Unit- 4 PRODUCT, PRICING, DISTRIBUTION AND PROMOTION STRATEGIES

Principles of Marketing .. FERVID.. (Sem IV)
Unit- 4 PRODUCT, PRICING, DISTRIBUTION AND PROMOTION STRATEGIES
PRODUCT
Meaning of Product: A product is the core element of marketing mix. It is anything that satisfies need and want of
customers. It can be
physical goods: book, pen, furniture, etc.
services: car repair, haircut, air travel, etc.
properties: land, building, shares, etc.
idea: safe driving, go green, small family happy family, etc.
experience: bunji jumping, cablecar ride, rafting, elephant ride, etc.
person: sportsperson, filmstar, model, singer, etc.
place: picnic spot, tour package, vacation, etc.
Service is a form of product that consists of activities, benefits or satisfaction offered for sale. It is intangible (can’t
be seen or touched, but only felt). For e.g. : services provided by dry cleaners, hair saloon, banks, hotels , airlines,
communication media, and so on. Both product and service comes together.
Jerome McCarthy has said, “Product means need-satisfying offering of a firm.”
Concepts of Product (Levels of Product):
1. Tangible concept: It is the traditional concept of product. Tangible products are those which can be touched
and seen. They have physical features for e.g. books, computer, mobile, etc.
2. Intangible Concept: Products can be intangible such as services, ideas, experiences and events. They can’t
be felt by customers but can’t be seen or touched.
3. Augmented Concept: This concept combines tangible and intangible products. Many physical goods carry
service packages. For e.g. solar heater with free installation service, photocopy machine with two years
warranty for free repair and maintenance, etc.
4. Total concept: it is the combination of all- tangible, intangible and augmented product concepts. It focuses
on product features, advantages and benefits. Features are physical characters, advantages relate to the
performance & benefits and results of buying. For instance, the marketer of a car not only offers
combination of metal, rubber, plastic, but also space for 4- 5 passengers, comfortable travel with image and
status related to ownership of brand.
Classification of Products (Types of Products)
A. Consumer Products B. Industrial products
1. Convenience Products 1. Material & Parts
2. Shopping ,, 2. Capital Items
3. Speciality,, 3. Supplies and Services
4. Unsought ,,
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A. Consumer Products: Products purchased to satisfy personal and family needs. Food items, clothes,
cosmetics, refrigerator, books, etc. are examples.
B. Types of Consumer Products:
1. Convenience Products: are purchased easily & often. Consumers buy them frequently and immediately
with minimum buying effort. Examples are bread, newspaper, sweets, eggs, etc.
2. Shopping Products: are less frequently purchased goods. Customers carefully compare quality, price,
suitability and style. Furniture, shoes, television, refrigerator, etc. are shopping products. These last for
years and consumers spend more time and effort for
purchase.
3. Speciality Products: are consumer products with unique features or brand identification. These are so
special for the buyers that they are ready to put extra effort to purchase the products.e.g. Rolex watch,
jewellery, expensive camera, high brand electronic equipment, designer clothes, and so on.
4. Unsought Products: These are the products that the consumers do not know or do not normally think of
buying. Consumers have little product awareness and knowledge. Examples are life insurance policy,
painting, artistic product, encyclopedia, etc.
Features of Convenience Products
1. Convenience products are frequently or regularly purchased.
2. Purchase planning is not required.
3. Generally the price of per unit is low.
4. Convenience products are sold with good packaging.
5. Consumers prefer different variety of products at different time.
6. Such products are sold by many retailers.
Features and Marketing Considerations of Consumer Goods
Features Convenience Shopping Speciality Unsought
1. Purchase Frequency Frequently Less
frequently
Infrequently Rarely
2. Purchase planning Rarely High Very high None
3. Price Low High High High
4. Packaging Very important Less
important
Less
important
Importance
Varies
5. Brand Loyalty Low Low High None
6. Distribution Intensive(many
retailers)
Selective(few
retailers)
Exclusive
show rooms
Factory
outlets
Marketing Considerations Convenience Shopping Speciality Unsought
1. Product features Modify products Improve
features
Maintain
quality
New
products
2. Branding Awareness Image Loyalty Awareness
3. Packaging Attractive Useful
protective
Not
important
Appropriate
4. Pricing Low price High price High price High price
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5. Place(distribution) Long channels Short channels Very short
channels
Direct
channel
6. Promotion Nationwise by
manufacturer
Local by
retailer
Targeted
promotion
National &
Local
Marketing Considerations of Convenience Products: The businesspersons or marketers have to focus on
following considerations for marketing of convenience products:
1. The products features should be modified from time to time.
2. Branding (Name, symbol ,etc.) should be used.
3. Attractive packaging is required to win competition.
4. Low price is more favorable.
5. Convenience products should be distributed through long channels.
6. Manufacturer is responsible for promotion all over the country.
B. Industrial products: are purchased for business purpose- to run organization, to manufacture goods or resale.
Fuel, raw materials, machines, tools, etc. are industrial products.
