Product Level

Marketers must plan about the product on different levels, starting with “What is the buyer really buying” ? At the first level when on buying a product, it is only problem–solving core benefits that consumers seek. The product planner must build levels around the core product.

Philip Kotler attributed five levels to products raising the product benefits to match the satisfaction of the consumers. The products may have as many as five characteristics : a quality level, features, styling, a brand name and packaging.

Levels of Product

Core benefit

The fundamental need or want that satisfies the consumers when on buying a product or service. For E.g., the need to process digital images.

Generic product

A version of the product containing only some attributes or characteristics that are necessary for its functioning. For E.g., the need to process digital images could be a generic, low–end, personal computer using free image processing.

Expected product

The set of attributes or characteristics that buyers normally expect on purchasing a product. For E.g., the computer processor delivers fast image with high– resolution and accurate colour screen.

Augmented product

The inclusion of additional features, benefits, attributes or related services that serve to differentiate the product from its competitors. For E.g., the computer is loaded with high–end image processing software at no extra cost or incremental cost.

Potential product

In the next step, all the augmentations and transformations are studied that can be provided in the product in future. The customer needs to be surprised and delighted in future for retaining loyalty. For E.g., the customer receives image processing software upgrades with new features.

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Classification of Products

Goods or products are divided into two categories:

1. Consumer
   
   
2. Industrial products
   

Consumer Products

Products that are purchased by consumers or users to satisfy their personal needs are called consumer products.Consumer products, also known as consumer goods, are products purchased by individuals or households for personal use or consumption.

These products are the end result of the production and manufacturing process and are meant to satisfy the needs and wants of consumers.

E. gs. are – cold drinks, eatables, clothes, toothpaste etc. Consumer products can be distinguished on the basis of shopping efforts, and durability of product.

Products are further classified into categories

• Convenience Products
  
• Shopping Products
  
• Specialty Goods
  
• Unsought Goods

Convenience Products

These are goods purchased frequently, and with least time and efforts. Convenience in making a purchase is the main criterion. For E.g., availability of product and nearness of shop etc. These goods are regular and continuously in demand. They are essential for a consumer who buys in small units.

Branded and standardized products are sold easily with hardly any inquiry about quality and price due to customer’s habitual purchases. There is severe competition due to which many advertisements are given. There are sales promotions schemes, discount offers, gift offers, etc.

Types of Convenience Goods

Staples

For purchasing staple goods, consumers do not spend least time possible. These items are bought frequently for immediate consumption. E.g., milk, bread, grocery items.

Impulse Goods

These goods are picked by shopper on sudden desire, without planning. E.g., gift items, etc. Window displays are essential to draw the attention of consumers.

Emergency Goods

Some products are purchased on some urgent need. E.g. umbrella due to sudden rains, pain reliever for headache etc. Customers do not waste time on the price or quality of such products.

Shopping Products

Shopping goods are due diligence. The customers studies in detail about the product’s quality, price, suitability, competitive products, substitutes of product and the brands available in different stores. The goods are durable with high unit price.

There is a gap between decision to buy and actual buy requiring indulgence of sales person. Service and warranty work are often important considerations as well. E.g. – Ready made Garments, shoes etc.

Specialty Goods

When consumers extensively search and research for a product, it is a Specialty Good. These are products have high brand loyalty. E.g. – high–end audio system. These goods have high unit value and purchased infrequently.

Unsought Goods

These are products are purchased only when there are problems. E.g. emergency automobile tools, specialized medical treatment. Consumers generally are generally unaware of these products or their importance till they realize it.

Industrial Goods or Products

Industrial products are primarily goods used as inputs in producing other goods. E.g. – raw material, machines tools etc. The derived demand arises due demand of end products. E.g. demand for leather is derived from demand for shoes.

The demand is raised by technicians and advised by experts like engineers, production managers etc. The selling may happen through direct selling by manufacturers and many a times customized as per buyers’ specifications. The limited buyers are generally concentrated in specified geographical area.

Major Categories of industrial goods are :

• Raw–materials E.g., natural rubber, cotton, agricultural products, mines etc.
  
