Product

Chapter VI
Product Decisions
1.
2.
3.
4.
Meaning of Product
Concepts of Product
Levels of Product
Type of Products, Their Distinctive Features and Marketing
Considerations
5. Product Life Cycle: Meaning, Stages and Marketing Activities
6. Meaning of New Product
7. Importance of New Product
8. Process of New Product Development
9. Reasons for New Products Failure
10. Product Adoption and Diffusion
11. Product Line and Mix Strategies
12. Meaning of Services
13. Characteristics of Services
14. Services Marketing Strategies
15. Branding: Meaning, Objectives, Reasons for and against Branding, Types
and Essentials of Good Brand Name
16. Packaging: Meaning, Objectives and Functions, Levels of Packaging,
Essentials of Good Packaging
17. Labeling: Meaning, Objectives, Functions, and Types
Meaning of Product
Concepts of Product
Levels of Product
On the surface it seems a product is simply a marketing offering, whether tangible or intangible,
that someone wants to purchase and consume. In which case, one might believe product
decisions are focused exclusively on designing and building the consumable elements of goods,
services or ideas. For instance, one might think the key product decision for a manufacturer of
floor cleaners is to focus on creating a formula that cleans more effectively. In actuality, while
decisions related to the consumable parts of the product are extremely important, the TOTAL
product consists of more than what is consumed. Marketers must first identify the core
consumer needs (develop core product), then design the actual product and find ways to augment
it in order to create the bundle of benefits that will best satisfy the customer. Marketers must first
identify the core consumer needs (develop core product), then design the actual product and find
ways to augment it in order to create the bundle of benefits that will best satisfy the customer.
The total product offering and the decisions facing the marketer can be broken down into three
key parts. These are called the levels of product which are given below:
1. Core Product
Marketers must first define what the core benefits the product will provide the customer.
Consider what we have talked about many times in this tutorial; people make buying decisions
that satisfy their needs. While many needs are addressed by the consumption of a product or
service, some needs are not. For instance, customers may need to be perceived highly by other
members of their group or need a product that is easy to use or need a risk-free purchase. In each
of these cases, and many more, the core product itself is the benefit the customer receives from
using the product. In some cases these core benefits are offered by the product itself (e.g., floor
cleaner) while in other cases the benefit is offered by other aspects of the product (e.g., the can
containing the floor cleaner that makes it easier to spread the product). Consequently, at the very
heart of all product decisions is determining the key or core benefits a product will provide.
From this decision, the rest of the product offering can be developed. EXAMPLE SONY
CAMCORDER: Core--the ability to take video pictures conveniently.
The most basic/fundamental level of the product is the basic level which answers question what
the buyer is really buying. The core product stands at the center of the total product. It consists of
problem solving services or core benefits that consumers seek when they buy a product. Thus
when designing products, marketers must first define the core of benefits the product will
provide to consumers. Customers feel satisfied after using or consuming such products. The
marketers sell the core benefits not product features.
Since the core product is not the tangible, physical product, nobody can touch it. That's because
the core product is the benefit of the product that makes it valuable to you. So with the car
example, the benefit is convenience i.e. the ease at which you can go where you like, when you
want to. Another core benefit is speed since you can travel around relatively quickly.
2. Actual Product
Marketer must then build the actual product around the core product. Actual products are those
which have a physical object and they are identified by quality, features, design, brand name and
packaging. All these elements are combined carefully to deliver the core benefits. The actual
product is the tangible, physical product. You can get some use out of it. Again with the car
example, it is the vehicle that you test drive, buy and then collect. Actual Product may have as
many as five characteristics:
Quality level
Features
Design
Brand name
Packaging
Color
All combined to carefully deliver the core benefit(s).

The core benefits are offered through the components that make up the actual product the
customer purchases. For instance, when a consumer returns home from shopping at the grocery
store and takes a purchased item out of her shopping bag, the actual product is the item she holds
in her hand. Within the actual product is the consumable product, which can be viewed as the
main good, service or idea the customer is buying. For instance, while toothpaste may come in a
package that makes dispensing it easy, the consumable product is the paste that is placed on a
toothbrush. But marketers must understand that while the consumable product is, in most cases,
the most critical of all product decisions, the actual product includes many separate product
decisions including product features, branding, packaging, labeling, and more. Full coverage of
several of these important areas is provided later in this tutorial. EXAMPLE SONY
CAMCORDER: Actual--Sony Handycam (brand name), packaged, convenient design so you can
hold it, play back features etc. that provide the desired benefits, high quality etc.
3. Augmented Product
The marketer must build an augmented product around the core and actual products by offering
additional consumer services and benefits. It includes warranty, after sale service, repairs and
maintenance, delivery, finance/credit, installation. Augmented product refers to the totality of
benefits that a person receives or experiences in obtaining the actual product. The competition in
the market is not between what the firms produce but what they add to the output in the form of
additional services (augmented product). The firm that produces the right augmented product
will thrive in the market. The augmented product is the non-physical part of the product. It
usually consists of lots of added value, for which you may or may not pay a premium. So when
you buy a car, part of the augmented product would be the warranty, the customer service
support offered by the car's manufacture, and any after-sales service.
It offers additional consumer benefits and services.

a. Warranty
b. Customer training
Marketers often surround their actual products with goods and services that provide additional
value to the customers purchase. While these factors may not be key reasons leading customers
to purchase (i.e., not core benefits), for some the inclusion of these items strengthens the
purchase decision while for others failure to include these may cause the customer not to buy.
Items considered part of the augmented product include:
Guarantee This provides a level of assurance that the product will perform up to expectations
and if not the company marketing the product will support the customers decision to replace,
have it repaired or return for a refund.
Warranty This offers customers a level of protection that often extends past the guarantee
period to cover repair or replacement of certain product components.
Customer Service This consists of additional services that support the customers needs
including offering training and assistance via telephone or online.
Complementary Products The value of some product purchases can be enhanced with add-on
products, such as items that make the main product easier to use (e.g., laptop carrybag),
enhance styling (e.g., cellphone face plates) or extend functionality (e.g., portal keyboard for
PDAs).
Accessibility How customers obtain the product can affect its perceived value depending on
such considerations as how easy it is to obtain (e.g., stocked at nearby store, delivered directly
to office), the speed at which it can be obtained, and the likelihood it will be available when
needed.
EXAMPLE SONY CAMCORDER: Augmented--receive more than just the camcorder. Give
buyers a warranty on parts and workmanship, free lessons on how to use the camcorder, quick
repair service when needed and toll free telephone number when needed.
Type of Products
1. Consumer Goods
a) Convenience Goods
Packaging is important to sell the product. Consumers will accept a substitute. Marketers
focus on intense distribution, time utility. Convenience products can be categorized into
staple (milk), impulse (not intended prior to shopping trip).
Features
Such products are purchased with minimum time and effort.
Such products are purchased frequently since these products are consumed or used
immediately and are bought in small quantities.
Since price is usually low, every transaction is not regarded as important.

