Product Strategy | Management Optional Notes for UPSC PDF Download

Introduction

• In a narrow context, a product is often perceived as a set of tangible physical attributes assembled in a recognizable form. However, within the realm of marketing, the concept of a product extends far beyond its physical form. It encompasses services, emotions, pleasures, reputation, or even experiences. Essentially, when a consumer purchases a product, they are acquiring a bundle of satisfaction.
• Organizations need to view products from the customer's perspective. For instance, while cosmetic companies may produce lipsticks, vitamin manufacturers create pills, and watchmakers craft timekeeping devices, customers perceive these items as symbols of hope – a hope to look young and beautiful, a hope for a healthier life, and a status symbol, respectively.
• According to Philip Kotler (1999) in "Marketing Management," a product is defined as anything offered to a market for attention, acquisition, use, or consumption that could satisfy a need or want. William J. Stanton (1994) in "Fundamentals of Marketing" states that a product comprises tangible and intangible attributes, including packaging, color, price, manufacturer's prestige, retailer's prestige, and associated services, all aimed at fulfilling buyer wants.
• Therefore, it becomes evident that a product is not merely a collection of physical and chemical attributes; it also incorporates various intangible elements that can address the current and potential needs and wants of customers. Furthermore, a product goes beyond the physical good itself, encompassing aspects such as packaging, branding, labeling, manufacturer's prestige, as well as the prestige of wholesalers and retailers, guarantee, warranty, installation, after-sales services, and more. For instance, a customer purchasing an air conditioner with a maintenance contract from Samsung is acquiring a distinct product compared to someone buying an unbranded air conditioner without a maintenance agreement.

Composition of A Product

To comprehend the composition of a product, it is likened to an onion, possessing various layers. Much like peeling an onion reveals subsequent layers, a product consists of five layers, each contributing to customer value, collectively forming a customer value hierarchy. The various product levels are illustrated in Figure.

Core product

• At the fundamental level, the core product offers the core benefit, representing the essential service or benefit that customers truly seek. It constitutes the primary reason for the product's purchase, reflecting the basic satisfaction consumers anticipate. 
• For instance, when a woman buys lipstick, she isn't merely acquiring lip color; she is purchasing the hope or feeling of looking attractive. The core product is akin to the raw or natural form of a product, as seen in freshly plucked tea leaves before processing.

Basic product

• The second level involves transforming the core product into a basic product. Marketers enhance the core product by adding quality, features, designing packaging, assigning a label, and providing a brand name. 
• For example, tea leaves, in their raw form, become the core product, but after grading, packing, labeling, and branding, they evolve into the basic product.

Expected product

• At the third level, the marketer assembles an expected product by incorporating additional attributes and conditions, making it more valuable to customers. This includes factors such as the convenience of purchase and economical prices. 
• The market offers various types of tea leaves with different pricing, considering quality levels and packaging costs.

Augmented product

• The fourth level involves the creation of an augmented product that surpasses customer expectations. New and improved features are introduced to the product, differentiating it from competitors. For instance, tea producers launch various flavors like ginger tea, green tea, honey lemon tea, premium tea, etc. 
• Today's competition primarily revolves around product augmentation, where marketers add distinctive features to their products, as noted by Theodore Levitt in "The Marketing Mode."

Potential product

• The fifth level represents the potential product, undergoing all necessary augmentations and transformations for the future. Companies strive to discover innovative ways to satisfy customers and distinguish their offerings from competitors. 
• Successful companies go beyond customer satisfaction to delighting customers, exceeding their expectations. A product, upon introduction to the market, can traverse through these levels.

Product Classification

Product classification can be approached from various perspectives. Based on tangibility and durability, products can be categorized into three main groups, as illustrated in Figure.

Non-durable goods:

• Non-durable goods are tangible items typically consumed in one or few uses, generally within a year. Examples include bread, butter, soap, beverages, snacks, sugar, and salt. Due to their quick consumption and frequent purchase, an effective strategy involves widespread availability, minimal markup, and heavy advertising to encourage trial and build preference.