  
• Component parts and materials E.g., tyres and batteries for cars etc.
  
  
• Accessory items E.g., machine tools etc.
  
  
• Installations E.g., overhead cranes etc.
  
  
• Supplies E.g., fuel, coal, cleaning materials, lubricating oil, electric power etc.
  
  
• Business Services E.g., consultants, advertising agency etc.
  
  
• Semi–finished–goods, supplied by another industrial unit for further processing.
  
  
• Production Facilities & Equipment E.g., Buildings, Equipment, Furniture etc.
  
  
• Materials used in administration E.g., Stationery etc.

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Product Differentiation

The customers are offered many choices of products and services from various manufacturers in the market. It is therefore necessary to distinguish from the competition to remain in business and grow. The differentiation can be through pricing or product.

What is Product Differentiation?

Product differentiation is a marketing process of differentiating a product or service from others in the market, to make it more appealing to the target audience.

Marketers would involve defining unique position for the product or service in the market by explaining the unique benefits – its unique selling proposition (USP). It’s important to differentiate the product from competition not only for better market share but also for survival.

Importance of Product Differentiation

• Translates the product attributes into benefits.
  
• Answers the customers for – ‘What’s in for me ?’
  
• Gives the customers reasons to purchase and repurchase the brand.
  
• Increases the recall value of the product.
  
• Increases brand loyalty and builds brand equity.
  
• Attribute–based differentiation is important to defend higher price from competition.

Types of Product Differentiation

Horizontal differentiation

Distinctions in products that cannot be evaluated in terms of quality. E.g. : Mineral water brands.

Vertical differentiation

Distinctions in products that can be evaluated in terms of quality. E.g. Duracell batteries over others, believing it last longer.

Simple (or mixed) differentiation

Differentiation based on numerous characteristics. E.g. iPhone over an Android considering status symbol. Order on line on Amazon rather than visit store for conveyance.

Basis of Product Differentiation

Price

It is the most common determinant to attract target group to a brand. It separates the premium product from others products. E.g. High–priced ‘Forever 21’ products.

Features

Features like size, shape, ingredients, origin, etc. differentiate products in the same price spectrum. They also help the brand to back their high pricing.

Performance & Quality

A good quality product always stands apart from others. E.g. Duracell AAA batteries that lasts longer.

Reliability

Some products are famous to be more reliable than others.

Looks

Appearance play an important role especially in case of garments and other luxury products.

Channels of Distribution

Channels of distribution are also crucial. E.g. Tupperware has a selective distribution strategy.

Complexity

The level of complexity of usage of a product is important factor in differentiating products, especially in the technology industry.

Location

Manufacturer’s location – country of origin of the product and retailers’ location play an important role in differentiating a product from its competitors.

Marketing efforts

Marketing efforts gives good brand image. Other marketing efforts like sales promotion act as an add–on to differentiation strategy.

After–sale services

Good after sale services make the customers assurance in the brand.

Basis of Service differentiation

• Ordering ease : how easily the customer is able to place an order with the company for E.g. ICICI’s Home loan.
  
  
• Delivery how well the product or service is delivered to the customer for E.g. Pizza for Pizza Hut.
  
  Installation : the work done to make a product operational in its
  
  
• Planned location or E.g. Installing Compaq’s computers, LG’s air conditioners.
  
  
• Customer training : getting the employees of the customer trained in the use of vendor’s equipment for example training hospital staff before installing GE’s X–ray equipment.
  
  
• Repair : quality of repair service available to buyers of the company’s product for example LG’s home appliances, Samsung’s electronic items etc.

Product differentiation advantages

• Creates Value : Product differentiation gives a reason to the customers to choose the brand over others.
  
  
• Defends high price : It gives reasons the product is high priced.
  
  
• Non–price competition : It allows to compete in areas other than price.
  
  
• Brand loyalty : A successful brand loyalty is created.
  
  
• No close substitutes : A perception is created that there is no substitute available.

Product differentiation disadvantages

• Added pressure on the manufacturers : The manufacturer has to decide which attribute could possibly turn out to be the USP for that product.
  