These products are bought at the most convenient location/retail shops. The convenient
location may be defined as the shops which are located near the house, office, or on the
way to office of consumers.
Brand is not important to consumers, brand loyalty is of little significance. So, consumers
may accept any one brand among the various alternative/substitute brands.
Packaging plays important role in buying decisions.
The consumer does not plan the purchase of convenience goods, the product is bought
whenever need arises.
Consumers have sufficient information regarding features of the product to be purchased
before buying.
Marketing Considerations
Intensive Distribution
Since consumes will buy the convenience goods with minimum of effort at the convenient
location and purchase frequently, such goods are purchased immediately and any one of several
substitutes will be acceptable to consumers, a manufacturer must secure wide distribution using
as many retailers as possible. The absence of a brand in a particular store will not cause a buyer
to seek it elsewhere.
Long channel of Distribution
There will be a need for intensive distribution because the convenience goods are sold through a
large number of retail outlets and because sales per retail store is typically small, it is not
economical for a manufacturer to sell directly to all retail outlets as a result of which the
distribution of convenience goods requires the heavy use of marketing intermediaries and a long
channel of distribution.
Heavy National Advertising Supported by sales promotion
Advertising is heavily used with respect to convenience goods in order to inform buyers about
the nature of brands because buyers do not seek out such information on their own. Also,
advertising is necessary to develop recognition of and (establish a brand) preference for, their
specific brands. The entire responsibility of advertising lies primarily with the manufacturer.
Because retailers carry several competing brands of convenience item, and because many other
stores carry them and any advertising by one retailer may help the competitors, retailers are not
interested in doing much advertising of these articles.
Point of Purchase/Counter Displays and Packaging;
b) Shopping Goods
Consumers expend considerable effort planning and making purchase decisions. IE appliances,
stereos, cameras. Consumers are not particularly brand loyal. Need producer intermediary
cooperation, high margins, less outlets than convenience goods. Use of sales personnel,
communication of competitive advantage, branding, advertising, customer service etc. Attribute
based (Non Price Competition), product with the best set of attributes is bought. If product
attributes are judged to be similar, then priced based.
Features
Considerable shopping effort is needed to purchase the product since consumers generally
compare price, quality, suitability and style of the product at several stores before making the
final purchase decision.
Such products are purchased less frequently because such products may be used over a long
period of time due to their durable nature.
Consumers do not have any information regarding features of these products before buying.
So, consumers undergo through information search and evaluation process during the
formation of their buying process.
Brand is not important to consumers.
Packaging is less important to consumers of shopping goods.
Such products are sold through a small number of outlets (selective).
It takes a long time to make a purchase decision. Purchase decision can even be suspended.
Selective Distribution
The shopping goods are sold through a fewer but larger retail outlets than convenience goods do,
which is the case of selective distribution strategy because consumers are willing to look around
a little for what they want, consumers purchase these goods infrequently, inventory turnover is
lower, the need does not require immediate satisfaction and middlemen expect to receive higher
gross margins. While selecting resellers, the manufacturer usually has a set of criteria (capital
requirements, order size, annual sales volume, inventory turn over rates) the resellers must meet.
Stores are Clustered
Most of the outlets of shopping goods are clustered near other outlets carrying competing items.
Because consumers visit several stores before thy find the product from a certain store
satisfactory and to provide the convenience of comparison the stores should be clustered in a
certain area.
Short Channel of Distribution
Since retail stores buy shopping goods in large quantities and the reputation and the name of the
store are more important to the buyer than the manufacturers names, the manufacturers sell
directly to retailer.
Advertising
Since customers do not know the details of the product, in addition to advertising, plays an
important role in promoting a brand of shopping goods. Moreover, manufacturers and retailers
jointly assume and sponsor the promotion campaign. The retailer uses retail sales people and
assumes the burden of local advertising for promoting a product.
Store displays plays attractive role: to attract consumers to visit the store.
Offer of services: such as money-back and replacement guarantee. Warranty, delivery,
installation, repair and maintenance play important role in marketing shopping goods.
c) Specialty Goods
Buyer knows what they want and will not accept a substitute, IE Mercedes. Do not compare
alternatives. Brand, store and person loyal. Will pay a premium if necessary. Need reminder
advertising.
Features
Consumers show strong brand loyalty. They do not accept substitutes. It is the special and
unique features perceived by the consumer that makes general product a specialty product for
the consumer. Specialty goods have one or two unique characteristics.
Consumers spend substantial time and effort in locating the brand/ to find the product of their
choice.
Such goods are bought/purchased infrequently.
Price is generally high. Such goods are expensive.
Exclusive distribution through limited number of retail outlets. Bought in exclusive outlets.
Are sold relatively few outlets.
Packaging is less important.
Purchase is well planned.
Exclusive Distribution
The exclusive distribution strategy is appropriate to adopt for the specialty goods. In Exclusive
distribution the specialty goods are sold through only one retailer in a relatively large geographic
area. Since specialty goods tend to be very high quality and among the highest price in their
product categories and are purchased rather in frequently used over a long period of time, or
require service or information to fit them to buyers needs, the use of wholesalers is not necessary.
That is why these goods are distributed through short channel of distribution. The manufacturer
of specialty goods sells directly to the retailer. Most of the retailers selling specialty goods handle
the products of single manufacturer or other manufacturers use his own retail outlet to sell his
products, can open their own retail branches to serve the customers.
Advertising
Much amount is spent on advertising to boost up the sales. It is because advertisement brings
about the specialties of the product. There is close cooperation, and perhaps contractual
agreement, between the manufacturer and the retailer. The manufacturer relies exclusively upon
the retailer to implement the promotional program for the product, because a few retail outlets
are used and brand is important.
Service Facilities
The suppliers will have to extend certain services like credit sales, after sale services like
guarantee, free repairing or services of the articles.
d) Unsought Goods
Sudden problem to resolve, products to which consumers are unaware, products that people do
not necessary think of purchasing. Umbrellas, Funeral Plots, Encyclopedia.
Features
Price is generally high because the product is new.

Purchased rarely.
No purchase planning. No buying effort made.
Branding is less important. Brand loyalty varies.
Importance of packaging varies across products.
Purchased at the factory outlets or at the customers location through salesmen.
Consumers are unaware about these products.
Consumers generally show reluctance to buy these products unless approached by the
marketer.
2. Industrial Goods
a) Raw Materials
Features
Raw materials are unprocessed products.
Branding has little significance.
Advertising is rare.
Raw materials have short life. That is why these products should be purchased continuously in
large volume.
These products are of low unit-value.
Supply of natural raw materials is limited and cannot be substantially increased by producers
whereas supply of agricultural raw materials can be altered to some extent but cannot
increased or decreased rapidly.
Agricultural raw materials are produced at particular season and perishable in nature.
Natural raw materials are bulky in nature.
1. Natural Raw Materials
Transportation
The natural materials are bulky and low unit value in nature on the one hand and the existence of
long distance o the other necessitate minimum of physical handling as a result of which
transportation plays a vital role and a short channels of distribution direct from producer to
industrial user is heavily used.
Arrangement of Adequate Supply
Industrial users have to arrange for the supply of natural raw materials in adequate quantities.
So, they often contact in advance to assure timely and adequate supply.
2. Agricultural Raw Materials
1. Ware Housing
Because agricultural products are perishable and are seasonable natures not produced at a
uniform rate, throughout the year warehousing facility are essential.
2. Distribution channel
Since producers are small, numerous and geographically dispersed, many midlines are involved
and long channel of distribution are needed.
Standardization and Grading
Collecting and gathering from small producers and transpiring then to the place of
processing.
b) Fabricating Parts and Materials

Features
These are semi-finished products. Fabricating parts are just assembled with no further
(processing) change in form whereas fabricating materials undergo further processing.
Both fabricating parts and materials are purchased in large quantities.
Manufacturers generally purchase these products on a long term contract basis from a reliable
supplier.
Direct Sale
Because fabricating parts and materials are usually purchased in large quantities, bulk of the
goods is sold by the producers to individual users directly.
Industrial users seem to have used middlemen in case buyers purchase in small lots, buyers are
small or buyers purchase to meet out shortages or emergencies. However, direct sale to
industrial users is common.
Ensuring Regular Supply
To make the finished products steady and uniform in quality, industrial users want to ensure an
adequate, steady, constant and uniform supply. For this purpose to achieve, industrial users prefer
to buy on contact basis and also, place an order a year or more in advance.
Price and Service
Price and service provided by the seller are important considerations while making buying
decisions.
Branding and promotion are less important in marketing these products.
c) Installations
Features
Installations have long life.
Installations do not need frequent purchasing.
These are high priced products.
These products affect the scale of operations of an organization.
These are technical capital goods which are used to produce other goods.
Direct Sale
As installations involve huge amounts, unit sale is large, the product is made to detailed
specifications and they are highly technical, no middlemen are involved in the distribution of
installations. The cannel is direct from producer to industrial user.
Presale and post-sale services
Certain presale and post-sale services are the determinant factors while selling the installations.
Presale services are canvassing on desirable quality; price conformity to specifications as per
customer requirements, stipulated delivery, minimum transport cost and credit facilities. After
sale services include erecting, technical advice on operation of machines, repairs maintenance,
training etc.
Personal Selling
The role of personal selling is much more important and weightier than advertising. Advertising
is used but is much less important than personal selling. Advertising is not enough to create
actual demand for installations because such equipments are purchased only from when new
plants are to be started, or for expansion purposes, or for replacement of worn-out machinery.
The promotional emphasis on personal selling is due to high unit price of installations, long
negotiation period before the transaction is consummated and every single sale means a lot for
them. So the manufacturers often uses high caliber sales force such as sales engineer to market
installations.
Lease:
Reputation of the Manufacturers:
d) Accessory Equipments
Direct and Indirect Sale
The accessory equipments are sold directly to industrial users if product is of relatively high unit
value and order is large. However, if potential buyers are geographically widespread, unit sales
and orders are small, buyers are numerous, the products do not require any technical knowledge,
manufacturers of accessory equipment use middlemen.
Wide and Aggressive Advertisement
Since a large number of producers are competing in the market, advertising is extensively and
aggressively used for promotion of product in the market.
Prompt Delivery:
Reputation and Brand Name
Company reputation as well as brand name play important role in marketing.
e) Operating Supplies
Wide Distribution
Operating supplies are normally distributed through wholesaling middlemen because the
product is low unit value, is bought in small quantities and goes to quite a good number of
customers who are geographically dispersed. Since product is low unit value and is standardized
customers made their purchases with minimum of effort. So the manufacturers of operating
supplies arrange to distribute through as many retailers as possible.
Price Competition
The decision of the buyer is to great extent, influenced by price. Price competition is tough
because such products are quite standardized brand preference / insistence is low and various
manufactures handle similar products/goods.
Long Channel of Distribution:
Extensively Advertised:
Product Life Cycle