Types of Industrial Products:
1. Material & Parts: include raw materials, manufactured materials and parts. Raw materials consist of
farm products(wheat, cotton, fruits, vegetables) and natural products( fish, crude petroleum, iron ore,
minerals, herbs).
Manufactured materials and parts consist of component materials(iron, yarn, cement, wires)
and component parts (tyres, spark plug, nuts, bolts,). Most of manufactured materials and parts are
directly sold to industrial users.
2. Capital Items: are fully manufactured products used for production of other products or for providing
services. They include installations and accessory equipments. Installations consist of major purchases
such as buildings, generators, elevators, lift machines, large computer systems, etc.
Accessory equipments include portable equipment& tools such as hand tools, fax machine,
telephone set, desk, table accessories, and so on. They simplify production as well as official works.
3. Supplies & Services: Supplies include operating supplies such as petrol, diesel, mobil, grease, coal,
paper, ink, nails, stapler pins, etc.
Business services include maintenance & repair service(cleaning, computer repair, facility
maintenance,) and advisory service(legal, management consultancy, advertising ). Such services
usually exist on contract.
Features and Marketing Considerations of Industrial Products
Features Raw Materials Capital Items Supplies & Services
1. Purchase Frequency Frequent Rarely Frequent or less
frequent
2. Life Span Generally short Very long Short
3. Unit Price Low Very high Medium / low
4. Purchase Planning Long term contract One time contract None
5. Brand Loyalty Low High Generally low
6. Distribution Channel Selective Exclusive Intensive
Supplies & Services
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Marketing Considerations Raw Materials Capital Items
1. Purchase
Standardization
Very much Very little Moderate
2. Brand Preference None High Low
3. Pricing Negotiated Negotiated Fixed
4. Place(distribution) Short channel Direct Long
5. Promotion None Personal Selling is
important
Less important
6. Post-sale services None Very important None
Product Life Cycle (PLC)
Concept: All products have a life-cycle like living beings. They are born, they live and they die.
Changes in technology, competition & customers’ preference affect the life of the product. PLC is
based on following assumptions:
 Every product has a limited life
 Product sales pass through in each stage different stages
 Profits rise and fall at different stages
 Different buyer groups buy products during different stages
 Marketing strategies should differ of PLC
 No product sells forever
Stages of Product Life Cycle
1.Introduction 2. Growth 3.Maturity 4. Decline
1. Introduction Stage: starts when a new product is first launched. The marketing objective is to
create product awareness & make trial purchase among consumers.
Features:
a. Slow growth of sales: due to low awareness of product.
b. Innovator customers: customer acceptance is low. Only few customers try the product.
c. Small production level: the firm is unable to predict the success of product & keeps
production at low quantity.
d. Technological problems: since the product is new, some technological problems exist.
e. High price: due to high production cost, distribution & promotion expenses.
f. No competitors: Competitors lack production facility and technical knowledge to compete.
2. Growth Stage: If the new product satisfies the market, it will enter in growth stage, where sales
start improving. This stage is the period of market acceptance. The marketing objective is to
increase market share.
Characteristics:
a. Sales increase rapidly: innovators continue to buy products. New customers join them.
b. Improved features: the firm corrects technical defects in production & adds new features in
product.
c. New market segments: the firm moves the product into new market segments.
d. High profit: high sales bring more profit.
e. Slightly lower price: production cost decreases & prices are slightly lower.
f. Growing competition: new competitors enter into the market.
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3. Maturity Stage: At some point, a product’s sales growth will slow down, & the product will enter a
maturity stage. This stage is the period of defending market share & lasts longer. The marketing
objective is to stabilize profit & defend market share. Characters:
a. Decreasing sales volume: market competition slows down the growth in sales.
b. Tough competition: more & more competitors enter into market. They are attracted by higher
sales & profit.
c. Price cuts: competitors reduce their prices forcing the organization to price cuts.
d. Heavy promotion: organization spends more on sales promotion to attract new customers.
e. Low profit: low sales, high marketing costs bring low profit.