  
• Can increase prices : The production and marketing costs can be transferred to the end–users.
  
  
• Increased Revenue Not Guaranteed : There is no guarantee that the USP will generate more revenue.
  

• Added pressure on the manufacturers : The manufacturer has to decide which attribute could possibly turn out to be the USP for that product.
  
  
• Can increase prices : The production and marketing costs can be transferred to the end–users.
  
  
• Increased Revenue Not Guaranteed :There is no guarantee that the USP will generate more revenue.

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Product Mix

The set of all products of a company needs to be related to each other to take advantage of the total offerings to the market, and branding of the company itself.

Product Hierarchy

We need to understand the product hierarchy which stretches from satisfying the basic need of the customer to higher levels.

Need Family

It is a core need that underlies the existence of a product family. These products satisfy a core need of an individual. E.g. Hunger.

Product Family

All the product classes that can satisfy a core need with reasonable effectiveness are included here. It comprises of varieties of product within this group, which compete with one another to satisfy the same need. E.g. snacks, thali system of eating out.

Product Class

It is a group of products within the product family of products recognized as having a certain functional coherence, similar characteristics. E.g. Fast Foods.

Product Line

It is a group of products within a product class which are closely related to each other since they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels, or fall within the given price ranges. A product line may consist of different brands, or a single–family brand, or individual brand that has been line extended. E.g. Food outlets.

Product Type

It is a group of items within a product line that encompasses one of several possible forms of the product. E.g. Burger, Pizzas.

Item (Product Variant)

It is a distinct unit within a brand or product line which is distinguishable by size, shape, price, appearance, or some other attribute. E.g. Burger King’s Jumbo Chicken burger.

The Product Mix

The product mix is a combination of products manufactured or sold by the same organisation. Mostly, firms offer an assortment of products to the markets instead of focusing on a single product to strengthen their presence in the market and increase profitability.

Smaller or medium firms usually offer products that are related to each other while bigger ones go for large scale diversified product range. For E.g. – Ayur Herbals, a comparatively smaller enterprise basically deals with cosmetics and beauty products while giants like ITC group have their presence in fields in Cigarettes, Food, Lifestyle, Personal Care, Stationary, Safety Matches and Agarbatties.

Multiple products also spread the risk as well as enables a firm to expand its customer base with various offerings.

Product Line

Product line is a group of products that are closely related because they satisfy a class of need, or used together, are sold to the same customer group, are marketed through the same types of outlets, or fall within given price ranges.

As the organisation can have a number of different types of products, it will have similar number of product lines. Thus, in Nestle, there are milk based products like Milkmaid, Food product line like Maggi, Chocolate product line like Kitkat and other such product lines. Thus, Nestle’s product mix will be a combination of the all the product lines within the company.

Product Item

It is a unit within the product line that is separate from others on basis of colour, size, price or other attributes. E.g., Vivel soap of ITC is a product unit distinguishable from other items in the product range.Product Item : It is a unit within the product line that is separate from others on basis of colour, size, price or other attributes. E.g., Vivel soap of ITC is a product unit distinguishable from other items in the product range.

Product Item – ITC (Vivel Soap)

Structure of Product Mix

The product mix has width, length, depth, and consistency.

Width

Width of the product mix means the number of different product lines found within the company. Thus, breadth is measured by the number of product lines carried. E.g., ITC Group has a number of subsidiaries producing wide range of products.

Width of ITC Group (partially shown below)

Depth

Depth of the product mix refers to the average number of items offered by the company within each product line. It is measured by assortment of sizes, colours, models, prices and quality offered within each product line. E.g., ITC offers a number of variants of Engage Deo.

Depth of Engage Deo of ITC

Consistency

The consistency of product mix points out how closely related the various product lines are in terms of consumer behaviour, production requirements, distribution channels or in some other way. E.g., General Electric have an overall consistency in that most products involve electricity in one way or the other.