Nature
Like living organisms products have also life cycle. A product life cycle can be divided into
several stages characterized by the revenue generated by the product. The life cycle concept may
apply to a brand or a category of product. Its duration may be as short as a few months for a fad
item or a century or more for product categories such as the gasoline-powered automobile.
Product development is the incubation stage of the product life cycle. There are no sales and the
firm prepares to introduce the product. As the product progressed through its life cycle, changes
in the marketing mix usually are required in order to adjust to the evolving challenges and
opportunities.
Like living organisms, which are born, live and die, a product is introduced into the market
place, it grows and it is terminated in the course of time. However the life of a product is
determined in terms of sales and profitability. The sales and profitability of a product will never
be uniform throughout the life of a product. On the basis of sales position, a product moves from
introduction to growth, maturity and decline that is known as the distinct stages of the product
life cycle. Usually, the stages are based on where the rate of sales growth or decline tends to
become pronounced.
Life cycle curve followed by different products vary substantially. The product life cycle follows
the form of a S-shaped curve. However, not all products pass through the idealized S-Shaped
product life cycle. The shape of the PLC may vary somewhat among the products. Cox studied
the PLCs of 754 ethical drug products and found six different PLC patterns {William E Cox, Jr
Product Life cycles as Marketing Models, Journals of Business, October 1967, PP 375-84}.
Another develops no less than nine variants [Chestor R. Wasson, Product Management St
Charles III challenge books 1971]. However some 15 studies of consumer products and 4 studies
of industrial goods provide substantial evidence to validate the classical product life cycle.
However a total of all different cyclical patterns were found. [David. R. Rixic and John E. Swan,
Product Life cycle Research A Literature Review, Journal of Business Research 7 (September
1979) PP 212-19].
The length of the lifecycle varies among products managing from a short period to several
decades. The length of the PLC depends on rate of technical change, rate of market acceptance
and ease of competitive entry. [ Joel Dean, Pricing Policies for New products, Harvard Business
Review, Nov-Dec 1950, PP45-53].
Also the length of each its stages vary considerably. It seems likely that average length of
decline stage is longer than the other three stages combined [ Willian Ecot Jr 1967, PP 375 84].
And the introduction and growth stages are shortening for consumer durables [ William Wualls,
Richard W. Olshavsky and Ronald E Michaels, Shortening of the PLC- An Empirical Test,
Journal of Marketing Fall 1981, P77].
Product life cycle stages dont necessarily follow each other predictably or in sequence some
products show a rapid growth from the very beginning. Other products go directly from
introduction to maturity. Still others move from maturity to a second period of rapid growth.
The product life cycle concept helps marketing managers to plan alternative marketing strategies
to address the challenges that their products are likely to face. It also is useful in monitoring sales
results over time and comparing them to those of products having a similar life cycle.
Stages of the Product Life Cycle

1. Introduction Stage
When the product is introduced, sales will be low until customers become aware of the products
and its benefits. Some firms may announce their product before it is introduced, but such
announcements also alert competitors and remove the element of surprise. Advertising costs
typically are high during this stage in order to rapidly increase customer awareness of the
product and to target the early adopters. During the introductory stage, the firm is likely to incur
additional costs associated with the initial distribution of the product. This higher costs coupled
with a sales volume usually make the introduction stage a period of negative profits.
The introduction stage of the product life cycle begins or the new product life cycle begins when
the new product is first distributed in the market place and made available for purchase to
buyers. At this point sales are zero and profits are negative. Bringing a new product to market is
fraught with unknown, uncertainties and frequently unknowable risks.
Features
The main features of the introduction stage are as follows:
Low Sales Volume
Sales volume and sales growth are very low in this stage. This is because of delays in the
expansion of production capacity, technical problems in the product or in production, delays in
achieving middlemen, delays in making the product available to customers, customer reluctance
to change established patterns of behavior and small number of buyers.
High Costs
Cost of production and marketing will be high in this stage. Because the company produces only
in limited volume, they are not in a position to reap the benefits of economics of scale.
Moreover, substantial investments take place in research and development, marketing research,
promotion campaign and stocks.
High Promotion
The promotional expenses represent the highest figure by far in the introduction stage of the
product life cycle. This effort is needed to inform potential consumers of the new and unknown
product, to induce initial product trial, to stimulate repeat purchases and to secure distribution in
retail outlets. Furthermore, personal selling and sales promotion programs will have to be
launched to assure wholesalers and retailers that demand will be substantial.
Net Losses
Profits are negative at this stage of the product life cycle because of low volume of sales, large
promotion and distribution expenses and heavy initial investments. In fact, it is the least
profitable stage of the product life cycle. However the positive figure of profits starts to appear at
the end of the introduction stage.
No Competition
No competition exists in this stage because competitors are few. No entrepreneurs want to
produce the basic versions of the product because developing and introducing a new products is
quite high, the market is not ready for the product, only the higher income groups are ready to
purchase the product, consumers are small in number, and only a few marketers have the
resources, technological knowledge, managerial capacity and marketing knowhow to launch the
product commercially.
High Price
Price is set high to recoup expensive product development costs and to recover excessive costs
of launching. Also costs are high due to relatively low output rates, technological problems in
production may have not yet been fully mastered and high margins are required to support the
heavy promotional expenditures which are necessary to achieve growth. Production volume is
low as a result of which economies of scale could not be achieved.
Goal
During the introduction stage, the primary goal is to establish a market and build primary
demand for the product class.
Marketing Activities or Marketing Mix Decisions
The following are some of the marketing activities (mix implications) of the introduction stage:
Product one or few products, relatively undifferentiated.
Price Generally high, assuming a skim pricing strategy for a high profit margin as the early
adopters buy the product and the firm seeks to recoup development costs quickly. In some
cases a penetration pricing strategy is used and introductory prices are set low to gain market
share rapidly.
Distribution Distribution is selected and scattered as the firm commences implementation
of the distribution plan.
Promotion Promotion is aimed at building brand awareness. Samples or trial incentives
may be directed toward early adopters. The introduction also is intended to convince potential
resellers to carry the product.
2. Growth Stage
The growth stage is a period of rapid revenue growth. Sales increase as more customers become
aware of the product and its benefits and additional market segments are targeted. Once the
product has been proven a success customers begin asking for it, sales will increase further as
more retailers become interested in carrying it. The marketing team may expand the distribution
at this point. When competitors enter the market, often during the later part of the growth stage
there may be price competition and/or increased promotional costs in order to convenience
consumers that the firms product is better than that of the competition.
As the sales of a new product accelerate, a product enters into the growth stage. The early
adopters continue to purchase the product and the early majority will start to purchase the
product for the first time. This is where the product is successful at, matching and meeting the
needs of consumers. That is why a product gains a wide and rapid market acceptance. During
this stage, sales rise rapidly and profits reach a peak and then start to decline.
Features
The growth stage has the following features.
High Sales Rate

