SML413

Unit - 4
PRODUCT
 A product is a tangible or intangible item that is
created by a company or organization to meet
the needs or wants of its target market.

 Products can be physical goods, such as

consumer goods like cars, clothing, or electronics,
or industrial goods like machinery, equipment, or
raw materials.

 Products can also be intangible, such as services

like consulting, banking, or transportation.
Products are a critical component of a company's
marketing mix, which also includes price,
promotion, and place (distribution).
 Companies must carefully develop, design, and
manage their product offerings to meet the
needs of their target customers and differentiate
themselves from competitors.
PRODUCT DECISIONS
Product decisions are critical decisions that companies make
when developing and marketing their products. These
decisions involve the design, development, and management
of a company's product portfolio to meet the needs and
preferences of its target customers. Here are some important
product decisions that companies must make:

 Product design: This includes the physical appearance and

functionality of the product. The design of a product can
impact its attractiveness to customers, ease of use, and
overall effectiveness.

 Product features: These are the specific characteristics

and functions of the product that make it unique and
appealing to customers. Companies must determine which
features to include in their products to differentiate them
from competitors and meet the needs of their target market.
 Product branding: This includes the name, logo,
packaging, and other elements that create a unique
identity for the product. Effective branding can help to
create a positive image for the product and build customer
loyalty.

 Product packaging: Packaging is an important factor in

product decisions as it can impact the perceived value and
attractiveness of the product. Packaging also plays a role
in protecting the product during transportation and
storage.

 Product positioning: This involves determining how the

product should be positioned in the market and how it
should be marketed to target customers. Product
positioning decisions may involve targeting a specific
customer segment, promoting the product's unique
features, or positioning the product as a premium or value
offering.
 Product line extensions: Companies may
decide to introduce new products or variations of
existing products to expand their product portfolio
and meet the changing needs of customers. This
can help to increase sales and market share.

 Product lifecycle management: Companies

must also manage the lifecycle of their products,
from introduction to decline. This includes making
decisions about when to discontinue a product
and how to manage inventory levels.
PRODUCT CLASSIFICATION
 Consumer Goods: These are products that are
purchased by individual consumers for personal use or
consumption. Consumer goods can be further
classified into four categories: convenience goods,
shopping goods, specialty goods, and unsought goods.

 Industrial Goods: These are products that are

purchased by businesses for further processing or for
use in their operations. Industrial goods can be further
classified into three categories: materials and parts,
capital items, and supplies and services.

 Tangible Products: These are products that can be

physically touched and felt. Examples of tangible
products include food, clothing, and electronic devices.
 Intangible Products: These are products that cannot
be physically touched, such as services or digital
products like software or music.

 Perishable Products: These are products that have a

limited lifespan and can spoil or expire quickly. Examples
of perishable products include food, flowers, and
medicines.

 Non-perishable Products: These are products that do

not spoil or expire quickly and can be stored for a longer
period. Examples of non-perishable products include
clothing, electronics, and furniture.

 Impulse Products: These are products that consumers

buy on impulse without much thought or planning.
Examples of impulse products include candy, magazines,
and small toys.
 Staple Products: These are products that are
essential and are regularly purchased by
consumers. Examples of staple products include
groceries, household cleaning products, and
personal care items.

 Luxury Products: These are high-end products

that are expensive and are associated with luxury
or prestige. Examples of luxury products include
high-end cars, jewelry, and fashion items.

 Emergency Products: These are products that

are purchased in emergency situations, such as
flashlights, first aid kits, and emergency supplies.
PRODUCT MIX
Product mix refers to the combination of products
or product lines that a company offers to its
customers. A product mix can be composed of
different products that serve different purposes
and have different characteristics. A company's
product mix is an important aspect of its
marketing strategy and can influence its success
in the market.

Some key elements of product mix:

 Width: The width of a product mix refers to the

number of different product lines that a company

offers. For example, a company that produces
personal care products may have product lines for
hair care, skincare, and oral care.
 Length: The length of a product mix refers to the
total number of products within each product line.
For example, a company's hair care product line
may include shampoo, conditioner, hair oil, hair
gel, and other products.
 Depth: The depth of a product mix refers to the

number of variations or options available for each

product. For example, a company's shampoo
product may come in different sizes, scents, or
formulations for different hair types.
 Consistency: The consistency of a product mix

refers to how closely related the products are to

each other. For example, a company that produces
both personal care and home cleaning products
may have a less consistent product mix than a
company that only produces personal care
products.
PRODUCT LINE
 A product line refers to a group of products that are
closely related to each other in terms of their
purpose, target market, or other characteristics. For
example, a clothing company may have a product
line for women's clothing, which includes dresses,
skirts, sarees and tops. Each of these products is
designed for women and can be used in different
outfits or styles.