According to Philip Kotler, all three dimensions of product mix have a market rationale. ‘By increasing the width’ of the product mix the company hopes to capitalise on its good reputation and skills in present markets. ‘By increasing the depth’ of its product mix, the company hopes to entice the patronage of buyers of widely differing tastes and needs. ‘

By increasing the consistency’ of its product mix, the company hopes to acquire an unparalleled reputation in a particular area of endeavor.

PRICING THE PRODUCT MIX

The strategy for setting a product’s price often has to be changed when the product is part of a product mix. The company looks for a set of prices that will maximize profits on the total product mix, instead of on the individual product. The various products in the mix have related demand and costs, but face different degrees of competition, pricing is difficult. Therefore, we have to examine the five major product mix pricing strategies (or situations).

Product Mix Pricing Strategy

In product line pricing, the firm must determine the price steps between various products in a product line based on cost differences between the products, competitors’ prices, and, most importantly, customer perceptions of the value of different features. E.g., for car brand Audi, pricing has to be seen in relation between the other models’ price.

Optional product pricing is the pricing of optional or accessory products along with a main product. E.g. GPS purchase with new Audi car.

Captive product pricing is when companies make a product that has to be used along with the main product. E.g., Razor blade cartridges and printer cartridges. Producers of the main products – razors and printers often price them low and set the supplies price high. Sometimes, consumers are trapped into buying expensive captive products could resent the brand later.

By Product pricing refers to setting a price for by–products to make the main product’s price more competitive. Often, these by– products would not have much value and getting rid of them is costly. E.g. By–product of petroleum and other chemicals.

Product bundle pricing is combining several products and offer the bundle at a reduced price. E.g., Fast food outlet offers a bundle consisting of a burger, fries and a soft drink at a reduced price. However, the combined price must be low enough to get consumers to buy the bundle instead of a single product.

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Co–Branding

Co–branding is the utilization of two or more brands so as to create a new product. This can be of the same company or from two distinct companies. There should be complete harmony between the brands. Co–branding is done to create larger customer base which combines the existing customer base of the brand pairs.

Co–branding can be defined as a partnership between the marketing activities of at least two or more different brands which are also independent providers of products and services. This type of marketing strategy can involve various types of marketing activities like advertisements or sponsorships. This association should be beneficial for all the brands involved when they are aligned rather than when those products are promoted individually.

Ingredient Co–branding

Ingredient co–branding makes use of a popular brand to serve as an important element in the production process of the other popular brand. The underlying constituent brand is a subordinate to that of the primary brand.

E.g., Dell computers utilize a co–branding strategy with Intel processors. This arrangement, the company can produce products of better quality and gain more access to distribution channels, implement superior promotional activities and earn more profits.

Composite co–branding

This type of brand strategy utilizes two renowned brand names in such a way that they collectively provide a distinctive product or service which could have been very difficult to produce individually.

E.g., Nike and Apple. Nike found that their customers (runners) like to listen to music when they exercise or want to track their progress. This led the company to form a partnership with Apple. Apple manufactured a chip that is fitted in the shoes for recording the progress of the user when it is activated on their iPhone or iPod.

This microchip display user statistics like time, distance and speed along with the number of calories burned.

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Packaging, Warranties, Labelling, and Guarantees

Many marketers call packaging as the fifth P, along with price, product, place, and promotion. However, packaging and labeling can be considered as elements of product strategy. Warranties and guarantees can also be an important part of the product strategy.

Packaging

Packaging includes all the activities of designing and producing the container for a product. Packages might have up to three layers : a primary package inside a secondary package, with another packaged units sent in a shipping package.

Packaging is important because it is the buyer’s first encounter with the product. A good package draws the consumer in and encourages product choice.

The objectives of Packaging must achieve a number of objectives :

• identity of the brand,
  
• convey descriptive and persuasive information,
  
• facilitate product transportation and protection,
  
• assist at–home storage, and
  
• aid at–home consumption.

Functionally, structural design is crucial.

Aesthetic considerations relate to a package’s size and shape, material, color, text, and graphics. The packaging elements must blend with each other and with pricing, advertising, and other parts of the marketing program. Packaging updates and redesigns can keep the brand contemporary, relevant, or practical, but not confusing.