Since the new product satisfies the customers, the product gains familiarity in the market and
customers begin to seek out resulting in marked increase in consumer demand. Sales tend to rise
at an increasing rate than ever. In fact the stage is marked by a rapid climb in sales than other
stages of the product life cycle.
Highest Profits
The remarkable feature of this stage is that profits increases sharply reaching their peak level as
percentage of sales. Since high sales volume takes place, unit manufacturing costs and
promotion costs drop sharply, profits reach the highest level in their life. Typically, profits
start to decline at or near the end of growth stage. The marketing activity especially
promotion required to fight off competition is the cause of the leveling off profit in this
stage.
Some Competition
As the company realizes substantial profits from the business, some competitors will enter the
market with competitive imitative products in search of profits. Moreover, products appear
to be satisfying needs and wants of customers, competitors have had the time to build the
facilities and know how to offer the product, and manufacturers are attracted by the
opportunities for large scale production, a large number of competitors enters the market.
The presence of competitors dictates and limits what can easily be tried. As competition
increases, the product adjustments tend to be made and even functional aspects of the
product may be changed including changes in product features. Also the company
introduces new advertising campaign and additional channel of distribution.
Lower Price
Prices may come down a bit as many cost reductions are realized and passed on to consumers to
take advantage of heavy consumer demand and to attract new customers to their brands while
competitors enters the market. Some of these will begin to charge lower prices because of later
advances in technology, production shortcuts, the need to take lower profit margins in order to
get distribution.
Promotional Expenses
Promotional expenditure is also maintained at the same level to meet competition and continue
educating the market. Because of high turnover and constant promotional expenses, the sales
promotion ratio declines causing the profit. But advertising and other promotional expenditures
remain high compared to expenditures for established products. To show the superiority of its
own brand over others and develop a reputation for high product quality, promotion play a vital
role in the growth stage.
Goal
During the growth stage, the goal is to gain consumer preference and increase sales.
The following are some of the marketing activities (mix implications) of the growth Stage. The
marketing mix may be modified as follows:
Product New product features and packaging options; improvement of product quality.
Price Maintain at a high level if demand is high, or reduced to capture additional
customers.
Distribution Distribution becomes more intensive. Trade discounts are minimal if resellers
show a strong interest in the product.
Promotion Increased advertising to build brand preference.
3. Maturity Stage
The maturity stage is the most profitable. While sales continue to increase into this stage, they do
so at a slower pace. Because brand awareness is strong, advertising expenditures will be reduced.
Competition may result in decreased market share and/or prices. The competiting products may
be very similar at this point, increasing the difficulty of differentiating the product. The firm
places effort into encouraging competitors customers to switch, increasing usage per customer,
and converting non-users customers. Sales promotion may be offered to encourage retailers to
give the product more shelf space over competiting products.
When the product sales reach the saturation point, it is known as the maturity stage. In this stage
of product life cycle, rate of sales growth declines/ shows dramatically and sales level off. Profits
continue to decline further. The maturity stage can be divided into three phases viz growth
maturity, the sales growth rate starts to decline because the product has achieved acceptance by
most of the potential buyers and only some laggard buyers enter the market. In the stable
maturity, no sales rise and sales level off because almost all potential sales are governed by
population growth and replacement demand. In the decaying maturity absolute level of sales
(sales volume) starts to decline because customers start moving towards other products and
substitutes.
Features
The features of this stage of life cycle are as follows:
Decline in Sales Growth
The maturity stage is characterized by the slowdown in the rate of sales growth. Sales continue
to rise in this stage but at a decreasing rate than the previous stage. Since most consumers are
owning or using the product by now and few new customers are trying the product, future sales
are very sensitive to changes in the economy, population growth and replacement demand.
Many Competitors
Seeing the highest profit earned by the companies already established, a large number of
competitors enter the fray. In fact, because the market is so well known and defined competition
is intense during this stage. Severe competition forces prices down and profits negligible as a
result of which funds would be shaky, which in turn, companies can not engage in new
innovative activities emphasizing improvements and differences in their versions of the product.
That is why this period is characterized by a great shake out of the less capable competitors
because they find themselves unable to compete with lower price and less demand. As such, less
effective and weaker competitors disappear from squeeze out of the market and only well
entrenched, large and rich companies with a large market share survive in this stage.
Lowest Price
Price is charged ever lowest in this stage of the product life cycle. Low manufacturing costs
owing to the cheap technology coupled with large-scale production is the basic factors of lowest
price. The price charged just to cover special costs in addition to the usual manufacturing
expenses plus a low margin for the investment. [P.199, C.N. Sontakki, Marketing Mangement,
Kalyani Publishers, New Delhi, 1992]
Decline in Profits
Profits decline throughout the maturity stage of the product life cycle since stiffening
competition forces prices cut in an attempt to attract new buyers, promotion expenditures may
have to be boosted in order to extend the products life, and Research and Development budget
increases. Both manufactures and intermediaries suffer from the backwash effect of declining
profits. Opportunities for profits from new sales being severely limited, companies
concentrate/rely on tighter cost control and cost savings to maintain desired profit margins and
increase profits.
Heavy Promotional Outlays
Heavy to encourage brands switching hoping to convert some buyers into loyal users.
Goal
During the maturity stage, the goal is to maintain market share and extend the product life cycle.
The following are some of the marketing activities (mix implications) of the maturity stage. The
marketing mix decisions may include:
Product Modifications are made and features are added in order to differentiate the
product from competiting products that may have been introduced.
Price Possible price reductions in response to competition, while avoiding a price war.
Distribution New distribution channels and incentives to resellers in order to avoid losing
shelf space.
Promotion Emphasis on differentiation and building of brand loyalty. Incentives to get

competitors customers to switch.
4. Decline Stage
Eventually sales begin to decline as the market becomes saturated, the product becomes
technologically obsolete, or customer tastes change. If the product has developed brand loyalty,
the profitability may be maintained longer. Unit costs may increase with the declining production
volumes and eventually no more profit can be made.
The decline stage is signaled by a drastic fall in sales. In course of time all products eventually
reach the zero sales level and are withdrawn from the market. (KD Koirala, P.127, Marketing
Decisions, MK Publisher and Distributors, Ktm). As a result, profits decline; promotion expenses
decline competitors withdraw from the market.
Features
The outstanding features of this stage of product life cycle are as follows:
Drastic Fall in Sales
In this stage sales drift downward due to new competing products that enter the market; change
in consumer needs, consumer buying behaviors and consumer tastes; decline in a products
usefulness owing to a new technology (innovation) or competition or a new life style. The rate of
sales decline may be fast or slow. Sales may plunge to zero abruptly or they may drop to a low
level and continue for many years at that level.
Few Competitors
As sales and profits are declining (dropping off) with the old product, many competitors with
lower market share and those with marginal product quality have dropped out of the market. So
there are only a few manufacturers left and many competitors abandon the offering. Production
gets concentrated into fewer hands. Carrying weak or unprofitable products can be very costly to
the firm, since the product will have no value to the manufacturer or distributor. The weak
product may consume a disproportionate amount of management is time, it often requires
frequent price and inventory adjustment, it generally involves short production runs in spite of
expensive setup times, it requires both advertising and sales force attention that might better be
divested to making the healthy products maximum profitable resources that might be better spent
in the weak products delay the aggressive search for replacement products, they depress current
profitability and weaken the companys foothold on the future.
Lower Price
The price is reduced to exhaust (reduce) existing inventory and eliminate the product, allow for
quick inventory turnover or keep the demand at the current level. Moreover, severe competition
and lower promotional expenses pave the way for setting lower price.
Reduction in Promotional Expenditures
Minimal to let the brand coast (make progress without much effort) by itself. Minimum
expenditure required to phase out the product.
Decline in Profits
Very low sales volume, lower price combined with low profit margin are the responsible factors
for the sharp decline in profits. Even profits reach near zero. Declining volume pushes costs up
to levels that eliminate profits entirely.
During the decline phase, the firm generally has three options: (i) Maintain the product in hopes
that competitors will exist. Reduce costs and find new uses for the product. (ii) Harvest it,
reducing market support and coasting along until no more profit can be made. (iii) Discontinue
the product when no more profit can be made or there is a successor product.
The following are some of the marketing activities (mix implications) of the decline stage
Product The number of products in the product line may be reduced. Rejuvenate surviving
products to make them look new again.
Price Price may be lowered to liquidate inventory of discontinued products. Prices may be
maintained for continued products serving a niche market.
Distribution Distribution becomes more selective. Channels that no longer are profitable
are phased out.
Promotion Expenditures are lower and aimed at reinforcing the brand image for continued
products.
New Product
Meaning of New Product
In common parlance, a new product signifies genuinely real innovation. But in marketing sense,
the way of and approach to defining a new product is entirely different. Here, the major bases
for defining a new product are that which opens up an entirely new market, replaces existing
ways of satisfying customer desires, broadens the market for an existing product or offers a
completely new approach in fulfilling consumer desires. As a matter of fact, a product may be
viewed as new if it is different from what is already on the market in some characteristic
(appearance, performance etc.) though competitive products may have been available in the
market. We define a new product as something that the company is producing for the first time
(Busch and Houston: 376) or the company has not marketed previously (Pride and Ferrell, 267).
Using this approach new product may include real innovations, replacement for and
modifications of existing products as well as imitative products. There are two good reasons to
refer to all these sorts of products as new: one is consumers perceive it as new and second is it
will result in a series of new decisions and pressures on the company ( Rosenberg,258). Given
the rapid changes in tastes, technology, and competition, a company has to develop a new
product in order to satisfy the customers incessantly.
Importance of New Product