Durable goods:

• Durable goods are tangible items that typically endure multiple usages, with an economic life of one year or more. Examples encompass television sets, refrigerators, cars, computers, and clothing. These goods require more personal selling, services, offer greater benefits, command a higher margin, and necessitate quality control, guarantees, and warranties.

Services:

• Services are intangible, inseparable, variable, and perishable products delivered directly from the service provider to the recipient. Quality control, supplier credibility, and adaptability become crucial in service delivery. Examples include services provided by beauty salons, hotels, schools, banks, and others.

Consumer Goods Classification:

Products can also be classified based on who consumes them and for what purpose. This classification results in two categories: consumer goods and industrial goods.

1. Consumer Goods: Consumer goods are items consumed by final consumers for personal use, not for commercial purposes. They can be classified based on consumer shopping habits into four types: convenience goods, shopping goods, specialty goods, and unsought goods.

Convenience goods:

• Frequently purchased with minimal effort, convenience goods include items like soaps, toothpaste, batteries, candies, and newspapers.

Shopping goods:

• Purchased after thorough comparison based on suitability, quality, price, and style, shopping goods include furniture, clothing, shoes, accessories, and major electronic appliances.

Specialty goods:

• Unique goods with brand identification, for which buyers are willing to make special efforts. Examples include luxury cars, photographic equipment, and designer clothes.

Unsought goods:

• Goods that consumers may not know about or consider purchasing. This category includes unsought regular products (known but not regularly purchased, like medicines) and unsought new products (new to the market and not well-known).

2. Industrial Goods Classification: Industrial goods facilitate the production of other goods and can be classified into three categories by Philip Kotler: materials and parts, capital items, and supplies and business services.

Materials and parts:

• Goods that become part of the manufacturer's product, including raw materials (from nature, like wheat and cotton) and fabricated materials and parts (manufactured products used in processing).

Capital items:

• Basic goods essential for the manufacturing process, divided into installations (buildings and heavy equipment) and equipment (factory and office equipment).

Supplies and business services:

• Goods and services that facilitate the production process, including operating supplies (lubricants, writing paper) and maintenance and repair items (tools, fixtures), along with business services (maintenance, repair, and advisory services).

New Product Development Process

The development of a new product involves a series of carefully navigated stages, ensuring a systematic approach to minimize the risk of product failure. The process typically encompasses seven stages, as outlined below:

Idea Generation Stage:

• This initial stage involves the generation of diverse ideas, which are later evaluated as potential product options.
• Ideas can be sourced from various channels within or outside the organization, with a focus on customer needs and wants.
• Techniques like focus group interviews, feedback from sales personnel, and competitor analysis contribute to idea generation.

Idea Screening Stage:

• Ideas generated are critically evaluated by senior management to select the most attractive options.
• Input is sought from various levels within the organization to minimize errors in dismissing good ideas (drop error) or allowing poor ideas to progress (go-error).

Concept Development and Testing Stage:

• Selected ideas are discussed with customers, distributors, and employees using detailed concept notes or storyboards.
• Feedback is collected regarding product features, customer interest, and potential pricing.

Business Analysis Stage:

• In-depth efforts are made to assess the commercial viability of remaining product ideas.
• Marketers estimate market size, manufacturing costs, and expected sales and profit figures.
• The focus is on ensuring the proposed product is financially feasible.

Product and Marketing Mix Development Stage:

• The basic design of the product is prepared in collaboration with the research and development department.
• Prototypes are developed, and functional tests are conducted to ensure performance and safety standards.
• Decisions on the marketing mix elements (Price, Place, Promotion) are also made at this stage.

Market Testing Stage:

• Products that pass through the previous stages are tested in the market to gauge real-world response.
• Market testing involves introducing the product in a small geographical area, seeking consumer feedback, and making necessary adjustments.

