Product - Meaning, Features, Attributes, Product Mix, Product Life Cycle, New Product Planning and Development, Pricing Policies and Strategies

Meaning of Product

In marketing, a 'product' is much more than just a physical object. It is anything that can be offered to a market to satisfy a want or need. This includes physical goods, services, ideas, experiences, persons, places, organizations, or even a combination of these. The core idea is that a product is a bundle of benefits, both tangible and intangible, that a customer receives in exchange for money or some other form of value.

For example, when you buy a car, you are not just buying metal, plastic, and rubber. You are buying transportation, status, comfort, safety, and perhaps even the joy of driving. Similarly, a restaurant meal is not just food; it's an experience, convenience, and social interaction.

Features of a Product

Features are the specific characteristics or qualities of a product that describe its capabilities and performance. They are the tangible aspects that differentiate one product from another and provide functional benefits to the consumer. Features can be categorized as follows:

• Quality Features: These relate to the durability, reliability, performance, and consistency of the product. For instance, a smartphone's processor speed or a fabric's thread count.
• Design Features: These concern the aesthetics, style, and ergonomics of the product. A car's sleek design or a piece of furniture's elegant appearance are examples.
• Performance Features: These describe how well the product performs its intended function. A laptop's battery life or a washing machine's washing capacity are performance features.
• Technical Features: These are often related to the technology embedded in the product, such as a camera's megapixels or a TV's screen resolution.
• Convenience Features: These make the product easier to use or access. A remote control for a TV or a self-cleaning function in an oven are convenience features.

Attributes of a Product

Attributes are the broader characteristics of a product that contribute to its overall perceived value and appeal. While features are specific and often measurable, attributes are more encompassing and relate to the customer's perception and experience.

Key product attributes include:

• Brand Name: The name, term, sign, symbol, or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. A strong brand name can be a significant attribute, conveying trust and quality.
• Packaging: The container or wrapping of a product. Packaging serves protective, promotional, and functional purposes. Attractive and informative packaging can significantly influence purchase decisions.
• Warranty: A promise made by the seller to the buyer about the product's quality and performance. A good warranty can increase customer confidence.
• After-sales Service: Support provided to customers after the purchase, such as installation, repair, and maintenance. Excellent after-sales service can build customer loyalty.
• User Manual: Instructions on how to use and care for the product, contributing to a positive user experience.

Think of a smartphone: its features might be a 12MP camera and a 5-inch screen. Its attributes would include the brand name (e.g., Apple, Samsung), the sleek design of the casing, the intuitive user interface, the warranty offered, and the availability of customer support.

Product Mix (Product Portfolio)

A company's product mix, also known as its product portfolio, refers to the complete set of all products and items that a particular seller offers for sale. A product mix has four important dimensions:

1. Width: The number of different product lines the company carries. For example, a company that sells electronics, home appliances, and clothing has a width of three product lines.
2. Length: The total number of items within all the company's product lines. If the electronics line has 10 items, home appliances has 8, and clothing has 12, the total length is 30.
3. Depth: The number of versions offered for each product in a product line. For example, if a company offers a particular brand of soap in three sizes, two scents, and two packaging types, the depth for that product is 3 x 2 x 2 = 12.
4. Consistency: How closely related the various product lines are in end use, production requirements, distribution channels, or in some other way. A company with high consistency would offer products that are very similar, like multiple types of cleaning supplies.

Companies manage their product mixes by making decisions about adding or deleting products from their lines, adjusting the depth of lines, or changing the width of their mix.

Product Life Cycle (PLC)

The Product Life Cycle (PLC) is a concept that describes the stages a product goes through from its introduction into the market until its eventual withdrawal. Understanding the PLC helps marketers develop appropriate strategies for each stage. The typical stages are:

Stage 1: Introduction

This stage begins when a new product is first launched into the market.

• Sales: Low and slow.
• Profits: Negative or very low due to high development and marketing costs.
• Customers: Innovators and early adopters who are willing to try new things.
• Competition: Little to none.
• Marketing Objective: Create product awareness and trial.
• Strategies: Focus on basic product features, build selective distribution, and use heavy promotion to build awareness among early adopters and dealers. Pricing might be high (skimming) to recover costs or low (penetration) to gain market share quickly.

Stage 2: Growth

If the product gains acceptance, it enters the growth stage.

• Sales: Rapidly increasing.
• Profits: Start to rise significantly as production costs decrease and sales volume increases.
• Customers: Early majority begins to adopt the product.
• Competition: Starts to increase as competitors enter the market.
• Marketing Objective: Maximize market share.
• Strategies: Improve product quality, add new features and services, expand distribution channels, shift promotion from building awareness to building brand preference, and potentially adjust pricing as competition intensifies.

Stage 3: Maturity

This is the longest stage, where sales growth slows down and eventually levels off.

• Sales: Peak and then start to plateau.
• Profits: High but may start to decline due to increased competition and marketing expenditures to defend market share.
• Customers: Majority of consumers adopt the product.
• Competition: Intense. Many competitors are in the market, leading to price wars and increased promotional spending.
• Marketing Objective: Maximize profit while defending market share.
• Strategies: Differentiate the product and brand, diversify brands and models, maintain or reduce prices, emphasize brand differences and benefits in advertising, increase sales promotion, and intensify distribution. Companies might also look for ways to modify the market (e.g., finding new users) or the product (e.g., improving features).

Stage 4: Decline

In this final stage, sales and profits consistently fall.

• Sales: Declining.
• Profits: Declining, potentially becoming losses.
• Customers: Laggards and loyal customers remain.
• Competition: Decreases as weaker competitors exit the market.
• Marketing Objective: Reduce expenditure and milk the brand, or harvest/divest.
• Strategies: Phase out weak products, cut prices, reduce promotion, selective distribution (phase out unprofitable outlets), and eventually discontinue the product.