1. New Product account for a large percentage of total company sales
A firms product policy should look to the future and recognize that items, no matter how
successful, are usually mortal that is, they cannot sustain a peak level of sales and profits
forever. Therefore, replacements need to be constantly planned. According to recent
survey, major consumer and industrial goods companies expected new products (those
are less than five years old) to account for about 35% of their total sales by 1986.
between 1981 and 1956, these cos intended to double the number of new products, they
introduce each year. [Thomans. D. Kuczmarks; and Steven Silver, Strategy. The key to
successful New product Development, Management Review, Vol 71 (July 1982), PP 2640
2. New products offer different advantages
The introduction of new products is important for many reasons. Desirable differential
advantages can be fostered New Tartar Control formula crest is clinically prove, to
reduce tarter, a mineral deposit that forms on the teeth. Rights Grand American Ice
Cream appeals to restaurants, hospitals and colleges because it can be stored at higher
temperatures than traditional ice creams. Frequently, new products enhance a firms
image and position it as an innovator.
3. New Products lead to sales growth or stability
For some cos, new products are necessary for continued growth. This is why Perrier has
added lemon-, lime -, and orange flavored mineral water. Perrier with a twist and
schwinn has brought out a new line of lightweight bicycles to compete with foreign bike
makers for firms with cyclical or seasonal sales, new products can stabilize revenues and
costs throughout the year. Union corbide diversified into agriculture, fish and medical
testier equipment to reduce its dependence on the cyclical chemicals business. Black
Decker, the world is largest maker of power, tools, cut back sharply on lawn mowers and
hedge trimmers and looked for new opportunities in more traditional stable product lines
such as acquiring the small appliance division of central electricity.
4. New product can take time
Planning for growths must consider the time required for a new product to move from
the idea stage to full commercialization. For instance in lab, a searle scientist discovered
that aspartame could be used as non-sugar, low calorie sweetener. After years of product
development, approval of aspartame in 1973. yet it could not be marketed in the US until
the end of 1981 (and then only in tablets and powder fourm and as a food additive0. not
until July 1983 did the FDA allow aspartame in diet soda. Then coca cola and others
quickly signed agreements with searle.1984 sales of aspartame were $ 585 million.
5. New products can increase profits and control
New products can lead to larger profits and allow a firm to gain control over market
strategy. For example Cole cols cabbage Patch Kids (introduced in late 1983) enabled its
try division to $210 million in 1984. this saved coleco the large losses in curred with
consumer electronics.
6. Rise may be lessened through diversity
To limit risk, many firms seek to reduce dependence on one product or product line.
Ocean spray now makes a variety of beverages and fruit products; it no longer depends
exclusively on cranberry products. Turtle wax, the worlds leading manufacturer of carcare products has recently added shoe polish, rust inhibitors, ad fabric protectors.
7. New Products may improve channels
Some cos look to maximize the efficiently of their established distribution systems by
introducing new products into them. This enables the firms to spread sales, and
distribution on corks among several products, obtain dealer support and preclude
potential competitors from entering the distribution network. Cos such as Nabisco, coca
cola and Revlon are able to place new products in many outlets quickly and obtain dealer
support for them.
8.
Technology can be exploited
Cos often seek technological breakthroughs. As an illustration cannon developed simple,

inexpensive 35mm cameras and personal photocopiers. It revolutionized both markets
and paved the way for others such as Minolta to further advance technology. In some
cases, firms try to find uses for waste materials from existing products. For example, the
chicken industry has discovered that we have 4 billion boilers and the consumer generally
does not want the necks and backs. What to do? We grind it up to balcony and hot dogs
and things like that.
9. New products respond to life style
Firms introduce new products to respond to changing consumer demographics and life
styles. Henris Salad Dressing to Go, Falbars wine in glass, and ready made golden grain
spaghetti are geared to smaller families interested in convience. Granola bars and soda
with fruit juce are for health conscious consumers. Reebok sports shoes appeal to active
consumers. New coke is oriented to drinkers desiring sweeter loss robush cola.
Good long run new product planning requires system are research and development
matching the requirements of new product opportunities against company abilities
emphasis on consumers Received product attributes sizable expenditures of time and
money and defensive as well as offensive planning. In addition a firm must be willing to
accept that some new products will fail because of competition, and changing customers;
a progressive firm will take risks (PP 264- 267)
Source: Evars/Berman: Marketing
New Product Development Process

Before a product is introduced it goes through seven stages of development discussed in detail
below:
1. Idea Generation
A product idea is a general concept of what the product might be. A product idea is a potential
product described in objective, functional terms (Busch and Houston, 1985:395). Because new
products are developed from ideas, generating ideas is the starting point for the new products
development process. The purpose of idea generation is to create a large number of ideas. Since
most ideas will never reach the markets, a company has to generate more and more ideas in order
to find a few commercially successful new products. It is so because the rate of mortality of ideas
for new products is exceptionally high even higher than the failure rates for the products that
are actually introduced. Given the high mortality rate of new products, management has sought
ways to improve the number and quality of product ideas. Although some organizations get their
ideas almost by chance, firms that are trying to maximize product mix effectiveness usually
develop systematic approaches for generating new product ideas. In 1968 it took 58 ideas to
generate one new successful product. In 1981 it found that only 7 ideas were required for every
successful new product [ Booz, Allen and Hamilton More New Products Die Aborning than in
1968, Marketing and Media Decisions, may 1982, 48]. The significant improvement is due to
more rigorous and sophisticated procedures for generating new product ideas.
2. Screening
Once product ideas have been generated, the next step in the process of new product
development is screening of these ideas. The company means screening to evaluate/rate the ideas
generated whether they are desirable and promising ones. The greatest number of ideas that are
incompatible with company objectives and resources or that carry high cost, high risk and little
profit opportunity are discarded from further consideration. It is the stage where poor ideas are
rejected without investing large sums of money in them that will not succeed. If poor ideas are
allowed to pass through the screening stage, it wastes efforts, money and time in subsequent
stages until it is later abandoned. The screening stage is where management saves the most
money by weeding out unworkable ideas before capital is invested in them (Rosenberg,p.261).
The fact that a product idea that survives the screening phase will by no means assume that it
will be marketed. Rather, it only indicates that the product appears to be consistent with
resources, market conditions, and product development objectives.
New product screening should be designed to avoid making two types of errors:
Rejecting an idea that could become a very successful product.

