Unit 3
Product Planning
A product is the item offered for sale. A product can be a service or an item. It can be physical or in virtual or cyber form. Every product is made at a cost and each is sold at a price. The price that can be charged depends on the market, the quality, the marketing and the segment that is targeted. Each product has a useful life after which it needs replacement, and a life cycle after which it has to be re-invented.
A product needs to be relevant: the users must have an immediate use for it. A product needs to be functionally able to do what it is supposed to, and do it with a good quality.
A product needs to be communicated: Users and potential users must know why they need to use it, what benefits they can derive from it, and what it does difference it does to their lives. Advertising and 'brand building' best do this.
A product needs a name: a name that people remember and relate to. A product with a name becomes a brand. It helps it stand out from the clutter of products and names.
A product should be adaptable: with trends, time and change in segments, the product should lend itself to adaptation to make it more relevant and maintain its revenue stream.
Following are the importance of a product-
1.Element of marketing mix: Product is the key element of the whole marketing mix. All other elements that are price, promotion, and place mix are all dependent and decided in accordance with the product.
2.Initiates market planning: Product is termed as the starting point and centre of all marketing programs. All marketing activities like sales promotion, advertising and distribution are decided according to the nature of the product.
3.Competitive weapon: Product is a powerful weapon of business to face strict market competition. Businesses by efficiently producing products are able to provide better quality at a lower cost which attracts more and more customers.
4.Means of consumption and satisfaction: Product is the centre of consumption and satisfaction of customers. People buy and consume different products for satisfying their numerous needs.
5.Key to market success: Product is an important element for attaining success in the market. If business is able to deliver products in accordance with customer requirements, their product will widely be accepted. It will attract more customers and will provide growth opportunities for the business.
6. Essential from social viewpoint: It is important from the viewpoint of society as it provides numerous benefits to them. The product satisfies the wants of society, improves their standard of living and also serves as a means of providing employment opportunities to a large number of peoples involved in various processes of the product.
1) Product Innovation:
Product innovation is associated with modifying a product or having all new product offering some productive use. The term 'innovation' is thus related with bringing change and growth in the product. The firms which lack innovation usually fail to maintain stability in the competitive market. Product innovation helps in driving the market demand for the product and gaining profits by increasing sales. It is a method through which an idea can be converted into product and successively into profit after the product is sold.
2) Product Diversification:
The extension in the width and depth of the product line is known as ‘product diversification'. Number of product lines represents the width whereas number of variants, i.e., sizes, 'styles, quality, colours, designs, etc., represents the depth of the product line. Product diversification
Helps in incorporating growth and stability to the firm and also helps in enhancing profits. When the firm lacks managerial efficiency and finance, then at that time, product diversification seems to be the saviour. It helps in balancing the losses of one product with the profit earned by the other. Further, the risk is minimized with the help of diversified product line.
3) Product Standardization:
Another element of product planning is product standardization. It includes limiting the number of variants or types of products under a particular product class. Here, uniform quality products with limited variants or larger quantities are manufactured so as to optimally utilize the scarce resources. Economies of cost as well as the human resources are the end result of such standardization processes.
4) Product Elimination:
Product elimination is also an element of the product planning. In this, several products are removed from the product line due to some defects or technological obsolescence. To determine which product is to be eliminated is a very delicate issue, therefore, it cannot be decided instantly. As the firm has invested time money and effort in a particular product, it is not easy for the marketer to eliminate it. Ethical concern also there in informing the public about the elimination. However, eliminating the right product helps in preventing the misuse of the resources and the funds can be diverted into more productive investment. Therefore, the product elimination decision should be based on deep research comprising the historical and financial research related with product.
Product classification refers to the organization of the different types of products that consumers buy. Knowing these classifications can help marketers create advertisements for their company's goods and services. Product classification can help professionals in all levels of business, as it can also help determine product demand, pricing and the primary demographic to which advertisers can target with their marketing campaigns.
What are the different product classifications?