New Product Planning and Development

Developing new products is crucial for a company's long-term survival and growth. It's a systematic process involving several stages:

1. Idea Generation: This is the first and most critical step. Ideas can come from various sources:
   • Internal Sources: R&D departments, employees, sales force, management.
   • External Sources: Customers (feedback, complaints, suggestions), competitors (studying their products), suppliers, distributors, trade shows, and even academic research.
2. Idea Screening: The goal here is to filter out poor ideas and focus on those with the most potential. Companies evaluate ideas based on factors like:
   • Does the product fit the company's objectives and resources?
   • Is there a real market need?
   • Is the market size sufficient?
   • Can we develop and market it profitably?
   • What is the competitive landscape?
3. Concept Development and Testing: Promising ideas are developed into detailed product concepts. A product concept is a detailed version of the new product idea stated in meaningful consumer terms.
   • Concept Development: Creating different versions of the concept to appeal to different market segments.
   • Concept Testing: Presenting the product concept to target consumers, either physically or descriptively, to gauge their reactions and determine purchase intention.
4. Marketing Strategy Development: Once a concept is validated, a preliminary marketing strategy is formulated. This involves:
   • Describing the target market.
   • Outlining the product's positioning.
   • Defining the marketing mix: product features, pricing, distribution, and promotion budget.
5. Business Analysis: This stage involves a detailed review of the sales, costs, and profit projections for the new product to determine if it meets the company's objectives. It includes forecasting demand, estimating costs, and analyzing break-even points.
6. Product Development: The concept is now turned into a physical product. This involves R&D and engineering to create a prototype that can be tested. This stage is often the most expensive and time-consuming.
7. Test Marketing: The new product and its proposed marketing program are introduced into realistic market settings. This allows the company to gather real-world data on how consumers and distributors react before a full-scale launch. It helps refine the marketing plan and identify potential problems.
8. Commercialization: This is the final stage, involving the full-scale launch of the new product into the market. It requires significant investment in production, marketing, and distribution. Decisions include timing of the launch, geographic rollout, target markets, and the marketing plan.

Pricing Policies and Strategies

Pricing is a critical element of the marketing mix, directly impacting revenue and profitability. It reflects the value customers perceive in a product. Companies adopt various policies and strategies to set prices.

Factors Influencing Pricing Decisions:

Before choosing a strategy, marketers consider:

• Cost: Fixed and variable costs associated with producing and marketing the product.
• Customer Perceived Value: What customers are willing to pay based on the benefits they receive.
• Competition: Prices charged by competitors for similar products.
• Economic Conditions: Inflation, recession, and market demand.
• Government Regulations: Price controls or taxes.
• Marketing Objectives: Survival, profit maximization, market share leadership, etc.

Common Pricing Policies and Strategies:

1. Cost-Plus Pricing (Markup Pricing): Adding a standard markup to the cost of the product.
   • Formula: Price = Cost + Markup
   • Pros: Simple, ensures costs are covered and profit is made if sales volume is as expected.
   • Cons: Ignores customer demand and competitor prices, may lead to overpricing or underpricing.
2. Break-Even Pricing (Target Profit Pricing): Setting the price to break even on the costs of making and marketing a product or to make a target profit.
   • Concept: Focuses on covering costs and achieving a specific profit level.
   • Pros: Ensures profitability if sales targets are met.
   • Cons: Ignores price elasticity of demand and competitor pricing.
3. Value-Based Pricing: Setting the price based on the customers' perception of the product's value rather than on the seller's cost.
   • Example: Luxury brands often use this, pricing based on the prestige and exclusivity they offer.
   • Pros: Captures more of the customer's willingness to pay, aligns price with perceived benefits.
   • Cons: Requires a deep understanding of customer psychology and market research.
4. Competition-Based Pricing: Setting prices based on competitors' prices, strategies, costs, and market offerings.
   • Go-to-Market Pricing: Pricing at the same level as competitors.
   • Above-Market Pricing: Pricing higher than competitors, often signifying higher quality or brand prestige.
   • Below-Market Pricing: Pricing lower than competitors, often to gain market share or appeal to price-sensitive customers.
   • Pros: Simple, reflects market realities.
   • Cons: Can lead to price wars, may not reflect the company's own costs or value proposition.
5. Skimming Pricing: Setting a high initial price for a new product to "skim" maximum revenue layer by layer from segments willing to pay the high price. The company makes fewer, but more profitable, sales.
   • When to Use: When the product has unique features, high demand, inelastic demand, and is protected by patents or significant barriers to entry.
   • Pros: High initial profits, helps recover R&D costs quickly, creates a premium image.
   • Cons: Attracts competitors, may alienate price-sensitive customers.
6. Penetration Pricing: Setting a low initial price for a new product to attract a large number of buyers quickly and win a large market share.
   • When to Use: When the market is highly price-sensitive, production/distribution costs fall with scale, and low prices deter competitors.
   • Pros: Rapid market acceptance, discourages competition, can lead to economies of scale.
   • Cons: Lower initial profits, may create a low-quality image, difficult to raise prices later.
7. Promotional Pricing: Temporarily pricing products below list price and sometimes even below cost to increase short-run sales. This includes discounts, special-event pricing, loss leaders, and cash rebates.
8. Geographical Pricing: Setting prices for customers in different geographical locations, considering transportation costs and market differences (e.g., FOB-Origin, Uniform Delivered, Zone Pricing).
9. Psychological Pricing: Pricing that considers the psychology of prices and not just the economics. For example, pricing a product at $9.99 instead of $10.00 ($9.99 is perceived as significantly cheaper).