Commercialization Stage:

• The product is ready for launch in the broader market, with some firms introducing it in phases.
• Decisions regarding timing, geographical distribution, target market prospects, and introductory marketing strategy are crucial.
• The company must decide when and where to introduce the product, whom to target, and how to introduce it in the market.
• In conclusion, following these stages diligently is crucial for marketers to prevent costly mistakes in the future and ensure the successful development and launch of a new product.

Product Life Cycle

Once a product is commercialized, it embarks on a life cycle akin to that of a human being—birth, rapid growth, maturity, and eventual decline. The product life cycle delineates the stages a product undergoes from introduction to growth, maturity, and decline, influencing marketing strategies and the marketing mix accordingly.

A. Stage One: Introduction Stage

• In this initial stage, the product is launched, a venture fraught with risk. Product branding, quality establishment, and intellectual property protection are prioritized. Basic versions are introduced, accompanied by substantial investments in production, distribution, and promotion, often resulting in minimal or negative profits. Pricing strategies, such as penetration or skimming, are employed. Sales growth is slow due to low consumer awareness, selective distribution, and aggressive promotional efforts targeted at innovators and early adopters.
• Marketers adopt strategies like rapid skimming, slow skimming, or slow penetration based on market conditions.

B. Stage Two: Growth Stage

• Marked by a surge in sales and profits, the growth stage sees the product gaining traction among early adopters and the middle majority. Competition intensifies, and pricing remains steady as demand increases. Profits rise due to higher sales volume and spreading promotion costs. Marketing strategies focus on maintaining product quality, introducing improved models, expanding market segments, and shifting advertising towards product conviction.

C. Stage Three: Maturity Stage

• In the maturity stage, sales growth slows, leading to industry overcapacity and heightened competition. Profits start declining, and marketing strategies shift to sustaining sales through product differentiation, attracting non-users, promoting more frequent usage, winning over competitors' customers, reducing prices, intensive distribution, and emphasizing product differentiation in promotions.

D. Stage Four: Decline Stage

• In the decline stage, market saturation results in declining sales and profits. Strategies in this phase involve maintaining the product with new features, offering it to loyal customers at reduced prices, discontinuing the product, or using it as a replacement for a new launch. Marketing decisions depend on whether the product is being rejuvenated, liquidated, or left unchanged. Prices may be maintained or drastically reduced if liquidation is the chosen path.

Product Mix and Product Line

The product mix represents the entirety of products offered by a business to strengthen its market presence, increase market share, and enhance profitability. For instance, Hindustan Unilever's product mix encompasses fabric wash, haircare, skincare, oral care, household cleaning, and various other product lines. The terms "product mix" and "product line" are used to describe the range and variety of a firm's products.

• Product Mix: This is the broader concept, referring to the complete set of products a company offers for sale. It encompasses all the product lines maintained by the company.
• Product Line: A product line constitutes a group of closely related products treated as a unit due to marketing, technical, or end-use considerations. For instance, Hindustan Unilever's toilet soaps like Dove, Pears, Lux, Liril, Rexona, Hamam, Lifebuoy, and Breeze form a product line within the personal wash category.
• Width of Product Mix: The width of a product mix indicates the number of product lines it encompasses. It can also be termed as a line extension, which involves introducing a new product line. For example, when Mercedes expanded from manufacturing cars to bikes, it was a downward line extension.
• Length of Product Line: The length of a product line is determined by the number of items in a product mix. It reflects the variety and depth of the products offered.
• Depth of Product Line: This signifies the total number of items under each brand in the product line, considering variants, shades, models, pack sizes, etc.
• Constant Appraisal of Product Lines: A growing business needs to continually assess its existing product lines to ensure their relevance in the dynamic business environment. Market acceptance, changes in consumer preferences, and evolving technologies can render certain products obsolete. Regular appraisal helps in making decisions like product withdrawal, quality control adjustments, independent branding, feature additions, or the introduction of new products.

Packaging

Packaging has evolved into a crucial aspect of a product, earning it the designation as the fifth "P" in the marketing mix. It is imperative to distinguish between packaging and packing, where packing pertains to safeguarding goods during transportation and storage, while packaging is a broader term encompassing the design and production of suitable packages for a product. Various materials like paper, plastic, glass, steel, and wood can be utilized for packaging.

