UNIT 3: Product Decision

Product Decision Concept:

The product decision concept encompasses the various strategic and operational
choices made by businesses throughout the lifecycle of a product. These decisions are
crucial for the success of a product in the market. Here are key elements of the product
decision concept:

1. Product Development:
 Deciding on the features, design, and specifications of the product.
 Choosing the development methodology and technology.
2. Market Positioning:
 Identifying the target market and positioning the product relative to competitors.
 Developing a unique value proposition.
3. Pricing Strategy:
 Determining the optimal pricing model based on costs, market demand, and
perceived value.
 Considering discount strategies, bundling, or penetration pricing.
4. Distribution Channels:
 Selecting the channels through which the product will be delivered to customers.
 Managing relationships with distributors and retailers.
5. Marketing and Promotion:
 Developing a comprehensive marketing strategy, including advertising and
promotional campaigns.
 Choosing the most effective channels for promotion.
6. Packaging and Branding:
 Deciding on the product's packaging design and branding elements.
 Ensuring that the packaging aligns with the brand image and appeals to the
target audience.
7. Product Launch:
 Planning and executing the product launch strategy.
 Coordinating with various teams for a successful introduction to the market.
8. Post-Launch Support:
 Providing customer support and addressing any issues or concerns.
 Gathering customer feedback for future product improvements.
 Classification of Product Decisions:

Product decisions can be classified based on different criteria, providing a structured

framework for understanding and managing them. Here's a classification based on the
nature of the decisions:

1. Strategic Product Decisions:

 Decisions related to overall product strategy, market positioning, and long-term
goals.
 Examples: Target market selection, product differentiation strategy.
2. Tactical Product Decisions:
 Decisions that focus on the implementation of the overall strategy.
 Examples: Pricing decisions, choice of distribution channels.
3. Operational Product Decisions:
 Day-to-day decisions related to product development, production, and supply
chain management.
 Examples: Inventory management, quality control.
4. Marketing and Promotion Decisions:
 Decisions related to creating awareness, promoting, and selling the product.
 Examples: Advertising strategy, social media promotion.
5. Customer Support and Post-Launch Decisions:
 Decisions aimed at maintaining customer satisfaction after the product is in the
market.
 Examples: Customer service strategy, handling product recalls.
6. Product Lifecycle Decisions:
 Decisions that consider the different stages of the product lifecycle.
 Examples: Introducing product updates, deciding when to phase out a product.
 PRODUCT LEVEL:
1. Core Product:
 Definition: The core product represents the fundamental benefit or problem-
solving capability that the product provides to customers.
 Example: The core product of a smartphone is communication and access to
information.
2. Actual Product:
 Definition: The actual product is the tangible, physical product that customers
can see, touch, and experience.
 Attributes: This includes features, design, quality, brand name, and packaging.
 Example: For a smartphone, the actual product includes the device itself, its
features (camera, processor, etc.), and the brand name.
3. Augmented Product:
 Definition: The augmented product includes additional features and services
that go beyond the core and actual product, providing additional value and
differentiation.
 Attributes: After-sales service, warranty, customer support, delivery, and any
additional services or features.
 Example: The augmented product for a smartphone may include a warranty,
customer support, and access to software updates.

Understanding and managing these levels is crucial for developing a comprehensive

product strategy. Here's a more detailed breakdown:

 Core Level:
 Focuses on addressing the fundamental needs or desires of the customer.
 Identifies the primary problem that the product aims to solve.
 Helps in shaping the overall product concept and positioning.
 Actual Level:
 Deals with the tangible aspects of the product.
 Involves product design, features, brand, and packaging.
 Differentiation at this level is often a key factor in attracting customers.
 Augmented Level:
 Involves additional services and features that enhance the overall customer
experience.
 Can create a competitive advantage and contribute to customer loyalty.
 After-sales service, warranties, and customer support are common elements.
 PRODUCT MIX AND DESIGNING VALUE
Designing Value:

Designing value involves creating products and offerings that provide significant
benefits and satisfaction to customers. The value proposition is the unique combination
of features, benefits, and price that a company offers to its customers. Here's how to
design value effectively:

1. Customer Understanding:
 Gain a deep understanding of customer needs, preferences, and pain points through
market research.
 Identify the specific benefits and solutions that are most valued by your target audience.
2. Differentiation:
 Differentiate your products by offering unique features or attributes that set them apart
from competitors.
 Communicate the distinct value your products provide compared to others in the
market.
3. Quality and Reliability:
 Ensure that your products meet high standards of quality and reliability.
 Consistently deliver on promises to build trust and enhance the perceived value of your
offerings.
4. Price-Value Relationship:
 Establish a pricing strategy that aligns with the perceived value of your products.
 Clearly communicate the value customers receive in relation to the price they pay.
5. Innovation:
 Continuously innovate to stay ahead of changing customer needs and technological
advancements.
 Introduce new features or improvements that enhance the overall value proposition.
6. Customer Experience:
 Consider the entire customer experience, from the buying process to product use and
post-purchase support.
 Provide excellent customer service to enhance the overall value customers receive.

Product Mix Dimension:

Designing the dimensions of a product mix involves strategically planning the variety
and depth of products that a company offers. It is crucial for meeting diverse customer
needs and optimizing the company's market position. Here's how to design product mix
dimensions:
1. Market Analysis:
 Conduct a thorough analysis of the target market to identify gaps and opportunities.
 Understand customer segments and their preferences.
2. Segmentation:
 Divide the market into segments based on factors such as demographics,
psychographics, and behavior.
 Tailor product offerings to meet the specific needs of each segment.
3. Breadth and Depth:
 Determine the breadth (number of product lines) and depth (variations within each line)
of the product mix.
 Consider offering a balanced mix to appeal to a wider audience.
4. Consistency:
 Ensure consistency within the product mix to create a cohesive brand image.
 Evaluate how well different product lines complement each other.
5. Innovation and Adaptation:
 Innovate the product mix to adapt to changing market trends and consumer
preferences.
 Introduce new products or modify existing ones to stay competitive.
6. Lifecycle Management:
 Monitor the product lifecycle of each offering.
 Plan for product introductions, updates, and potential discontinuations.
7. Competitive Positioning:
 Position products strategically to compete effectively in the market.
 Consider how your product mix compares to competitors.
8. Market Shifts:
 Be flexible and adjust the product mix in response to shifts in the market or industry.
 Anticipate changes and proactively align the product mix with evolving customer
demands.
 PRODUCT STRATERGIES
1. Product Development Strategies:

 New Product Development:

 Introducing entirely new products to the market.
 Leveraging innovation to meet emerging customer needs.
 Example: Apple introducing the iPhone.
 Product Line Extensions:
 Adding new variations or models to an existing product line.
 Capitalizing on the success of existing products.
 Example: Coca-Cola introducing new flavors.
 Product Improvements:
 Enhancing existing products through updates and upgrades.
 Addressing customer feedback to improve features.
 Example: Software updates for smartphones.

2. Product Positioning Strategies:

 Differentiation:
 Highlighting unique features or qualities to distinguish a product from competitors.
 Creating a distinct and desirable brand image.
 Example: Volvo emphasizing safety in its cars.
 Cost Leadership:
 Competing based on lower production costs and offering products at lower prices.
 Focusing on efficiency and economies of scale.
 Example: Walmart's strategy of everyday low prices.

3. Product Life Cycle Strategies:

 Introduction Stage:
 Investing in marketing and promotion to create awareness.
 Setting the right pricing strategy to gain market share.
 Example: Launching a new tech gadget.
 Growth Stage:
 Expanding distribution channels and reaching a wider audience.
 Enhancing product features to maintain competitiveness.
 Example: Scaling production to meet increasing demand.
 Maturity Stage:
 Differentiating the product to prolong its life cycle.
  Implementing cost-cutting measures.
 Example: Offering bundle deals or discounts.
 Decline Stage:
 Considering product phase-out or discontinuation.
 Managing the decline and focusing resources on more profitable products.
 Example: Phasing out outdated technology products.

4. Portfolio Management Strategies:

 Product Portfolio Analysis:

 Evaluating the overall performance and contribution of each product in the portfolio.
 Allocating resources based on the strategic importance of products.
 Example: GE's use of the Boston Consulting Group (BCG) matrix.
 Harvesting:
 Reducing investments in products with declining market potential.
 Maximizing short-term profitability.
 Example: Scaling back marketing for legacy products.
 Divestment:
 Selling off or discontinuing products that no longer align with strategic goals.
 Streamlining the product portfolio.
 Example: A company selling a non-core business unit.