4. Declining Stage: this is the stage where sales decline & profits also decline. The marketing objective
is to survive or withdraw their products from the market. Those who continue rapidly reduce their
prices & try to attract price sensitive buyers.
Characteristics:
a. Declining sales: new technology, change in customers’ preference, intense competition
b. Declining profits: profits decline & reach to zero or negative level.
c. Laggard customers: hard core loyal customers continue buying the products. Late comers(laggard)
also buy.
d. Declining competition: competitors withdraw attention from the market. They incur losses.
e. High price: the loyal customers are still willing to pay high price to support the organization.
New Product
Concept: In general sense, a new product is an innovative product developed & introduced for the
first time in market. However, in marketing, a new product has several meanings. It can be
original product, improved product, modified product or new brand. But it should be taken as new
by the customers.
Types of New Products
1. Innovative Products 2. Modified Products 3 . Imitating Products
1. Innovative Products: are unique or original products launched for the first time. Innovations
are costly, riskier and time consuming. Polarized glass, aneroid mobiles, medicines for cancer,
etc. are examples. Only 10% of new products are innovative and about 75% of innovative
products fail.
2. Modified Products: existing products are modified & improved in terms of quality, functions
& benefits. The objective is to capture market share. Customers believe them different from
existing products.
For example: introduction of Horlicks in paper package, change in look & features of Honda
Dio scooter, etc.
3. Imitating Products: are new to the organizations but old to the market. These products are
“copy products”& follow me too “strategy”. Some organizations find difficulty & risk to
bring innovative & modified products. They copy successful products under different brand
name to capture some market share. e.g. Podreg for Godreg, Noktel for Nokia, introduction of
“Chinese Style” ball pens by local firms& so on.
New Product Development Process
It is time consuming and painful process. In order to create successful new products, a
company must understand its consumers, markets, competitors & deliver superior value to
customers.
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Steps in New Product development Process are
1. Idea Generation: New product development starts with idea generation. A company
generates hundreds of ideas, in order to find few good ones. New ideas can be
collected through several sources such as consumers’ complaints, marketing
research, investors, competitors, inventors. Similarly, the company can also rely on
its sales representatives, middlemen, engineers, consultants and employees.
(Customers are the best source of ideas in 80% of companies in USA)
2. Idea Screening: is the method of picking out good ideas and leaving out poor ones.
The ideas are screened in terms of organization’s objectives, policies, resources &
technical capabilities. Marketers find out answers to questions like- Is it real?.., Can
we win?
3. Concept Development & Testing: Concept development is the selection of 4 to 5
ideas for consumers. Promising ideas are turned into product concept. Consumers
can easily react to product concept without seeing the physical product. For e.g.
noodles can have three product concepts:
a. breakfast in the morning
b. Tasty snacks for afternoon
c. Full meal for lunch or dinner
Concept testing is asking potential customers to evaluate description of product
concept. The interview technique is used to find out customer reaction on uniqueness
& clarity of concept, price value, need satisfying features, frequency of potential use.
4. Marketing Strategy & Business Analysis: During new product development
process, the firm has to develop primary marketing strategy for the successful
product concepts. It covers target market share, marketing budget & marketing mix.
Business analysis is done to evaluate the attractiveness of product concept. It
involves competitor analysis, demand forecast, cost statement & break even analysis
to estimate costs, and profit projections.
5. Product Development & Test Marketing: Research & development department
develops physical versions of the product. They are known as product prototypes.
Functional tests and field conditions are conducted to see the performance of
product. Product tests are mostly essential in consumer products like foods,
cosmetics, etc.
6. Test Marketing: Product is manufactured in a limited scale. It is given a brandname,
packaging and marketing programme. Trial, first repeat, adoption and purchase
frequency are monitored.
Trial: Number of consumers buying for the first time.
First repeat: ,, ,, ,, for the second time.
Adoption: ,, ,, ,, who continue using the product (adopters).
Purchase frequency: frequency of product purchased by adopters.
7. Commercialization: is the last step. It involves commercial launching of the product
in the target market. In this stage, the organization prepares full-scale production and
marketing programmes. It involves decisions relating to timing, place, market
segment & strategy for launching the product.
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