PBM : Unit-1

“Product management is an organizational function that guides every step of a

product’s lifecycle — from development to positioning and pricing — by focusing on
the product and its customers first and foremost. To build the best possible product,
product managers advocate for customers within the organization and make sure the
voice of the market is heard and heeded.”

Thanks to this focus on the customer, product teams routinely ship better-designed
and higher-performing products. In tech, where entrenched products are quickly
uprooted by newer and better solutions, there is more need than ever for an intimate
understanding of customers and the ability to create tailored solutions for them.
That’s where product management comes in.

“Product management is a company's organizational function that handles a

product's life cycle. This includes the development of new products as well as
the planning, production, pricing, marketing and final product launch. Product
managers aim to develop a product that is better or different from the
company's current offerings, which ensures the new product is valuable to its
target audience.”

What are the 5 Product Levels?

The five product levels are;

1. Core Benefit.
2. Generic Product or Basic Product.
3. Expected Level.
4. Augmented Product.
5. Potential Product.
Let’s example each level of a product;

1. Core Benefit

The first and the basic level is the core product/benefit the
customers look at. It is the basic good or service purchased, aside
from its packaging or accompanying services. We buy a product first
because of its core or fundamental benefit – the problem it solves or
the need it satisfies.
From a bar soap, for example, the core benefit we look at is: it
cleans our skin. While the purchaser of a cosmetic item buys beauty,
the purchaser of a lottery ticket buys hope, and so on. A core
product’s benefits range from tangible to intangible.

2. Generic Product or Basic Product

The benefits that customers look at must be turned into a basic

product by the marketer. A calculator, for example, includes plastic,
metal, electronic circuits, and a liquid display crystal.

The most fundamental level is the basic product, which seeks an

answer to the question: What is the buyer really buying? The basic
product forms the nucleus of the total product. It constitutes the
problem-solving features or basic benefits that consumers seek
when they acquire a product.

A person buying a car acquires mobility, which enables him to move

from one place to another. Theodore Levitt has pointed out that
buyers “do not buy quarter-inch drills; they buy quarter-inch holes.”

3. Expected Product

The next level is the expected level. It includes a set of attributes

and conditions that the buyer expects which marketer should
provide for purchase to take place. In the case of a calculator, the
buyers expect it to be handy, easy to operate, and so on.

4. Augmented Product

The Fourth Level of a Product is the Augmented Level or the

augmented product. The augmented product is what the customer
is really buying. It is a good, service, or an idea enhanced by its
accompanying benefits.

It is a combination of what the seller intends, and the buyer

perceives. An augmented product gives customers more than they
expect. People do not buy products; they buy the expectations of
benefits. The marketing view demands the active recognition of this
and acts accordingly.

Modern-day marketers compete with each other through the

augmented product. A marketer deciding to augment his product
should be well aware of the total consumption system of buyers.

Understanding the total consumption system means identifying the

tasks customers perform through the use of the product. Identifying
this will give him leads on which he can augment his product.

In formulating the product augmentation policy, the marketer

should take note of a number of things. Since augmentation
requires the company substantial costs, it should know whether
customers will be willing to take this load.

After getting the augmented benefits for sometimes, customers start

thinking those as rights, i.e., they consider those benefits as
expected, not augmented. The company should, therefore, look for
additional benefits to offer.

The company should also note that soon after it offers augmented
products at a premium price, some competitors may start offering
the basic or expected product at a much lower price.

This will obviously pull a significant number of customers, thus

causing the firm a fall in sales. The company should therefore
remain ever alert so that augmentation yields the desired result.

5. Potential Product

The last level of a product is the potential product. It encompasses

all the augmentations and transformations that the product might
ultimately undergo in the future’.
Augmentation, you know, is concerned with what the product
includes in the present term, where the potential product is
concerned with what may be added to the product in the future to
make it more desirable. The potential product is aimed at not only
satisfying the customers but present the product that delights and
surprises the customers.

Classification of Products in Marketing

Product classification is a marketing and commercial phrase that divides products
into categories depending on how and why customers buy them. The organizing of
the various sorts of products that consumers purchase is referred to as product
classification.
Consumer goods and industrial goods are the two types of products. These can be
further divided into the following categories –

Consumer Products
Consumer goods are made for the final consumer's personal use.

Convenience Products
Convenience Products are typically low-cost, readily available items that customers
purchase on a regular basis without prior preparation or research, and with minimal
comparison and purchasing effort. Customers can obtain such products through a
wide range of distribution channels, including all retail shops.
Fast moving consumer goods (FMCG) such as soap, toothpaste, detergents, and food
items such as rice, wheat flour, salt, sugar, milk, and so on fall into this category.