5. Brand Extension Strategies:

 Line Extension:
 Introducing new products under the same brand within the existing product category.
 Leveraging brand recognition to enter related markets.
 Example: Apple launching new models within the iPhone series.
 Category Extension:
 Expanding into new product categories under the existing brand.
 Capitalizing on brand loyalty to enter diverse markets.
 Example: Dove extending from soap to skincare products.

6. Global Product Strategies:

 Global Standardization:
 Offering the same product globally with minimal customization.
 Capitalizing on economies of scale and consistent branding.
 Example: Fast-food chains offering similar menus worldwide.
 Localization:
 Adapting products to suit the cultural and regional preferences of different markets.
 BRANDING, PACKAGING AND LABELING
1. Branding:

 Definition: Branding involves creating a unique name, design, symbol, or any other feature that
identifies and distinguishes a product or service from its competitors.
 Purpose:
 Build brand awareness and recognition.
 Establish a positive brand image and perception.
 Foster customer loyalty and trust.
 Elements:
 Brand name, logo, tagline, brand colors, brand voice, etc.

2. Labeling:

 Definition: Labeling is the presentation of information about a product on its packaging. It

includes details such as ingredients, nutritional facts, usage instructions, and other relevant
information.
 Purpose:
 Provide regulatory information and comply with labeling laws.
 Communicate essential product details to consumers.
 Enhance transparency and build trust.
 Elements:
 Nutrition facts, ingredient list, product description, usage instructions, safety warnings,
etc.

3. Packaging:

 Definition: Packaging involves the design and creation of the container or wrapping for a
product. It goes beyond mere protection and containment to serve marketing and promotional
functions.
 Purpose:
 Protect the product during transportation and storage.
 Facilitate product use and consumption.
 Attract attention, convey brand identity, and communicate product features.
 Elements:
 Physical container, materials used, design, graphics, branding elements, product shape,
etc.

Interconnections:
1. Brand Integration:
 Branding elements such as logos and colors are often incorporated into packaging
design to reinforce brand identity and promote recognition.
2. Communication:
 Labels play a crucial role in communicating essential information about the product.
They often include branding elements to maintain a consistent identity.
3. Differentiation:
 Packaging is a significant tool for product differentiation. Unique and attractive
packaging can set a product apart from competitors, complementing the differentiation
achieved through branding.
4. Consumer Experience:
 Effective packaging and labeling contribute to a positive consumer experience. They
make it easy for customers to identify, use, and understand the product.
5. Regulatory Compliance:
 Labels are essential for providing legally required information such as nutritional facts
and safety warnings. Packaging and labeling must comply with industry regulations.
6. Promotion:
 Packaging serves as a promotional tool, especially on store shelves. It can attract
attention, convey the brand's personality, and communicate key selling points.
7. Influence on Purchase Decision:
 Strong branding, appealing packaging, and informative labeling collectively influence a
consumer's decision to purchase a product. A cohesive and well-executed combination
can enhance the overall perceived value.
8. Sustainability:
 Increasingly, consumers are conscious of sustainability. Packaging and labeling strategies
can communicate a brand's commitment to environmental responsibility.
 NEW PRODUCT DEVLOPMENT
New product development (NPD) is a strategic process that organizations use to
introduce innovative products or improve existing ones. Successful new product
development is crucial for staying competitive, meeting customer needs, and driving
business growth. Here are the key stages and considerations in the new product
development process:

1. Idea Generation:

 Sources:
 Customer feedback and surveys.
 Market research and analysis.
 Employee suggestions and brainstorming sessions.
 Competitor analysis and industry trends.
 Activities:
 Encourage creativity and idea generation.
 Evaluate and prioritize potential ideas.

2. Idea Screening:

 Criteria:
 Alignment with business goals.
 Market demand and potential.
 Technical feasibility and resources.
 Profitability and return on investment.
 Activities:
 Evaluate and filter ideas based on established criteria.
 Select ideas with the highest potential for success.

3. Concept Development and Testing:

 Concept Development:
 Create detailed concepts for the selected ideas.
 Define features, benefits, and positioning.
 Concept Testing:
 Gather feedback from target customers.
 Refine concepts based on customer responses.

4. Business Analysis:
 Financial Evaluation:
 Assess the potential costs and revenues associated with the new product.
 Calculate the return on investment.
 Risk Assessment:
 Identify potential risks and challenges.
 Develop contingency plans.

5. Product Development:

 Design and Prototyping:

 Develop detailed product specifications.
 Create prototypes for testing and refinement.
 Engineering and Manufacturing:
 Build the final product based on the approved design.
 Establish production processes.