 A product line can be expanded or contracted based

on the needs of the company and the preferences of
its target market. For example, the same clothing
company may add a new product line for men's
clothing or accessories, or may discontinue a
product line that is no longer profitable or relevant.
PRODUCT LINE DECISIONS
Product line decisions refer to the strategic choices that a
company makes regarding the development, expansion, and
management of its product lines. These decisions are an
important aspect of a company's marketing strategy and can
have a significant impact on its success in the market. Here
are some common product line decisions:

 Product line extension: A company may choose to extend

its product line by introducing new products that are related
to its existing products. For example, a company that
produces soap may introduce a new line of body lotions or
shampoos.

 Product line contraction: A company may choose to

eliminate certain products or product lines that are no longer
profitable or relevant. This can help to streamline operations
and focus on more profitable products.
 Product line filling: A company may choose to fill gaps
in its product line by introducing new products that
address specific customer needs or preferences. For
example, a company that produces shoes may introduce
a line of shoes for people with wider feet.

 Product line stretching: A company may choose to

stretch its product line by introducing products that are
priced higher or lower than its existing products. This
can help to reach new customer segments and expand
the company's market share.

 Branding: A company may choose to use different

branding strategies for different product lines. For
example, a company that produces both high-end and
low-end products may use different brand names and
marketing strategies to appeal to different customer
segments.
 Packaging and design: A company may
choose to use different packaging and design
strategies for different product lines. This can
help to differentiate the products and create a
unique identity for each product line.

 Pricing: A company may choose to use different

pricing strategies for different product lines. This
can help to position the products differently in
the market and appeal to different customer
segments.
PRODUCT LIFE CYCLE
 The product life cycle refers to the stages a product goes
through from its introduction to the market until its decline
and eventual retirement. The product life cycle concept is a
useful tool for businesses to understand the evolution of a
product and develop appropriate marketing and business
strategies.

The four stages of the product life cycle are:

 Introduction: In this stage, the product is new to the

market, and sales are typically low. The focus of marketing

efforts is to create awareness of the product and its benefits.
Examples include:
Electric cars: Companies like Tesla are introducing electric
cars to the market, which are still in the introduction stage.
Virtual Reality (VR) Headsets: VR headsets like Oculus
Rift and HTC Vive are still in the introduction stage as they
are gaining popularity, but are not yet mainstream products.
 Growth: In this stage, sales increase rapidly as
the product gains acceptance in the market. The
focus of marketing efforts is to differentiate the
product from competitors and build brand loyalty.

Examples include:
Smartphone's: Smartphone's, like the iPhone and
Samsung Galaxy, are in the growth stage, as sales
continue to increase year over year, and
companies are constantly introducing new features
to differentiate their products.

Streaming Services: Streaming services like

Netflix and Amazon Prime are also in the growth
stage as they continue to gain subscribers and
create original content to differentiate themselves.
 Maturity: In this stage, sales growth slows down, and
the product reaches its peak in terms of market
saturation. The focus of marketing efforts is to maintain
market share and extend the product's life cycle by
introducing new features or repackaging the product.

Examples include:
Soft Drinks: Soft drinks like Coca-Cola and Pepsi are
in the maturity stage as they have been on the market
for decades and have reached their maximum market
share. Companies are focused on introducing new
flavors or packaging to maintain interest.

Computers: Computers, like laptops and desktops, are

in the maturity stage, as the market is saturated, and
companies are introducing new features like
touchscreens or convertible designs to maintain
interest.
 Decline: In this stage, sales begin to decline as
the product becomes outdated, and consumer
preferences shift towards newer products. The
focus of marketing efforts is to maximize profits
and retire the product gracefully.

Examples include:
Fax Machines: Fax machines are in the decline
stage, as they have been replaced by email and
digital document sharing.

Cassette Tapes: Cassette tapes are also in the

decline stage, as they have been replaced by
CDs, MP3s, and streaming services.
 New product development is the process of designing,
creating, and introducing a new product or service to
the market. The process typically involves several
stages, including idea generation, product design,
prototype development, testing, and launch.

The Process of New Product Development -

 Conduct Market Research: It is essential to conduct

thorough market research to identify gaps in the market,

consumer preferences, and potential competitors. This
research will provide insight into what features or
benefits consumers are looking for in a product, which
can inform the development process.