Informed or Shopping goods

Shopping items and services are more expensive (in comparison to convenience
products) and are less commonly purchased consumer goods and services. When
purchasing such products or services, the consumer devotes a significant amount of
time and effort to acquiring information about the product before making a purchase
based on price, quality, features, style, and suitability.
These products are only available through a few exclusive distribution outlets.
Televisions, air conditioners, automobiles, furniture, hotel and airline services, and
tourism services are all examples.

Specialty goods
Customers are convinced that this product is superior to all other competing brands
in terms of features and quality, and thus are willing to pay a high price for it.
Specialty Products are high-priced branded products and services with unique
features, and customers are convinced that this product is superior to all other
competing brands in terms of features and quality, and thus are willing to pay a high
price for it.
These items are rarely acquired, perhaps once or twice in a lifetime, and are supplied
through one or a few limited distribution venues. Specialty products are not
compared by purchasers.

Mandatory or Unsought goods

Consumers that buy mandatory purchases, often known as unsought goods, do so
out of necessity rather than want. Typically, these are items like batteries, smoke
detectors, air filters, and cleaning supplies that buyers aren't very enthusiastic to
acquire. When advertising these things, marketing teams can concentrate on
reminding customers of their need for them and establishing brand familiarity,
allowing them to buy a specific brand without hesitation.
A marketing team might, for example, promote a flashlight by showing someone
utilizing one during a power outage.

Industrial or Business Products

Industrial goods are basically made for industrial purposes.
Materials and Parts
Agricultural products, crude petroleum, and iron ore are examples of raw materials;
produced materials include iron, yarn, cement, and wires; and component parts
include small motors, tyres, and castings.
Capital Items
Capital items include installations such as factories and offices, fixed equipment such
as generators, computer systems, and elevators, and auxiliary equipment such as
tools and office equipment.
Supplies
Lubricants, coal, paper, pencils, and repair supplies such as paint, nails, and brooms
are among the supplies available.
Business Services
Maintenance and repair services, such as computer repair, legal services, consulting
services, and advertising services, are all examples of services.

Reasons for Classification of Products

Professionals divide products into categories for a variety of reasons. Product
classifications can influence a variety of decisions during a product's life cycle,
including how corporations promote it, its pricing, the sort of consumer who buys it,
and how high demand is for it.
Other reasons why professionals classify products include the following reasons −

Marketing Strategies
As previously stated, the strategies used by marketing teams to promote a product
are typically determined by its classification type. The focus of a campaign and the
marketing budget can both be affected by product classification.
For example, a corporation is less likely to invest money on organizing a focus group
to test its product while selling a speciality item. They may instead devote their
resources to brand management.

Product Pricing
The classification a product receives can have an impact on how merchants and
distributors price it. Because consumers value the availability and necessity of
convenience items and necessary purchases, they are generally less expensive than
specialty items or informed purchases.
Convenience and necessary items are also more regular in nature, and include lower-
cost things like meals. Because consumers have a lesser level of brand loyalty for
products in these categories, it's even more crucial for companies selling
convenience and necessary purchases to assign a lower price to these things in order
to compete with other brands.
Product Demand
The demand for a product is frequently affected by its classification. In general,
customers choose to buy obligatory and convenience items over speciality and
informed purchases. This has an impact on how corporations make these products
and how marketing teams promote them.
Companies selling specialist and informed buy products may need to devote more
time and money to marketing their products since consumers may require more
inducement to make purchases that they need less frequently.

Invention
A corporation may consider product classes when determining which products to
develop. Because marketing efforts for each sort of product differ, a corporation may
choose to specialize in one type of advertisement, limiting the types of items they
can produce.
The demand for a product, which influences how specialists form product categories,
can also have an impact on a company's decision to develop a product

What is Product Mix?

Product mix, also known as product assortment or product portfolio, refers to
the complete set of products and/or services offered by a firm. A product mix
consists of product lines, which are associated items that consumers tend to use
together or think of as similar products or services.