6. Market Testing:

 Pilot Launch:
 Introduce the product on a limited scale in specific markets.
 Monitor customer reactions and gather additional feedback.
 Adjustments:
 Make necessary adjustments based on market testing results.
 Refine marketing and distribution strategies.

7. Commercialization:

 Full-Scale Launch:
 Launch the product to the wider market.
 Implement marketing and promotional campaigns.
 Distribution:
 Ensure products are available through appropriate channels.
 Manage inventory and supply chain logistics.

8. Post-Launch Evaluation:

 Performance Monitoring:
 Track sales, customer feedback, and market share.
 Assess the product's performance against initial projections.
 Continuous Improvement:
 Gather insights for future improvements.
  Consider updates, expansions, or complementary products.

Key Considerations:

1. Cross-Functional Collaboration:
 Involve teams from various departments (marketing, R&D, production) to ensure a
comprehensive approach.
2. Customer-Centric Approach:
 Prioritize customer needs and preferences throughout the development process.
3. Market Research:
 Conduct thorough market research to understand trends, competition, and potential
demand.
4. Agile and Iterative Approach:
 Be flexible and open to adjustments based on feedback and changing market conditions.
5. Risk Management:
 Identify potential risks and develop mitigation strategies.
6. Resource Allocation:
 Allocate resources effectively, considering budget, time, and personnel.
7. Regulatory Compliance:
 Ensure that the new product complies with relevant regulations and standards.
8. Sustainability:
 Consider environmental and social sustainability in product development.
9. Brand Alignment:
 Ensure that the new product aligns with the overall brand strategy and image.
 PRODUCT LIFE CYCLE
The product life cycle (PLC) is a concept that describes the stages a product goes
through in the market, from its introduction to its decline. Understanding the product
life cycle is essential for businesses to make informed decisions regarding marketing,
pricing, and product strategy. The typical stages of the product life cycle are as follows:

1. Introduction:

 Characteristics:
 Product is launched in the market.
 Sales are low, and there may be initial losses.
 High marketing and distribution costs.
 Objectives:
 Create awareness and promote the new product.
 Establish a market presence and gain early adopters.
 Strategies:
 Heavy marketing and promotion.
 Limited product variations.
 Focus on building distribution channels.

2. Growth:

 Characteristics:
 Rapid increase in sales.
 Growing market acceptance.
 Competitors enter the market.
 Objectives:
 Increase market share.
 Maximize profit.
 Expand distribution.
 Strategies:
 Build on initial success.
 Introduce product variations.
 Continue marketing, but with a broader audience.

3. Maturity:

 Characteristics:
 Sales growth stabilizes.
 Market becomes saturated.
  Intense competition.
 Objectives:
 Maintain market share.
 Maximize profitability.
 Extend the product's life cycle.
 Strategies:
 Product differentiation.
 Cost-cutting measures.
 Market segmentation.
 Price adjustments.

4. Decline:

 Characteristics:
 Sales decline due to market saturation or changing consumer preferences.
 Increased competition from newer products.
 Declining profitability.
 Objectives:
 Manage the decline.
 Harvest profits.
 Consider product discontinuation.
 Strategies:
 Cost reduction.
 Limited marketing.
 Consider product phase-out or replacement.

Factors Influencing the Product Life Cycle:

1. Technological Changes:
 Advances in technology can accelerate the introduction of new products, shortening
their life cycles.
2. Market Saturation:
 The rate of product adoption and market saturation can impact the speed of the life
cycle.
3. Consumer Trends:
 Changes in consumer preferences and trends can influence the life cycle of products.
4. Competitive Pressures:
 Intense competition may lead to shorter product life cycles as companies constantly
innovate to stay ahead.
5. Regulatory Changes:
 Regulatory shifts can impact the viability and life cycle of certain products.
6. Economic Conditions:
 Economic factors can affect consumer spending and, consequently, product life cycles.

Implications for Marketing:

1. Introduction Stage:
 Heavy investment in promotion and distribution.
 Focus on creating product awareness.
2. Growth Stage:
 Expand market presence.
 Introduce product variations.
 Manage increased demand.
3. Maturity Stage:
 Differentiate the product.
 Focus on cost efficiency.
 Consider market segmentation.
4. Decline Stage:
 Evaluate the potential for product rejuvenation.
 Consider product phase-out or replacement.