includes all activities from identification of a market segment to directing marketing effort at it.

 7) New Product: In view of increasing competition, scientific advancements, enhanced consumer expectations, it is necessary that new products are introduced. Such introduction is essential for the survival and growth of an organisation. The rate of increase in expenditure on Research and Developmen1 by many organisations is a clear proof of the need and realization to introduce new products.

THE SERVICES MARKETING NIIX

All these facts lead to the development of an expailded marketing mix with three new P's added'to the traditional mix. These are:

 People All hurnan actors who playa part in service delivery mid thus influence the buyer's perceptions; namely, the firms's personnel, the customer, and other customers in the service environment.

Physical evidence The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service. E

Process The actual procedures, mechanisms and flow of activities by which the service is delivered - the service delivery and operating system

Characteristics of Services

There are four major differences in the nature of services and products. These differences or unique characteristics of services lend special challenges in the marketing of services and have important implications for both marketer as well as the consumers of service. Following are the four distinct characteristics of services

• intangibility

• Heterogeneity

 • Inseparability

• Perishability

Intangibility

Unlike goods, services cannot be seen, touched or held. They do not occupy any shelf space and are therefore passed on as an experience to the customer. For e.g. a person opting for cosmetic surgery can only see and fee! the impact after the medical procedure is over. There is no physical product that changes hands in marketing of services. Services essentially provide the customers transitory control and access rather than possession of something. In other words, buyers of services buy a process rather than a tangible outcome. A lot of uncertainty creeps into the minds of the consumers due to the intangibility of services. As such, consumers draw inferences about the quality of service from numerous cues including the place where the service is rendered, people who render the service, equipment used for service delivery, communication material used in the service factory and the price of the service. The challenge for the service marketer is to convert the intangible service into concrete benefits and a well defined experience for the customer.

Inseparability

 This characteristic of services refers to the fact that in most cases, the service provider cannot be segregated from the service delivery process arid therefore the production and consumption of the service happens at the same time. The presence of the client at the time when the service is produced adds the dimension of provider-client interaction in service marketing.

 Variability

Services lend themselves to a lot of variability because they depend not only on who provides them and who receives them, but also when and where are they provided. Services are rendered in different situations and therefore it becomes difficult for an organization to standardize the service performance. To overcome this limitation service firms tend to invest heavily in good hiring and training procedures, try and standardize service performance process and prepare a service blueprint which depicts events and service processes in a flowchart. The objective of a service blueprint is to identify and correct fail points in the service delivery process. Last but not the least, service firms have to constantly monitor customer satisfaction to ensure that the element Of variability does not have any adverse consequences.

Perishability

 Perishability refers to the fact that services cannot be produced or stored beforehand. They have to be produced at a time when the consumption occurs. The characteristic of perishability warrants the necessity of demand management in services. Unlike goods, services cannot be produced in overnight shifted and stocked to be delivered as and when the demand occurs. Service organizations must ensure, that right services are available at the right places, at the right time and right process to maximize profitability.

Key Dimensions of Services Marketing

The three main aspects of this framework are:

 • Search Properties

 • Experience Properties

 • Credence Properties

 Search Properties Search properties enable customers to evaluate an offering prior to making a purchase,. Needless to say, physical products will have high search attributes that serve to reduce, customer risk and increase purchase confidence. In services the search properties are extremely limited.

Experience Properties Services are relatively high on experience properties. These properties cannot be evaluated prior to the purchase though, While sporting events, holidays and live entertainment can be explained by the service provider and imagined by the customer, the real experience is felt after the service has been delivered.

Credence Properties Given the characteristics like variability and intangibility of services, credence properties find maximum importance in a service offering. These credence properties enable a customer evaluate aspects of services which are otherwise difficult to comprehend. Most service organizations recognize the importance of credence properties and therefore plan their marketing activities in a way that reduces the perceived risk and reassures their customers prior, during, and after purchase.

Service Processes Services are considered to be processes. A process is a series of sequential steps that lead to predetermined outcomes. Processes are an integral part of the operations performed by a service organization. Pour different types of processes have been (identified by service experts, These are

• People Processing

• Possession Processing

• Mental Stimulus Processing

• Information Processing

People Processing This process is rendered in the presence of the customer. The customer spends time with the person rendering the service and is thus actively involved in the service delivery process. A person visiting a dentist for a root canal treatment will be present throughout the time the treatment will be done and will follow each of the dentist's instructions. Only then such a service can be rendered.

Possession Processing In such cases, the service is rendered on a possession and not on a human being. The possessions may be a car, computer, sofa or any other gadget. The engine of the car may require repair, new software may have to be installed in the computer, and the sofa may need dry cleaning and so forth. In possession processing services, the possession may have to be taken to the service provider or the customer may even invite the service provider to undertake the work at a place convenient to the customer, generally the residence or the office.