Accepting an idea that later fails. (Creavens, pp.343-344).
In general, three basic criteria are used to screen out the new product ideas. Firstly, product
ideas must be compatible with the companys goals/objectives. If the company has decided to
restrict itself to durable consumer products, all non-durable consumer products would be
removed from the set of ideas because of incompatibility with the firms goal structure, even
though they might show great profit potential. The next elimination factor reflects the technical,
financial, and managerial capabilities of the firm. If the firm cannot produce the product or does
not have the technical or managerial abilities necessary for the product, the idea would be
rejected. Similarly, the product must have sufficient market potential to justify further
investigation of the firms resources. (David B. Montgpmery and GlenL.Urban, Screening new
product Possibilities in Corporate Strategy and product Innovation, Robert Rothberg (Ed.), Free
press,1981,pp.313-331.
3. Concept Development and Testing
The third stage in product development is concept development and testing. Throughout the
stages of idea generation and screening, developers are working only with a product idea. The
product concept is to define the product idea and make the general concept more specific, which
will be facilitated by explaining the particular benefits/advantages to be provided to potential
buyers or by stating the attributes of the product. Concept development means transformation of
the product idea into specific product benefits and images for specific target customers. It is far
better to state the technical features of the product. In fact, in the course of developing the
product concept, defining buyers, explaining primary benefits, and stating that under what
circumstances will the new product be used is essential. A product concept is the subjective
meaning about a product that the company tries to communicate to the consumer. (Kotler,Mkt
Mgmt,3rd ed p.207).
Product Idea (Toilet Soap) Concept 1 (Beauty Soap)
Concept 2 (Health Soap)
Concept 3 (Freshness Soap)
After the concepts have been developed, concept testing begins. If a product prototype is already
available this step may often be excluded. But when a large number of possible/hypothetical
concepts exist and the cost of building a prototype is large, concept testing indicates a number of
important aspects of market demand that should be considered before any prototypes are
developed. These concepts should be tested before any money is invested in R & I in order to
obtain the reactions of the potential buyers to one or more hypothetical concepts or to develop an
estimate of market acceptance for the new product concept, or to compare competing concepts to
determining the most appealing concept.
Usually, Concept tests involve collecting three types of basic information. (a) a measure of
respondents affect or feelings of liking or disliking for the concepts, (b) a measure of
respondents behavioural intent to purchase the product concept, (3) open ended questions to
obtain information and insight about the reasons for feelings of likings or disliking and
behavioral intention. (Bill Isuo, Concept Testing: An Appropriate Approach, Journal of
marketing Research, May 1975, pp.228-231.).
Concept testing calls for testing these concepts with a small informal group of target consumers.
In a concept test, product features and benefits are presented in verbal form through a picture or
description or explained through visual aids. Potential consumers are then interviewed (asked) to
obtain comments about the merits and demerits of each concept, to make a direct comparison
among alternative concepts, to rate/evaluate the products in various ways, and to discuss and
compare their reactions to the concepts proposed attributes. The opinions and questions of these
focus groups can be valuable to the new product team, for they may reveal new insights new
insights into how easily people understand the concept. What features they like or find important,
and how they describe it to others.
4. Business Analysis
Business analysis means to predict the economic consequences and to evaluate the financial
viability of product concepts for which (ultimately determines) the probable profitability will be
determined using assumed prices. Only those products that have profit potential will survive this
stage. Assessing the profitability of product concepts help management decide whether to
develop the physical product and go ahead go ahead or drop the product concept.
In case of new products, the issue of profitability is slightly more complex for four reasons. First,
sales forecasts are inherently more uncertain for new products. Second, the pattern of costs and
sales for a new product will vary to a greater extent over time. Third, if the new product will be a
potential substitute for existing products or will share production or marketing resources with
existing products, only the incremental affect of the new product on profits should be evaluated.
Finally, new products may require an additional investment in facilities or equipment.
Alternative product concepts vary sharply in their sales pattern overtime, in costs, and in the
amount of initial investment required. Hence the marketer has to compare the alternative product
concepts in terms of profitability and choose which one to introduce because of limited financial
resources. To compare the alternative product concepts and to determine whether any of them
meet the firms minimum profitability standards, marketing managers can use several techniques.
The most widely used methods are the following:
Sales Forecasts =Market Potential * Market Share.
Where Market Potential = N*R*AP. N = Number of people. R = Average quantity of purchase

per person. AP =Average Price per product unit.
A survey conducted f the nations 500 largest manufacturing firms has shown that marketing
management uses capital budgeting techniques for decision making. In a new product
development, 81 percent of the firms have used payback, average rate of return, and present
value method.
Payback period = (Initial fixed investment/Annual cash flow for recovery period)
Average Rate of Return = (Average annual profits after taxes/ Total Investment)
Present Value = [1/(1+i)n]. Where I is discount rate. N is number of years from today. A firm
might set a minimum acceptable return on investment or minimum time period for repayment of
investment in the new products.
5. Product Development and Testing
Heretofore, the existence of new products was only in the form of drawings, word descriptions,
crude models, or mockup, or idea on paper. That is, the products existence was only theoretical.
Now in this stage physical product takes shape. Product development signifies the translation of
product concept into a physical shape. This is where the actual prototype of the product will be
manufactured. The prototype should embody the key attributes described in the product concept,
should perform safely under normal use and conditions, and should be produced for the budgeted
manufacturing costs. Besides, manufacturing a prototype of the product requires the construction
of new facilities and the hiring of additional labour. Consequently, the development of a
prototype requires the investment sizable sums of money which marks the beginning of real
financial risks for the company. The chief tasks to be accomplished in this period are planning
and scheduling of the development and testing phases, specification of design, features and
constraints, engineering design and testing, prototype production, product testing, process
design, procuring patents and trademarks, planning of pilot production, developing the marketing
strategy and plan, legal department review, recalculation of demand, risk, investment, and
profitability. (Carman and Uhl, p.443).
The product idea after having been converted into a physical product, it should be tested in
artificial conditions so as to estimate the achievable market share, to acquire new market share,
and to check on whether or not the concept has been implemented. There are two types of tests:
(a) functional tests, and (b) consumer tests. In functional tests, the performance of the prototype
based on functional features such as durability, speed, reliability and others are tested under
laboratory and field conditions to make sure that the product performs safely and effectively.
Consumer testing involves testing the buyers perceptions of the products performance. In this
test, consumers are requested to use a product in their homes and then asked to rate the product
and its attributes. Consumers may also be asked to use the own product and competiting product
simultaneously and then requested to draw comparisons between them. If consumer descriptions
do not match the intended concept or the product does not perform well, then reformulation may
be necessary. Also, the length interval that often exists between the production of the prototype
and the production of the actual product lowers the actual validity of the product test, In this
situation, the marketing manager may decide not to introduce the new product.
6. Test Marketing
Test marketing differs from preceding tests in that under it the product just developed/marketing
mixes tested in real market conditions/ authentic sales environment. So, it is more reliable than
preceding tests because market conditions are real. Test marketing means the introduction of a
product along with price, promotion, and distribution strategies in small geographic areas
selected to represent the target market on a trial basis in order to determine the fact that the
marketing mix should be introduced to the national market, should be modified, or should be
discontinued. The purpose of test marketing is to collect vital information needed to modify the
marketing mix and to minimize the risk of national failure. In the course of test marketing, the
marketer should make critical decisions on how many markets to test in, how long the test should
run, what information it should collect, and how the results should be interpreted.
Test marketing is more common for consumer goods than for industrial goods. However, not all
consumer goods go through test marketing step. Test marketing is essential in the following
conditions: (a) acceptance of the product concept is very uncertain, (b) sales potential is difficult
to estimate, (c) cost of developing consumer awareness and trial is difficult to estimate, (d) a
major investment is required to produce the product at full scale (relative to the cost of test
marketing), and (e) alternative prices, packages and promotional appeals are under consideration.
However, test marketing may not be necessary in the following cases: (a) the risk of failure is
low relative to test marketing costs, (b) the product will have a brief life cycle, (c) beating
competition to the market is important because the product is easily imitated, (d) basic price,
packages and promotional appeals are well established.
7. Commercialization
If the product has been successfully tested and it has been modified in relation to the other
marketing mix elements to satisfy consumer better, the moment of truth has arrived, The
Company must decide whether or not to go ahead with the commercialization of the project and
actually lunch the product. The company gears up for production during this phase. This may
require sizable capital expenditure, The necessary factory equipment must be installed and put
into operation for mass production. The sales force needs special training. Huge sums of money
may be needed for advertising and sales promotion. The firm may need to hire additional
personnel. These expenses together with capital expenditure can make commercialization
extremely costly. Such expenditure may not be recovered for several years. Because of enormous
capital investment involved, only the largest of the firms can affect the expense of a nationwide
lunch. Therefore, many companies prefer to enter the battlefield one market at a time. This
strategy is called Rolled Out. When introducing a new product, companies often use a rollout
procedure, meaning that the product is introduced in selected geographic regions rather than
nationally. When the product achieves a specific level of sales in a given territory, it is then rolled
out to another geographic area.
Commercialization requires maximum coordination and integration among the firms functional
areas. In particular, the areas of marketing, manufacturing and physical distribution must work
together very closely during this period.
Reasons for New Products Failure