 Idea Generation: Based on the market research,

generate ideas for new products. Brainstorming
sessions, customer feedback, and industry trends can all
help in generating new product ideas.
 Concept Development: Once you have
identified a potential product idea, develop a
concept around it. This includes defining the
product features, target market, pricing strategy,
and branding.

 Prototype Development: Build a prototype of

the product to test its functionality and to gather
feedback from potential customers. This will help
in making any necessary adjustments before
launching the product.

 Test Marketing: Conduct a test market to see

how the product performs in a real-world setting.
This will help in identifying any potential issues
and fine-tuning the product before a full launch.
 Launch: After successfully completing the above
steps, launch the product in the market. It is
important to have a well-planned marketing
strategy in place to create awareness and
generate interest among the target audience.

 Post-Launch Evaluation: Monitor the product's

performance after launch, gather feedback from
customers, and make any necessary changes to
ensure the product's continued success in the
market.
EXAMPLES OF NEW PRODUCT DEVELOPMENT
Tesla's Electric Cars:
Tesla identified a growing demand for
environmentally friendly vehicles and saw an
opportunity to disrupt the automotive industry
with electric cars.

Through extensive research and development,

Tesla was able to create a highly innovative
product that has revolutionized the automotive
industry.

Tesla's electric cars are highly sought after and

have positioned the company as a leader in the
electric vehicle market.
BRANDING
 Branding involves creating a unique name, design,
and identity for a product that differentiates it
from competitors.
 A strong brand identity can help businesses build

customer loyalty and increase brand recognition.

When developing a branding strategy, businesses
need to consider factors such as their target
audience, brand personality, brand values, and
competitive landscape.
 Branding decisions may include creating a brand

name, designing a logo, developing a brand

messaging strategy, and creating a brand style
guide.
PACKAGING
 Packaging involves designing the physical container
or wrapping for a product.

 Packaging decisions can impact the perception of the

product's quality, convenience, and appeal to
consumers.

 When developing a packaging strategy, businesses

need to consider factors such as product protection,
convenience, ease of use, and sustainability.

 Packaging decisions may include choosing materials,

designing graphics and typography, and creating an
overall packaging concept.
LABELING

 Labeling involves creating the information and

instructions that appear on the product's packaging
or container.
 Labeling decisions can impact the product's
compliance with regulations, consumer safety, and
overall appeal to consumers.
 When developing a labeling strategy, businesses

need to consider factors such as legal requirements,

consumer preferences, and branding strategy.
 Labeling decisions may include creating product

descriptions, ingredient lists, nutritional information,

and usage instructions.
PRICING
 Pricing is a process of fixing the value that a
manufacturer will receive in the exchange of
services and goods. Pricing method is exercised to
adjust the cost of the producer's offerings suitable
to both the manufacturer and the customer.

 Pricing refers to the process of determining the

value of a product or service and setting a specific
price that customers are expected to pay for it.

 This involves taking into account various factors

such as production costs, competition, market
demand, and profit margins.
 Pricing is a critical aspect of any business
strategy, as it can affect the profitability and
success of a product or service.

 There are several pricing strategies that

businesses may use, such as cost-plus pricing,
value-based pricing, penetration pricing, and
skimming pricing.

 The choice of pricing strategy depends on various

factors, including the type of product or service,
the target market, and the company's objectives.
MEANING OF PRICING
 The term pricing refers to the process of determining the
monetary value of a product or service. This process
involves analyzing the various costs associated with
producing and delivering the product or service, as well
as understanding the competitive landscape and market
demand.

 Once these factors have been considered, a business

can set a price for their product or service that is in line
with their objectives and reflects the value that the
product or service provides to customers.

 The pricing strategy chosen by a business can have a

significant impact on its success, as it can affect
consumer behavior, profitability, and overall market
positioning.
 OBJECTIVES OF PRICING
 Survival- The objective of pricing for any company is to
fix a price that is reasonable for the consumers and also
for the producer to survive in the market. Every company
is in danger of getting ruled out from the market because
of rigorous competition, change in customer’s
preferences and taste. Therefore, while determining the
cost of a product all the variables and fixed cost should
be taken into consideration. Once the survival phase is
over the company can strive for extra profits.

 Expansion of current profits-Most of the company

tries to enlarge their profit margin by evaluating the
demand and supply of services and goods in the market.
So the pricing is fixed according to the product’s demand
and the substitute for that product. If the demand is
high, the price will also be high.
 Ruling the market- Firm’s impose low figure for
the goods and services to get hold of large market
size. The technique helps to increase the sale by
increasing the demand and leading to low
production cost.