“Product Mix, another name as Product Assortment, refers to several

products that a company offers to its customers. For example, a company
might sell multiple lines of products, with the product lines being fairly
similar, such as toothpaste, toothbrush, or mouthwash, and also other such
toiletries. All these are under the same brand umbrella. Whereas, a
company may have varied and distinct other product lines that may be in
good contrast to each other, such as medicines and clothing apparel. “

“Product mix can also be understood as the complete set of products and
services that are offered by a firm. A product mix consists of the product
lines, which are associated items that a consumer purchases.”
Dimensions of a Product Mix
#1 Width

Width, also known as breadth, refers to the number of product lines

offered by a company. For example, Kellogg’s product lines consist of:
(1) Ready-to-eat cereal, (2) Pastries and breakfast snacks, (3) Crackers
and cookies, and (4) Frozen/Organic/Natural goods.

#2 Length

Length refers to the total number of products in a firm’s product mix.

For example, consider a car company with two car product lines (3-
series and 5-series). Within each product line series are three types of
cars. In this example, the product length of the company would be six.

#3 Depth

Depth refers to the number of variations within a product line. For

example, continuing with the car company example above, a 3-series
product line may offer several variations such as coupe, sedan, truck,
and convertible. In such a case, the depth of the 3-series product line
would be four.

#4 Consistency

Consistency refers to how closely related product lines are to each

other. It is in reference to their use, production, and distribution
channels. The consistency of a product mix is advantageous for firms
attempting to position themselves as a niche producer or distributor. In
addition, consistency aids with ensuring a firm’s brand image is
synonymous with the product or service itself.

Illustration of a Product Mix

In the illustration above, the product mix shows a:

• Width of 3
• Length of 5
• Product Line 1 Depth of 2
• Product Line 2 Depth of 1
• Product Line 3 Depth of 2

The mix is considered consistent if the products in all the product lines
are similar.
Example of a Product Mix

Let us take a look at a simple product mix example of Coca-Cola. For

simplicity, assume that Coca-Cola oversees two product lines – soft
drinks and juice (Minute Maid). Products classified as soft drinks are
Coca-Cola, Fanta, Sprite, Diet Coke, Coke Zero, and products classified
as Minute Maid juice are Guava, Orange, Mango, and Mixed Fruit.

The product (mix) consistency of Coca-Cola would be high, as all

products within the product line fall under beverage. In addition,
production and distribution channels remain similar for each product.
The product mix of Coca-Cola in the simplified example would be
illustrated as follows:
Importance of a Product Mix

The product mix of a firm is crucial to understand as it exerts a

profound impact on a firm’s brand image. Maintaining high product
width and depth diversifies a firm’s product risk and reduces
dependence on one product or product line. With that being said,
unnecessary or non-value-adding product width diversification can hurt
a brand’s image. For example, if Apple were to expand its product line
to include refrigerators, it would likely have a negative impact on its
brand image with consumers.

In regard to a firm expanding its product mix:

• Expanding the width can provide a company with the ability to

satisfy the needs or demands of different consumers and
diversify risk.
• Expanding the depth can provide the ability to readdress and
better fulfill current consumers.
•
Summary

Successfully expanding a product mix can help a business adjust to changing

consumer demand/preferences while reducing product risk and reliance on a
single product or product line. This, in turn, generates substantial profits for the
firm. On the other hand, poor product mix expansion can result in a detrimental
impact on a company’s brand image and profitability.

Importance of a Product Mix

The product mix of a firm is important to understand as it has a profound
impact on the firm’s brand image. The following are the important points
for the firm to expand its product mix:

• Expanding the product mix width can provide the company with the
ability to satisfy the needs or demands of the different consumers
and thus, diversify risk.

• Expanding the product mix depth can help the company to cater to
the current customers in a better and fulfilling way.
Factors affecting Product Mix
The product mix can be expanded, contracted, or modified depending on
the following factors:

1. Profitability-
Every company has an aim of maximizing its profits and for this, they
try to make certain changes in the product mix such that it has a
positive impact on the company’s profitability. The company prefers
introducing more product lines or product items to its existing
product lines to improve profitability. In the meantime, the product
mix is constantly adjusted to realize more profits.

2. Objectives and Policy of Company:

The company formaulates its product mix to attain the objectives it
has set. Therefore, the addition, subtraction, or replacement of the
product lines or the product items are based on the company’s target.
Hence, the product mix is prepared and modified according to a
company’s policy.

3. Production Capacity-
The decisions regarding the marketing mix, depend on the capacity
of the plant or production of the company to a large extent. The
company designs its product mix in a way that hails optimum
production capacity.