Most of the new products fail due to the following reasons:
1)
Lack of Differentiating Advantage
A product is likely to be perceived as unique if satisfied a new function; if it satisfies an

existing function in a new ways; if its price and performance give it an advantage over
the competitive products. It should be distinctive in one way or the other. Customers must
comprehend the new products distinct and differential advantage. Any product that does
not satisfy a unique need of customers, fails to dislodge more established brands
available.
2)
Poor Marketing Plan
Actual product was not designed well. Maybe it was incorrectly positioned in the
market, price too high, or advertised poorly. Poor marketing research findings. Costs of
product development are higher than expected.
3)
Poor Timing
The market success depends, to a large extent, on the ability of the company to lunch the
product at a time when consumer demand is at its highest. Though it may not always be
desirable to be the first to enter the market, undue delay or inopportune time may mean
that the demand for the product demonstrated during consumer testing phase might
vanish by the time the product is lunched in commercialization period. Hence,
appropriate time has its strategic importance in product success.
4)
Target Market too Small /Small Market Size
Sometimes marketing management overestimates the size of the target market for the
product. This is especially a problem when a firm tries to oversegment a market. The
resulting segments can violate the criterion of substantiality, that is, they are not
profitable enough to warrant a separate marketing effort.
5)
6)
7)
Poor Product Quality

No Access to Market
Competitive Entry into Market
A successful new product almost always prompts the competition to introduce its own
versions of the product. To deter competitors, management should design products so
well that other firms can only introduce parity products. After the introduction of various
brands of beers in the Nepalese market, Star Beer has gone out of the market.
8)
Lack of Channel Support
A product may fail because channel members are unwilling or unable to support the
product. Retailers and wholesalers are independent businesses, they make decisions
according to their customers needs and their own financial criteria. A firm should
research reaction of these intermediaries to a new product. Such research is usually done
in the market testing phase of the new product introduction process. Manufacturers who
try to introduce the third or the fourth brand of a new product are most likely to encounter
a lack of channel support.
9)
Changes in Consumers Tastes
Frequently, a change in consumer preference accounts for new product failure. Many
forces are at work that alters consumers needs and wants for products, life style change,
population, age and preferences change. If consumer preferences shifted to other products
of new models or brands, new products failed. If consumer preferences shift before
bringing the product to the market, a new product is failed. Continued monitoring of
consumer attitudes is one way to avoid a similar costly mistake.
Product Adoption and Diffusion

Adoption Process
Rate of adoption depends on consumer traits as well as the product and the firm's marketing
efforts.
1. Awareness
Individual becomes aware of the product. He is exposed to the innovation and then becomes a
prospect.
2. Interest
Prospect seeks information and is receptive to learning about product. Prospect is interested
enough to seek information.
3. Evaluation
Prospects consider product benefits and determine whether to try it. Prospects judge the
advantages and disadvantages of a product.
4. Trial
Prospects examine, test or try the product to determine usefulness relative to needs. Prospect
adopts the innovation on a limited basis. A consumer buys a sample, if the product can be
sampled.
5. Adoption
Prospects purchase the product and can be expected to use it when the need for the general type
of product arises. Prospects decide whether to use the innovation on a full scale basis.
6. Confirmation
After adopting the innovation, prospect becomes a user who immediately seeks assurances that
decision to purchase the product was correct.
Diffusion Process
The manner in which different members of the target market often accept and purchase a product
(go through the adoption process). Implications to marketers, company must promote product to
create widespread awareness of existence and benefits. Product and physical distribution must be
linked to patterns of adoption and repeat purchase.
1. Innovators
Innovators represent the first 2.5 % of customers to buy a product. Innovators are venturesome
consumers who are the first to adopt an innovation. Innovators are likely to younger, have higher
social status, and be in a better financial shape. Innovators tend to have broad social relationship
involving various groups of people in more than one community. They are likely to rely more on
nonpersonal communication liker advertising than personal selling.
2. Early Adopters
These tend to be opinion leaders. Adopt new products but use discretion. These represent the
next 13.5% of the total customers. These are wealthier and better educated and have greater
technical knowledge of the innovation. These exert great social influence, so other people of the
society turn to them for their advice when they come in contact with these persons.
3. Early Majority
This group accounts for the next 34% of consumers. They are the first part of the mass market to
buy the product. These are average people in terms of income education, age and occupations.
These tend to be more cautious before adopting new innovations. They normally wait until its
benefits and other features have been clearly demonstrated well before adoption.
4. Late Majority
They are less cosmopolitan and responsive to change. This group represents the next 34% of the
total adopters. These are more conservative, less educated, and older with limited purchasing
power. The reason for their adoption is that majority of the people have adopted or the product is
within their purchasing power now.
5. Laggards
They are price conscious and suspicious of change. The last chunk represents the remaining 16%
of the total adopters. They do not adopt until the product has reached maturity. This group
considers adopting as the last resort as there is no alternative.
Product Line and Mix Strategies

If an organization is marketing more than one product it has a product mix.
Product item--a single product
Product line--all items of the same type
Product mix--total group of products that an organization markets
1. Product Line Decisions