There are four main product classifications. Professionals base these categories on consumer habits, costs and their general characteristics. The four product classifications are:
1. Convenience products
Convenience products describe the items and services that customers purchase on a regular basis with little thought. Typically, consumers use the same or similar brands for convenience products unless they are compelled to do otherwise through an advertisement or availability. For example, dish soap is a convenience product. Another characteristic of convenience products is that they are easy to find. Most consumers can buy dish soap without conducting research or making a special trip to the store for it.
Marketers may use more techniques that discount other brands in their campaigns when marketing convenience products. This is because consumers may change their buying habits and switch to a different brand if convinced, such as through a comparison advertisement. For example, a company may market their dish soap to be more effective at removing grease from dishes. Marketers may also spend more time with consumer test groups, to determine how their brand compares to others or create marketing campaigns that get a consumer's attention by surprising them.
2. Informed purchases
Informed purchases, also known as shopping goods, refers to the products and services that consumers don't make often and usually perform research before doing so. These types of products can range from more expensive items, such as a house or car, or more regular purchases, such as a pair of shoes. Consumers typically take more time to make informed purchases, which can change the way marketers advertise them.
For example, because consumers typically perform more research or have higher standards for these purchases, they may include more information in their marketing campaigns and choose more specific demographic groups to target. For example, a marketing team may choose to target college-aged consumers when creating advertisements for laptops, as this demographic often needs the product. The marketing team might also include more information about the laptop's abilities, such as its graphics quality or operation speed.
3. Specialty items
Specialty items are unique products that marketers can advertise to a certain demographic of consumers without worrying about their competition. These products can include innovative goods that are one of a kind on the market or brand-name products that have a loyal fan base. While these items may be more expensive than others, consumers often feel less of a need to deliberate or research their decision to purchase a specialty item.
For example, the marketing team for a well-known luxury fashion brand wouldn't need to create advertisements that compare their clothes to other brands or even include detailed information. Instead, the brand's name and reputation alone can encourage consumers to purchase their products. These companies can focus more on building and maintaining customer relationships and brand recognition than distinguishing themselves from other companies.
4. Mandatory purchases
Mandatory purchases, also known as unsought goods, are products that consumers buy out of necessity rather than desire. Typically, these products are household or safety items that customers don't feel excited to buy, such as batteries, smoke detectors, air filters and cleaning products. Sometimes, consumers may buy these items out of fear or an obligatory response, such as buying a fire extinguisher or a car maintenance membership just in case of an emergency.
When advertising these items, marketing teams can focus more on reminding consumers of their need for these items and building brand recognition that allows consumers to purchase a specific brand with little thought. Some companies choose to feature reasons why you need these items in their advertisements, creating a sense of security through the purchase of their product. For example, a marketing team may advertise a flashlight by showing a person using one in the event of a power outage.
Product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services offered by a firm. A product mix consists of product lines, which are associated items that consumers tend to use together or think of as similar products or services.
Dimensions of a Product Mix
1 Width
Width, also known as breadth, refers to the number of product lines offered by a company. For example, Kellogg’s product lines consist of: (1) Ready-to-eat cereal, (2) Pastries and breakfast snacks, (3) Crackers and cookies, and (4) Frozen/Organic/Natural goods.
2 Length
Length refers to the total number of products in a firm’s product mix. For example, consider a car company with two car product lines (3-series and 5-series). Within each product line series are three types of cars. In this example, the product length of the company would be six.
3 Depth
Depth refers to the number of variations within a product line. For example, continuing with the car company example above, a 3-series product line may offer several variations such as coupe, sedan, truck, and convertible. In such a case, the depth of the 3-series product line would be four.
4 Consistency
Consistency refers to how closely related product lines are to each other. It is in reference to their use, production, and distribution channels. The consistency of a product mix is advantageous for firms attempting to position themselves as a niche producer or distributor. In addition, consistency aids with ensuring a firm’s brand image are synonymous with the product or service itself.