 A market for an innovative idea- Here, the

company charge a high price for their product and
services that are highly innovative and use
cutting-edge technology. The price is high
because of high production cost. Mobile phone,
electronic gadgets are a few examples.
METHODS OF PRICING
 Cost Oriented Pricing Method– It is the base
for evaluating the price of the finished goods, and
most of the company apply this method to
calculate the cost of the product. This method is
divided further into the following ways.
 Cost-Plus Pricing- In this pricing, the manufacturer
calculates the cost of production sustained and
includes a fixed percentage (also known as mark up) to
obtain the selling price. The mark up of profit is
evaluated on the total cost (fixed and variable cost).
 Markup Pricing- The fixed number or a percentage of
the total cost of a product is added to the product’s
end price to get the selling price of a product.
 Target-Returning Pricing- The company or a firm fix
the cost of the product to achieve the Rate of Return
on Investment.
 Market-Oriented Pricing Method- Under this category,
the is determined on the base of market research
 Perceived-Value Pricing- In this method, the producer
establish the cost taking into consideration the customer’s
approach towards the goods and services, including other
elements such as product quality, advertisement, promotion,
distribution, etc. that impacts the customer’s point of view.
 Value pricing- Here, the company produces a product that is
high in quality but low in price.
 Going-Rate Pricing- In this method, the company reviews the
competitor’s rate as a foundation in deciding the rate of their
product. Usually, the cost of the product will be more or less the
same as the competitors.
 Auction Type Pricing- With more usage of internet, this
contemporary pricing method is blooming day by day. Many
online platforms like OLX, Quicker, eBay, etc. use online sites to
buy and sell the product to the customer.
 Differential Pricing- This method is applied when the pricing
has to be different for different groups or customers. Here, the
pricing might differ according to the region, area, product, time
etc.
FACTORS AFFECTING PRICING
DECISIONS
 Cost of production: The cost of production is an
important factor to consider when setting prices. The
price should be high enough to cover the costs of
producing the product or service, including the cost of
materials, labor, and overhead expenses.
 Competition: The level of competition in the market
can also affect pricing decisions. If there are many
competitors offering similar products or services, pricing
may need to be more competitive to attract customers.
 Target market: The target market for the product or
service can also influence pricing decisions. Different
segments of the market may have different price
sensitivities and willingness to pay, so prices may need
to be adjusted accordingly.
 Brand image: The brand image and perceived value of
the product or service can also play a role in pricing
decisions. A premium brand may be able to charge higher
prices based on the perception of higher quality and
exclusivity.
 Marketing strategy: The marketing strategy can also
impact pricing decisions. For example, if the company is
using a promotional pricing strategy to attract customers,
the price may be set lower than usual.
 Economic conditions: Economic conditions, such as
inflation and recession, can also affect pricing decisions.
During a recession, for example, customers may be more
price-sensitive, and companies may need to adjust their
pricing accordingly.
 Government regulations: Government regulations and
taxes can also impact pricing decisions. For example, if
there are taxes on certain products or services, the price
may need to be adjusted to account for the additional
costs.
PRICE SETTING PROCEDURE
 Define the pricing objectives: The first step in
the price setting procedure is to determine the
pricing objectives. The objectives can be profit
maximization, revenue maximization, market share
maximization, or survival in the market.

 Analyze the market and competition: The next

step is to analyze the market and competition. This
involves identifying the target market,
understanding their needs and preferences, and
evaluating the competition's pricing strategies.

 Estimate demand: The third step is to estimate

the demand for the product or service. This involves
evaluating the market potential and estimating the
demand for the product at different price points.
 Determine costs: The fourth step is to determine the
costs of producing and selling the product or service. This
includes both the direct costs, such as materials and labor,
and the indirect costs, such as overhead expenses.
 Choose a pricing strategy: The fifth step is to choose a
pricing strategy. The strategy can be cost-based pricing,
value-based pricing, or competition-based pricing,
depending on the objectives, costs, and market conditions.
 Set the price: The final step is to set the price. This
involves determining the price that will achieve the pricing
objectives, considering the market, competition, demand,
costs, and pricing strategy.
 Monitor and adjust the price: Once the price is set, it is
important to monitor the market conditions and adjust the
price as needed. This can involve regular price reviews,
price promotions, and pricing optimization techniques to
maximize profits and maintain competitiveness in the
market.
THANK YOU