Companies must also consider environmental and safety concerns about excess and wasteful packaging.Functionally, structural design is crucial. Aesthetic considerations relate to a package’s size and shape, material, color, text, and graphics. The packaging elements must blend with each other and with pricing, advertising, and other parts of the marketing program.

Packaging updates and redesigns can keep the brand contemporary, relevant, or practical, but not confusing. Companies must also consider environmental and safety concerns about excess and wasteful packaging.

Factors that contribute to the growing use of packaging as a marketing tool :

Self–service

Numerous products are sold from self–serve supermarkets. As the purchases are made effective package must perform the task of sales, describing the features of the product, attract attention, and create favorable confidence in the consumers.

Consumer Affluence

Consumers are willing to pay a slightly higher price for the convenience, appearance, dependability, and prestige of better packages.

Warranty

Need for Product Warranty

Many products come with elaborate mechanism which is complicated making it difficult for an average consumer to grasp it totally. The Sale of Goods Act has given legal protection in the form of implied conditions and warranties. A warranty is an obligation of the producer and seller to stand behind the product and assure the buyer that he will derive certain services and satisfactions from the product.

The product warranty must be clear, unambiguous and meaningful. It has become an important selling point and a means of product differentiation in a competitive market. Warranties are also considered as promotional devices. Full disclosure of warranty information will ensure the consumer’s “right to know.”

Labelling

Packaging, Branding and Labelling go together and constitute an integral part of product. The purpose of labelling, like the purpose of branding, is to give the consumer information about the product he is buying and what it will and will not do for him.

A label is also a part of a package or it may be attached directly to the product. Label is anything may be a piece of paper, printed statement, imprinted metal, leather which is either a part of a package or attached to it indicating contents, price names of product and produces and such useful information beneficial to the consumer.

They give helpful information on the Brand name, name and address of producer, weight, measure, count, ingredients by percentages where possible, directions for the proper use of the product, cautionary measures concerning the product and its use, special care of the product, if necessary, date of packing and date of expiry, retail price, and unit price for comparison.

Guarantee

Guarantee is a step ahead of warranty wherein the company is so confident of their product, that they offer repair or replacement of the product. In short, if there is any problem in the product, the company will first try to repair the product and then if not repaired, it will offer free replacement.

Companies like Cross pens or Mont Blanc have lifetime guarantee of their products. They offer free replacement to the end customer if a problem is not resolved.

These companies have to factor in profit for the replacements. The difference between Warranty and Guarantee stands as differences in legal propositions. While a customer can claim repair of the product for free, he cannot claim the replacement of the product because the company is not legally obligated for a guarantee / replacement.

However, most companies know that it is cheaper to replace a product rather than getting into legal hassles and avoiding word of mouth negative publicity.

Thus, many companies do provide free replacements if the customer is very unhappy with the product or if there is an escalation. At all times, warranties and guarantees have been established to raise the trust level of customers and to provide them with assurance.

At the same time, if the customer is misusing the product and not following the terms set by the company, the warranty and guarantee can be termed void.

Overall, above were the key differences between warranty and guarantee. It is important to read the documentation accompanying the warranty or guarantee to understand what is covered under warranty and what is covered in guarantee.

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Brand Equity

A customer will have preference of a particular brand over another product from a different brand basis its brand equity.

A strong brand equity or positive brand equity in the market will have

• Brand awareness (customer’s ability to identify),
  
• Brand recognition (consumers correctly identify brand based on visual indicators),
  
• Brand preference (choose a company’s product when others, equally priced are available), and
  
• Brand loyalty (consumers continuously purchase one brand’s products over another).

This will have an upper edge in the market relative to other brands which will result in high revenues and high market share. A positive brand equity helps an organisation in many ways like financial benefits, easy prediction of revenue, ease on entering new markets, introduce new products, etc.

The customers loyal to a brand mostly overlook the shortcomings in the long term for a product from that brand Similarly, a brand with high and strong equity saves costs as there is less need to promote the product.

Mostly communication on product availability and its features in the target market does the job of making a product successful with strong brand equity. Brand equity is an intangible asset of great value to the company which is generally an approximate value.

