mm unit 2 point 1

Product and product line

Course: MBASubject: MM II

Unit: 2

• Definition: 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. In FMCG parlance, a brand can be revamped, re-launched or extended to make it more relevant to the segment and times, often keeping the product almost the same

•Description: 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

The product hierarchyThe product hierarchy stretches from basic needs to particular items that satisfy those needs. We can identity six levels of the product hierarchy (using life insurance as an example)

• 1 Need family – the core need that underlies the existence of a product family. Example : security .

• 2 product family – all the product classes that can satisfy a core need with reasonable effectiveness. Example : savings and income .

• 3 product class – a group of products within recognized as having a certain functional coherence . Also known as product category. Example : financial instruments.

4 product line- a group of product within a product class that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels, or fall within given price ranges. A product line may be composed of different brands or a single family brand or individual brand that has been line extended. Example : life insurance.

5 product type – a group of items within a product line that share one of several possible forms of the product, example :term life insurance .

6 Item (also called stock keeping unit or product variant): a distinct unit within a brand or product line distinguishable by size , price, appearance, or some other attribute, Example: ICICI prudential renewable life insurance.

Product systems and mixes

product system : - a product system is a group of diverse but related items that function in a compatible manner . For example , PalmOne handheld and Smartphone product lines come with attachable products including headsets, cameras keyboards, presentation projectors, e-books, MP3 players, and voice recorders .

Product mix

• A product mix (also called a product assortment ) is the set of all products and items a particular seller offers for sale. A product mix consists of various product lines. The Godrej Agrovet dicision has a wide range of products in animal feeds, agricultural inputs, horticulture, and tissue culture .

Classification of Products

• The classification of the product depends upon the TANGIBILITY and DURABILITY found in an offering.

• Typical classification of Product: Service Durable Non Durable

Non Durable Products

• Products that are consumed fast and are purchased on a regular basis. The consumer here spends minimum time and effort in comparing and buying the item.

• Consumer Products are further classified according to its use: Personal, Family and Household as Convenience, Shopping and Specialty.

FMCG

• Fast Moving Consumer Goods are the Non Durable Goods. Eg. Sot Drinks, Chips, Ice Creams etc…. The consumer shows minimum effort in buying these articles.

• FMCG is further sub divided into 3 Classes…

• StaplesThese are goods purchased on a regular basis. Eg. Soap, Pulses, Toothpaste etc…Whenever the stock is about to end the consumer buys these products again.

• Impulse GoodsThese are the goods which are purchased without planning or search… Our external stimuli provokes us to buy these products. Eg. Cold drinks, Chocolates, Chips….Most of the time the consumers aim is not buying the product solely but when spots them, feels, attracted and ends up in buying them.

• Emergency GoodsThese goods are purchased when the need arises. Eg. Umbrellas in rainy season, Pullovers in winters etc..The marketers tries for a very good distribution chain, as the sales is not the same throughout and whenever the need arises, the product should be available at maximum places…

Characteristics of FMCGConsumers Point

• FMCG has a very low shelf life1. Frequent Purchases: Salt, Rice, Chocolates2. Low Involvement: The consumer will buy an alternative if the brand ask for is not available….

Exceptions to the rule: Products like Cigarettes, Personal Hygiene Products, Brand Loyalty.

Characteristics of FMCG Marketers Point

• High VolumesThe volume of the product required is very high.

Eg. An average family may require 3-4 Soaps a month… Imagine No. of family using it in the whole country???If the organization cannot ensure high sales volume, they will have difficulties in surviving.

• Low MarginsAs the product is required in high volume, there is an intense competition which makes the marketer sell the product with very less margin.They earn through high volume sales to maximize their turnover.

The Key Becomes High Volumes Low Margins.

• Extensive Distribution Networks Consumer preference in FMCG products

are not that rigid. Recall plays a very important role. Brand Loyalty is not very high. Consumer allows shopkeeper to decide for

him.Due to all this it becomes very important for the marketer to make its product available at maximum place possible.

• High Stock TurnoverIt is a characteristic feature of FMCG. It is because these products are bought frequently or on a regular basis.Which in turn allows the marketer to rotate the capital invested.

Product Mix

• It is the set of product lines and items that a particular company offers to buyers.

• The Width of product mix refers to how many different product lines a company carries.

Product Line: It is a group of products that is closely related because they perform a similar function, targeted at the same customer groups, marketed through same channel.

• Eg. Products line of P & G :DetergentsBathing SoapsShampoosDisposable Diapers etc.

If, Pantene comes in 4 variants in 3 different sizes, the depth of the product mix becomes 4 X 3 = 12. This can also be referred as Stock Keeping Units (SKU’s)

• Consistency of a product mix refers to how closely related the various product lines are to the end user.

• The Width, Depth and consistency of product mix enables the company to define the Product Portfolio.

• Line Filling : A product line can be extended by adding more items to the existing range.

Reasons: Reaching for more profits Trying to satisfy dealers who complain about lost

sales due to missing items in the line Trying to utilize excess capacity Trying to offer a full line of the production Trying to plug holes in the positioning map.

• Line Modernization : Modernization is carried out continuously as competitors are constantly growing and coming out with new products and ideas.

• In this process an Organization should not be too early, if so, It can harm the existing product or late so that competitors already have a hold in the market.

• Line Featuring Its about featuring a particular product of the product line, so as to increase foot falls and then making the consumer exposed to other products too.

Product Life-Cycle Strategies

• Product development• Introduction• Growth• Maturity• Decline

• Begins when the company develops a new-product idea

• Sales are zero• Investment costs are

high• Profits are negative

PLC Stages PLC Stages

Product Life-Cycle Strategies

• Product development• Introduction• Growth• Maturity• Decline

• Slow sales growth – cell phones 15 yrs back, Hybrid cars today, Blu-Ray technology, HD TV

• Intensive promotions, communications

• Price uncertainty• Uncertain competition

reactions• Uncertain consumer

responses• Non-existent profits• Negative cash flow

PLC Stages PLC Stages

Product Life-Cycle Strategies

• Product development• Introduction• Growth• Maturity• Decline

• Rapid sales growth – cell phones today, internet, LCD TV

• Market acceptance• Price stabilization• Features stabilization• Profits start coming in• Brand building starts• Competition starts building

PLC Stages PLC Stages

Product Life-Cycle Strategies

• Product development• Introduction• Growth• Maturity• Decline

• Slow sales growth – Land lines, 100cc motorbikes, fountain pens

• Price reductions, promotions• Features changes / reductions

/ new• Profits go down• Competitors introduce new

products• Brand sustainability is

imperative in communication

PLC Stages PLC Stages

Product Life-Cycle Strategies

• Product development• Introduction• Growth• Maturity• Decline

• Decline in sales – audio & video cassette players, pagers

• New products meet satisfaction

• Profits erode• Communication expenses

are stopped

PLC Stages PLC Stages

Marketing Strategies in the PLC

• http://economictimes.indiatimes.com/definition/product• http://www.slideshare.net/LalitSharma16/the-product-hierarchy• http://www.slideshare.net/vagoel84/classification-of-product

Sources:-