The Market Offering

Prof. Kunal GauravDhruva College of Management

Hyderabad

PRODUCT CLASSIFICATION

Products have been traditionally classified on the basis of their characteristics like usage, durability and tangibility.

Based on durability and tangibility, products can be classified into three groups (i) non durables, (ii) durables and (iii) services.

Products can be classified depending on who the final purchaser is and how he uses them. Based on the usage of the products, they are divided into (i) consumer products and (ii) industrial products.

Consumer Products

Consumer products are products that are used by the consumer for personal, family or household use. They are bought with the intention of satisfying individual or personal needs.

Consumer products can be further divided into (a) convenience products, (b) shopping products, (c) specialty products and (d) unsought products, based on the purchasing habits of the consumer.

Limitations Of Product Classification Models

A single product can be a consumer product as well as an industrial product. For example, when the Eureka Forbes' fire extinguisher is used in homes it is deemed as a consumer product whereas when it is used in offices and hotels it becomes an industrial product. Therefore products cannot be classified exclusively as consumer products or industrial products.

The perception of every customer is different from the other and so they do not categorize the products in the same manner, e.g. an umbrella might be perceived as a shopping product by one customer and an unsought product by another.

Customers do not behave rationally all the time, for instance a person who takes a lot of time in evaluating brands might sometimes end up buying impulsively.

Product line & Product Mix

Product Line a group of closely related product items that are considered a unit because of marketing, technical or end use considerations.

Product Mix is the set of all the products that an organization offers to its customers. For instance HUL offers detergents, shampoos, hair care products, cosmetics, beverages, health care products, ice creams, etc. A product mix consists of all the product lines and categories offered by a particular seller.

Characteristics of Product Mix

Width: This is the total number of product lines a company carries.

Length: The length of the product mix is the total number of items in that mix.

Depth: The depth of a product mix is the assortment of sizes, colors and variations offered for each product in the product line.

Consistency: Consistency refers to the closeness exhibited by the products lines in production requirements, distribution, end usage, etc.

Product Mix Strategies

Expansion of product mix: An organization may opt to expand its existing product mix by increasing its product lines and/or the depth within the line. New product lines may be either related or unrelated to the existing product lines.

Contraction of product mix: Organizations contract their product mix either by eliminating the entire product line or by simplifying the assortments within the lines.

Altering existing products: Redesigning or adding new features to the existing product can prove to be less risky and more lucrative.

Trading Up & Trading Down: In Trading Up, Companies offer higher priced, prestige products to their existing product line in an effort to increase the sales of their low priced products and enhance the company's image. Trading down is used in order to provide a new product to customers who cannot afford the original product,

New Product Development

The World’s Most Innovative Companies

Apple Google Toyota General Electric Microsoft Procter & Gamble 3M Walt Disney

IBM Sony Wal-Mart Honda Starbucks Target BMW Samsung

New Product: Category

New to the world products: New product lines Additions to the existing product lines Improvement and revision of existing products Repositioning Cost reduction

STAGES OF NEW PRODUCT DEVELOPMENT

(a) Idea generation, (b) Screening, (c) Concept testing and business analysis,(d) Product development, (e) Test marketing and (f) Commercialization.

The New Product Development Decision Process

Idea Screening Errors

Drop error: This type of error occurs when a company rejects a good idea.

Go error: This type of error occurs when a company selects a poor idea.

Product use testing

Alpha testing: In this method, a group of target audience is selected from the employees of the company. Alpha testing is less expensive when compared to any other form of testing. Another advantage of selecting the internal employees as a target group is that the chances of leakage of new product idea are less likely. But the disadvantage can be that the company may not be able to get a true picture of the potential customer’s views.

Beta testing: Beta testing is carried out at the customer site. This type of test is usually carried out for machines and tools to be used in the business operations of the customer. Customer's insights regarding the product and its functionality can be gained through this test. But there is always a chance of the competitor learning about the firm's new product.

Gamma testing: Gamma testing is carried out on a long-term basis, where the customer uses the product extensively. Gamma testing is often used in pharmaceutical industry.

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