4. Demand-
Mostly the Product mix decisions are taken concerning demand. A
Marketer should study consumer behavior to find the popularity of
their products. The Change in the preferences of the consumers’
especially for fashion, interests, habits, etc., must be reflected in the
product mix of the company. The company, naturally, prioritizes the
products which have more demand. In case of falling demand, a
company must drop poor products gradually. Thus, the product mix
is adjusted to meet consumer needs and wants over time.
5. Production Costs-
The product mix is widened or narrowed depending upon the
production costs of the respective items. The company will prefer
those products, which can be produced within the budgeted limit. At
times, the manufacturing costs for existing products rise, then the
company decides to drop such products to reduce their production
costs. It also tries to balance selling price, profit margin, and
production costs.

6. Government Rules and Restriction-

Companies generally produce products that are not restricted or
banned by the governments. At times, a company has to stop certain
products or varieties when they are declared illegal. In the same way,
social and religious protests also play a vital role in this regard. The
size and composition of the product mix is directly affected by the
contemporary legal framework.

7. Demand Fluctuation-
Apart from the behavior of the consumer, demand also fluctuates
due to other reasons as well. Demand is affected more due to
seasonal effects, non-availability of substitutes, increase in
population, war, situations of drought, flood, or any other reason. To
meet the changing demand for certain products, the company has to
adjust its product mix.

8. Competition-
It is one of the major factors affecting the product mix. All
the companies try to formulate their product mix in a way that the
competitions can be strongly responded to. The product mix strategy
adopted by the close competitors has a direct significant impact on
the company’s product mix.

9. Impact of Other Elements of Marketing Mix-

Other elements of the marketing mix such as price, promotion, and
distribution are also equally important in designing the product mix.
The company tries to maintain consistency among these all elements
to carry out marketing activities effectively and efficiently.
10. Overall Business Condition or Condition of Economy-
Economic conditions domestically as well as globally are also
considered. Due to the process of liberalization and globalization, no
business can dare to underestimate the macro picture of the world
economy. Therefore, a company must keep in mind the condition of
the domestic economy concerning the world economy and is more
relevant for a company that is involved in international trade.

What is a Product Line?

A product line refers to an array of related products under the same
brand. In other words, a product line is a collection of similar products
that are sold to customers.

A product line is a group of related products all marketed under a single

brand name that is sold by the same company. Companies sell multiple
product lines under their various brand names, seeking to distinguish them
from each other for better usability for consumers.

Companies often expand their offerings by adding to existing product lines

because consumers are more likely to purchase products from brands with
which they are already familiar. A company's blend of product lines is
known as its product mix or product portfolio.

KEY TAKEAWAYS

• A product line is a group of connected products marketed under a

single brand name by the same company.
• Firms sell multiple product lines under their various brand names,
often differentiating by price, quality, country, or targeted
demographic.
• Businesses often expand their offerings by adding to existing product
lines because consumers are more likely to buy products from
brands they already know.
• Product lines should be abandoned if they prove unprofitable, except
in the case of a loss leader.
• The full portfolio of product lines is a company's product mix.
Summary

• A product line is an array of related products.

• Products under a product line can be related by functionality,
target market, price range, or brand.
• Product line depth refers to the number of products offered
under a product line.

Understanding Product Lines

Products under a product line are related either by functionality, target

market, price range, or brand. Although products in a product line are
generally complementary to each other, that does not need to be the
case. For example, the product lines of a company may look as follows:
As shown above, ABC Company carries two product lines:

• Product Line 1 consists of products that are fruit-based; and

• Product Line 2 consists of products for sports activities.

Product Line Depth

When discussing product lines, it is important to understand the idea of

“product line depth.” It refers to the number of products offered under
a product line.
For a product line, there is no ideal number for product line depth – a
product line may consist of a depth of five or nine and still be
successful. However, maintaining a depth that is too low can affect the
availability of choices for customers, while keeping a depth that is too
high can dilute the brand perception of the product line and cannibalize
sales. For example, consider two scenarios:

1. Low Depth

A company may keep a fruit-based product line depth of two (two

products under a product line) consisting of a mango drink and a
strawberry drink. A customer that prefers a grape drink may not be a
customer of the company due to the unavailability of such a product. It
would limit the addressable target market of the company and diminish
sales.
2. High Depth

A company may keep a fruit-based product line depth of five (five

products under a product line) consisting of a mango drink, a
strawberry drink, a guava drink, a grape drink, and a watermelon drink.
Keeping such an array of products may adversely impact a company if
one product is unpopular. For example, if it cost $100,000 to conduct
research and development for a watermelon drink but sales only
amount to $5,000.

Therefore, there is a careful balance between the number of products

that should be offered in a product line. The ideal number of products
to offer in a product line can be determined by conducting market
research.