Importance of a Product Mix
The product mix of a firm is crucial to understand as it exerts a profound impact on a firm’s brand image. Maintaining high product width and depth diversifies a firm’s product risk and reduces dependence on one product or product line. With that being said, unnecessary or non-value-adding product width diversification can hurt a brand’s image. For example, if Apple were to expand its product line to include refrigerators, it would likely have a negative impact on its brand image with consumers.
In regard to a firm expanding its product mix:
- Expanding the width can provide a company with the ability to satisfy the needs or demands of different consumers and diversify risk.
- Expanding the depth can provide the ability to readdress and better fulfill current consumers.
A product line refers to a grouping of products under a specific brand that are all related. Product lines are essential for companies who want to connect customers with a wide range of products to meet their needs. As consumers begin to develop familiarity with the brand, they can branch out and try new products in the line. In this article, we'll teach you about how product lines work and offer a few examples of how a company can benefit from having a product line of its own.
How do product lines work?
A product-line extension is when someone adds new products into their product line to try to entice new customers to purchase. For example, consider a company that produces whey protein powder for bodybuilders. That product is largely purchased by male bodybuilders, so to widen their audience and attract new customers, they may develop a nutritional supplement for women. Companies use product lines to diversify their clientele and attract more people. They expand existing product lines to get their existing customer base to buy more.
Marketers also use product lines to gain a competitive advantage. For example, if two rival coffee companies are competing for the same business, one company might expand its product line to include tea to attract additional customers who prefer herbal tea to coffee.
When it comes to marketing, product lines sometimes make up part of an overall marketing strategy. To structure a campaign around a product line, goals and objectives should be strategically aligned with growing the new brand. In many cases, a product line manager is a marketer responsible for structuring such a campaign.
The product life cycle is the process a product goes through from when it is first introduced into the market until it declines or is removed from the market. The life cycle has four stages - introduction, growth, maturity and decline.
While some products may stay in a prolonged maturity state, all products eventually phase out of the market due to several factors including saturation, increased competition, decreased demand and dropping sales.
Stages
There are four stages of a product’s life cycle, as follows:
1. Market Introduction and Development
This product life cycle stage involves developing a market strategy, usually through an investment in advertising and marketing to make consumers aware of the product and its benefits.
At this stage, sales tend to be slow as demand is created. This stage can take time to move through, depending on the complexity of the product, how new and innovative it is, how it suits customer needs and whether there is any competition in the marketplace. A new product development that is suited to customer needs is more likely to succeed, but there is plenty of evidence that products can fail at this point, meaning that stage two is never reached. For this reason, many companies prefer to follow in the footsteps of an innovative pioneer, improving an existing product and releasing their own version.
2. Market Growth
If a product successfully navigates through the market introduction it is ready to enter the growth stage of the life cycle. This should see growing demand promote an increase in production and the product becoming more widely available.
The steady growth of the market introduction and development stage now turns into a sharp upturn as the product takes off. At this point competitors may enter the market with their own versions of your product – either direct copies or with some improvements. Branding becomes important to maintain your position in the marketplace as the consumer is given a choice to go elsewhere. Product pricing and availability in the marketplace become important factors to continue driving sales in the face of increasing competition. At this point the life cycle moves to stage three; market maturity.
3. Market Maturity
At this point a product is established in the marketplace and so the cost of producing and marketing the existing product will decline. As the product life cycle reaches this mature stage there are the beginnings of market saturation. Many consumers will now have bought the product and competitors will be established, meaning that branding, price and product differentiation becomes even more important to maintain a market share. Retailers will not seek to promote your product as they may have done in stage one, but will instead become stockiest and order takers.
4. Market Decline
Eventually, as competition continues to rise, with other companies seeking to emulate your success with additional product features or lower prices, so the life cycle will go into decline. Decline can also be caused by new innovations that supersede your existing product, such as horse-drawn carriages going out of fashion as the automobile took over.
References-
- Basic Marketing- Concepts, Decisions and Strategies- Cundiff, Edward, W. & Still, R.R.
- Marketing Management - Kotler, Phillip
- Principles of Marketing - Kotler, Phillip & Armstrong, Gray
- Marketing Management - Mamoria, C.B,Mamoria Satish & Suri, R.K.