Brand Equity can be viewed from different perspectives :

• Organisations level – the premium that an organisation can demand from the customer basis its brand value.
  
  
• Product level – the flexibility with which a product line or product mix can be extended basis the brand value. It is easier for an organisation to introduce new products under the same brand.
  
  
• Consumer level – the attributes, awareness of brand image in the minds of customers. Brands with high awareness, loyalty, and strong and favourable associations are considered as high equity brands.
  

Factors considered for selecting and combining brand elements

Brand awareness improves when brand names are selected basis of :

• Brand name should be easy to pronounce, spell, and remember.
• Brand name should be strongly unique, interesting, and fun.
• Brand name should suggest something about the product benefits
• Brand name should be transferable to a variety of products or product lines.
• It could be used across geographical locations.

2. Logos and Symbols – Logos help recognition by means of symbols.

• Logos indicate origin and ownership of a product. They can be corporate names or trademarks written in distinctive forms, pictures, mascots, designs, plain alphabets or even splash of colours.
  
• Characters – Companies sometimes use characters as brand symbols. They help in brand awareness as they are unique and attractive.
  
• Slogans – Slogans are short phrases that communicate information about the brand.
  
• Packaging – Good packaging which aims at avoiding damage of the product can act as a good advertisement place.
  
  All the above brand elements contribute to brand identity which helps in creating favourable impression for customers during shopping.

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Branding Strategy

Branding involves cost as well as risk of losing reputation if it fails to click in the target market. Marketers need to assess various options and make strategy when branding a product.

Key Decisions for Brand Strategy

Brand Sponsor decisions

Whether to launch the product as:

• Manufacturer brand – It involves building brand identity by applying the company’s / manufacturer’s brand to products.
  
• Distributor’s brand or Private brand – It involves a channel member using its brand name or image on the product.
  
• Licensed brand – It involves manufacturers paying royalties to obtain licenses for using successful brand names.

Brand Name decisions

There are different brand name strategies:

• Individual brand names – It involves giving separate brand names for each product. It is used to better position products in individual target markets when the product mix is fairly large. The main advantage is that even if the product fails it doesn’t have a negative effect on company’s image.
  
  
• Family brand name – It involves establishing brand for individual product lines. This strategy is used by manufacturers when the brand equity is high for their products. As there is no need to research on brand name, promotion efforts and costs related to it are minimised.
  
  
• Separate family name – A separate family name is chosen for each product family. When the organisation is into different businesses it is better to use different brand names.
  
  
• Corporate name along with individual product names – it involves combining the company’s trade name with their different products.

Brand strategy decisions

A company considers the below choices when it comes to brand strategy

• Line Extension – It involves introducing additional items in the same product category under the same brand name such as new flavours, added ingredients, package sizes.
  
• Brand extension – It involves a company deciding to use an existing brand to launch a new product in a new category.
  
• Multi brands – It involves introduction of additional brands in the same product category. For E.g., HUL soaps, P&G detergents. Here a failure of one brand does not affect the company’s image. The firm through this strategy targets different buying motives of customers.
  
• New brands – when an organisation manufactures a product in a new category it is sometimes difficult to use it existing brand name. For E.g., it is unlikely for Apple to introduce bathing soaps with its brand name if it considers to get into manufacturing of soaps.
  
• 190 Co–brands – also known as dual branding, this concept is gaining momentum in modern times. For E.g., mobile buyers may insist on buying mobile phones with snapdragon processors. So many mobile manufacturers do advertise their offerings being built with snapdragon processor. The organisation believes that the brand sponsor will strengthen its image in the target market.

Brand Repositioning Decisions

Under influence of competition and changing consumer preferences, an organisation faces a challenge to reposition its brand. A competitor may launch a product similar to the organisations brand. This will eat into the organisations market share. The company considers following two factors when repositioning its brand :

• Cost involved in repositioning the brand in the market segment.
  
• Sales and profits that the brand will earn basis the number of buyers, competitors and price range of other brands in that segment.

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FAQ