Referred to as a silent salesman, packaging wields influence at the point of purchase and serves as a form of brand communication, conveying personality, positioning, values, and benefits. Key functions of packaging include enhancing the visual appeal, providing information, and facilitating the sale of the product. It also safeguards against breakage, pilferage, spoilage, and contamination while retaining moisture and freshness. Packaging adds functional utility by making products easy to handle and store.

As consumer affluence rises, there is a willingness to pay more for the convenience, appearance, dependability, and prestige associated with better packaging. It aids in preventing adulteration, attracts attention in a competitive market, and is crucial in self-service setups. Aesthetic factors play a role in making a brand stand out, while packaging increases the utility of branding by allowing the placement of brand names and marks for advertising.

Moreover, packaging serves as a lasting advertising medium as long as the product is used in its packaged form. It imparts individuality and identification to a product. Developing effective packaging may involve significant investment and time. Companies are increasingly addressing environmental and safety concerns by adopting eco-friendly, recyclable packaging materials. Small, economical packages are designed for both rural and urban markets, emphasizing the growing importance of packaging in the current market landscape.

Figure: Requisites of a Good Package

Branding

• Branding holds a pivotal role in the realm of marketing. A well-crafted brand not only boosts sales, fosters customer loyalty, and builds brand value but also serves as a catalyst for business growth by motivating consumers to choose a particular product. The expertise of professional marketers lies in their ability to create, maintain, protect, and enhance brands, with many considering branding as the cornerstone of marketing.
• According to the American Marketing Association (1995), branding is defined as "A name, term, symbol, or design, or a combination of them, which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors." A brand encompasses a name, term, symbol, or design, while a brand mark is a visual symbol or distinctive element. Trademarks, legally registered under the Trade and Merchandise Marks Act, 1958, fall under the umbrella of branding.
• Essentially, a brand is a promise made by a seller to consistently deliver a specific set of features, benefits, and services to buyers. It conveys attributes, benefits, values, culture, personality, and the intended user. The branding challenge lies in developing positive associations for the brand.

Characteristics of a Good Brand:

• Short and simple
• Easy to spell and read
• Easy to recognize and remember
• Easy to pronounce
• Pronounceable in all languages
• Suggestive of product benefits
• Adaptable to packaging and labeling
• Always timely
• Legally available for use

Functions of Branding:

• Product Differentiation: Branding distinguishes a product from its competitors, providing it with a unique identity.
• Advertising: A brand name is a tool used in advertising to establish an image in the minds of prospective consumers.
• Better Quality: Standardized brands ensure better product quality and authenticity.
• Competitive Advantage: A strong brand offers a competitive edge, fostering consumer trust and loyalty, allowing for premium pricing.
• Consumer Protection: Fixed prices printed on branded products protect consumers from overcharging by middlemen.
• Prestige and Goodwill: A well-established brand enhances the prestige and goodwill of a firm, resulting in long-lasting brand loyalty.
• Brand Loyalty: Effective branding leads to strong brand equity, allowing companies to charge more for their branded products compared to identical, unbranded alternatives.

Labeling: Informing and Promoting Products

• A label, an integral part of a product, serves as a vital source of information for customers by providing details such as the product description, content, manufacturing date and time, usage instructions, storage recommendations, and more. This information is crucial for consumers to make informed decisions about the product. Labeling can take the form of being directly on the package or through an additional sheet attached inside the product.
• Labeling is a means to communicate essential details such as brand identity, product grade, and other relevant information. In certain industries, particularly in agriculture and food, products are often graded and labeled with designations such as A, B, or C based on various quality parameters.
• The practice of labeling serves both promotional and informational purposes for consumers. From a promotional perspective, labels play a role in attracting customers through visually appealing graphics and designs. The aesthetic elements on the label can contribute to the overall promotion of the product, making it visually appealing and enticing to potential buyers.