Mental Stimulus Processing This category of services shape attitude or behavior of the customer and therefore are referred to as mental stimulus processing. Education, entertainment and any kind of professional advice falls under the domain of mental stimulus processing. In such services, the customer has to be mentally involved to get any kind of benefit from these services.

 Information Processing Finally some services may entail information processing. These kinds of. services are being increasingly rendered with the help of technology. In fact, advancements in information technology have excluded the human element from these services. Creating and hosting websites wherein customers can obtain any kind of information about the company's products, services and initiatives is an example of information processing services. Services could also be categorized as high-contact, medium-contact and low-contact services depending on the extent of contact that the customer has with the service provider during the process of service delivery.

High Contact Services In case of high contact services, customers personally visit the service facility and therefore they are personally involved throughout the service delivery process. For example, services rendered by a barber, beautician etc.

Medium Contact Services In case of medium contact services, customers do visit the service facility however they do/may not remain there for the entire duration during which the service is being rendered. For example, a customer has given his car for servicing and repairs at an authorized service station. The customer may decide to leave the service station and pick up the car after a few hours. Likewise in case of consulting services, the client may not be present for all the time during which the consultancy firm is working on his case. The client is required to be present at the time of explaining his requirements.

Low Contact Services in case of low contact services, there is little or no personal contact between customer and service provider. Under such circumstances, service is usually delivered from a remote location and that too through an electronic mean. For example, software upgradation required by users may be sent to them online without maintaining any personal contact with them

New Product Development

New product development in any organization is contingent on the organization's attitude to risk, its culture, as well as its approach to customer relationships. While the new product development process in itself is a long drawn one, the risk associated with new product development is pretty as new products fail due to multiple reasons: There are numerous reasons for failure of new products: • There is no market for the product.

 • The product does not meet customer requirements.

• The product's ability to meet the need is not adequately communicated to the market.

 • The cost of development is enormous; however the product cannot command a high price.

The development of new products is multifaceted and, as stated earlier, entails high risk. While monetary loses associated with new product failures is a blow to the organization, the loss of goodwill in case of failure is much more damaging for the company. In order to ensure that everything goes right in the new product development, organizations usually adopt a procedural approach. This process consists of several steps that enable hew product development progress to be monitored, tested and analyzed before there is any commitment to the market. Generally the new product development process consists of the following steps as depicted below:

The steps of the new product development process should be considered as a generalization. It is not necessary that the various steps would be followed and that they would occur in the linear sequence. A lot depends on the tempo, intricacy and number of people involved in the process. Steps may overlap or even take place totally out of sequence. Again, in general, the new product development process is essentially the same when developing new products for both consumer and business markets. The steps in the new product development process are discussed below:

Idea Generation The new product development process starts with the conceptualization or generation of an idea. Ideas for new products come from customers as well as other external and internal sources. Apparently the best source of idea generation is customers for they can bring to notice specific problems in existing products thus giving clues about improvement zones. However this is not always feasible, as customers may not always know what they want, Competitors, websites, and sales literature analysis may prove to be important sources of idea generations. Market research data can also be the source of ideas for products.

Idea Screening The ideas generated in the first step need to be assessed to ensure that only those ideas that meet predetermined criteria are considered for further steps. Most importantly the new idea must fit into the overall corporate strategy and objectives. The views of the customers can also be undertaken by employing concept testing either with the help of a focus group or by interviewing a small representative sample of customers to review the idea as early as possible. Th

Business Planning and Market Analysis At this stage, important information like the size^ shape, and dynamics of the market are determined. The development of a business plan is critical purely because it will specify the potential and profitability of the idea if it is converted into a product. The ensuing profitability forecasts will be important if and when the product will be developed. Weak profit forecasts, problematic manufacturing requirements or availability of stronger competitive products may-lead to the idea being dropped at this stage even though It has passed the screening stage.

Product Development Ideas that have commercial potential and those which fit into Its long-term strategy, goals, and use of resources see the light of the day. The actual development of the product is the most expensive and it requires the commitment of financial, human and infrastructural resources. In fact, before committing itself to mass production, a company develops prototypes and test versions of the product initially. These prototypes are then subjected to functional performance tests, design revisions and distribution analysis. Sometimes the feed back of the customers is also sought with the help of focus group sessions.

Test Marketing Before launching a new product in the market, many companies opt to test market the finished product. There is a trade-off between reducing the risk by test marketing the product and generate revenue and get a return on the investment committed to the new product. By testing the product either under controlled conditions or under real market conditions, many legitimate issues as perceived by customers can be resolved.

Commercialization If the results of the test marketing are favorable the product goes ahead for the full fledged commercial launch. The launch of the product into the market represents the end of the preceding tests, analysis, and development work.