1.1.
Product Line Length
a) Product Line Expansion

Product line expansion refers to seeking unfamiliar products in pursuing growth.
Product line expansion is a risky strategy, since it requires substantially different
knowledge, thinking, skills, and processes. As such, a company may choose this path
only when current product orientation does not seem to provide further opportunities for
growth. It is a strategic alternative which implies deriving revenues and profits from
different products. Expanding the line may be a valid strategy if it is in an area in which
consumers traditionally enjoy a wide variety of brands to choose from and are
accustomed to switching from one to another in search of something new. It may also be
worthwhile to expand a line either if competitors lack a comparable product or if
competitors have already expanded into this area themselves. The cost of such a venture
is an important consideration, however. Many companies are not equipped to expand
line without a substantial outlay of time, money and equipment. A firm may elect to
expand its present product mix by increasing the number of lines and /or depth within a
line. New lines may be related or unrelated to the present products. A company may
expand in both breadth and depth. Product line stretching and product line filling are two
important aspects of product line expansion. First, product Line Stretching involves
stretching upward, stretching downward or stretching bothways.
a) Stretching Upward: Companies at the lower end of the market may want to enter
the higher end. They may be attracted by a faster growth rate or higher margins at
the higher end or they may simply want to position themselves as full line
manufactures. Sometimes, companies stretch upward in order to add prestige to
their current products.
b) Stretching Downward: many companies initially locate at the upper end of the
market and later stretch their lines downward. A company may stretch downward
for a number of reasons. It may have first entered the upper end to establish a
quality image and intended to roll downward. It may respond to a competitors
attack on the upper end by invading the low end. Or a company may add a lowend product to plug a market hole that otherwise would attract a new competitor.
It may find faster growth taking place at the low end. Competitors used their
success at the low end as a base. To meet shifts in the market demand and to blunt
competitor thrusts new product lines should be introduced.
c) Stretching Bothways: Companies in the middle range of the market may decide to
stretch their lines in both directions. Companies stretch upward to serve to serve
the upper end of the product, and stretch downward to serve the lower end.
Second, Product Line Filling: A product line may be lengthened by adding more
items within the present range of the line. There are several reasons for product
line filling: reaching for extra profits, trying to satisfy dealers, trying to use extra
capacity, trying to be the leading full line company, and trying to plug holes to
keep out competitors. The company should ensure that new items are noticeably
different from existing ones.
b) Product Line Contraction
When product line expansion goes unchecked a company usually falls into the trap of
full line competition and as a consequence, the product line becomes unwieldy and
unmanageable. Generally, a product cannot indefinitely target market customers and
contribute to achieving an organizations overall goals. Under these circumstances, a
company may opt for simplification of product line as a policy option. To maintain an
effective mix, a firm has to get rid of some products, eliminate the entire product line or
simplifying the assortment within ma line. Product line contraction may be defined as
deleting or eliminating from the product line those items which no more satisfy the
criteria laid down by a company for retaining products on the line.
A weak product is a drain on the potential profitability because of poor future sales
volume, return on investment is below minimum acceptable level, costs exceeds
revenues, and market share is declining. In addition, too much of a marketers time and
resources are spent tying to revive the product, which in turn reduces the time and
resources available for modifying other products or developing new ones. Per unit
production costs increases due to shorter production runs. When a weak product causes
unfavorable reputations among customers, the negative ideas may rub off onto some of
the firms other products and cast a shadow on the companys image.
Dropping such products which do not contribute directly or indirectly to profits can
increase in sales and profits. Additional benefits of dropping weak products include
freeing executive time
for more profitable products, forcing management to give
thorough consideration to why products failed, and making scarce resources available for
more promising products (Busch, p.436).
c) Product Line Modernization
Product line length is adequate but it needs to be modernized. A companys machine
tools may have 1970s look and loose out to better styled competitors lines. The central
issue in product line modernization is whether to overhaul the line piecemeal or all at
once. A piecemeal approach allows a company to see how customers and dealers like the
new styles and before changing the whole line. Piecemeal modernization also causes less
drain on the companys cash flow. A major disadvantage of piecemeal modernization is
that it allows competitors to see changes and start redesigning their own lines.
Product modification is changing one or more of product characteristics. Product
modernization is the introduction of new versions or new models of the product. Usually,
product modification is achieved by adding new features or styles, changing processing
requirements, and altering product ingredients. Altering the product mix this way entails
less risk than developing a new product. Product modification can effectively improve a
firms product mix if existing customers perceive that the modification has been made
and if the product has been modified more consistent with customers desires which
provide greater satisfaction. Improvements or modifications are achieved by redesigning,
remodeling or reformulating so that the product satisfies customer needs more fully. This
strategy seeks not only to restore the health of the product but also sometimes to help in
distinguishing it from those of competitors.
There are three major ways to improve/ modify products: quality modifications,
functional modifications, and style modifications. First, quality modifications are
executed by altering the materials or production process used and related to a products
dependability and durability. Reducing a products quality may allow an organization to
lower the price and direct the item at a larger target market. Increasing the quality of a
product may give a firm over competing brands and higher quality may enable a firm to
charge a higher price by creating a customer loyalty and by lowering customer sensitivity
to price. Higher quality may require the use of more expensive components, less
standardized production process, and other manufacturing and management techniques
that force a firm to charge a higher price (Pride, p.262). Second, changes that affect a
products versatility i.e. effectiveness, convenience, and safety are called functional
modifications. They usually require that the product be redesigned. Functional
modifications can make a product useful to more people which enlarges its market can
place a product in a favorable competitive position by providing benefits competitive
items do not offer. Functional modifications can help organizations achieve and maintain
progressive image. Functional modifications are made to reduce the possibility of product
liability claims. Third, style modifications change the sensory appeal of a product by
altering its taste, texture, sound, smell or visual characteristics. Because a buyers
purchase decision is affected by how a product looks, smells, tastes, feels, or sounds. A
style modification may have a definite impact on purchases. Through style modifications,
a firm can differentiate its product from competing brands and thus gin a sizable market
share.
The pressure to improve present products can come from many sources: product
competition or product deficiencies that produce declining shares. New and more
stringent governmental regulations sometimes demand product changes. Sellers are
always trying to offer buyers greater satisfaction. Attempting to upgrade a satisfactory
brand image to an attractive one is less risky than adding a new brand or line.
d) Product Line Featuring
The product line managers select one or two items in the line to feature. This is product
line featuring. Sometimes, managers feature promotional models at the low end of the
line to serve as traffic builders. In such a situation, some companies develop, announce
and advertise low priced product in contrast to high end model and to bring customers
into their showrooms and to attract customers. At other times, managers feature a high
end item to give the product line class. Although few people buy, it acts as a flagship to
enhance the whole line.
2. Product Mix Decisions

a) Width
The width of product mix refers to the number of different product lines the company
carries. Altogether there are six product lines which are known as width. Width measures
the number of product lines a company offers. Enables a firm to diversify products,
appeals to different consumer needs and encourages one stop shopping.
b) Length
The length of product mix refers to the total number of items the company carries. The
total number of items is 42 which are known as length.
c) Depth
The depth of product mix refers to the number of versions offered of each product in the
line. If Colgate comes in three sizes and two formulations (paste and gel), Colgate has a
depth of six. Depth measures the number of products that are offered within each product
line. Satisfies several consumer segments for the same product, maximizes shelf space,
discourages competitors, covers a range of prices and sustains dealer support. High cost
in inventory etc.
d) Consistency
The consistency of product mix refers to how closely relate the various product lines are
in end use, production requirements, distribution channels, or in some other way. The
lines are less consistent insofar as they perform different functions for buyers. But
product lines are consistent insofar as they are consumer products that go through the
same distribution channels.
Product Positioning
Approaches to Positioning
1. Using Product Characteristics or Customer Benefits.
Probably the most-used positioning strategy is to associate an object with a product
characteristics or customer benefit.
2. Positioning by Price and Quality.
3. Positioning by Use or Application
Another way to communicate an image is to associate the product with a use, or
application.
4. Positioning by Product User
Another positioning approach is to associate a product with a user or a class of users.
5. Positioning by Product Class
Some products need to make critical positioning decisions that involve product class
associations.
6. Positioning by Cultural Symbols
Many advertisers deeply entrenched cultural symbols to differentiate their brand from
competitors. The essential task is to identify something that is very meaningful to people
that other competitors are not using and associate the brand with that symbol.
7. Positioning by Competitor
In most positioning strategies, an explicit or implicit frame of reference is one or more
competitors. In some cases the reference competitors can be dominant aspect of the
positioning strategy. It is useful to consider positioning with respect to a competitor for
two reasons. First, the competitor may have a firm, well-crystallized image developed
over many years. The competitors image can be used as a bridge to help communicate
another image referenced to it. If someone wants to know where a particular address is, it
is easier to say it is next to the Bank of America building than to describe the various
streets to take to get there. Second, sometimes it is not important how good customers
think you are; it is just important that they believe you are better than or perhaps as good
as a given competitor.
Why so many different products? Different needs of different target markets for
the same product. Channels of distribution economies etc.
Warranty and Guarantee
Warranty means repair. In warranty, if purchased products fail to perform within a
certain period this product will be repaired. In doing so, some parts may be
replaced.
Guarantee means replacement. In guarantee, if purchased products fail to perform
within a certain period the purchased product will be replaced by a new product.
Meaning of Services
A service is an intangible product involving a deed, performance, or an effort that cannot
be physically possessed. Dominant component is intangible. Includes rental of goods,
alteration and repair of goods owned by customers, and personal services. Goods are
tangible. You can see them, feel them, touch them etc. Services are intangible. The result
of human or mechanical efforts to people or objects.
Characteristics of Services
1. Intangibility
Major component of a service is intangible. Intangibility refers to the fact that, unlike
physical goods, a service cannot be touched, seen, or evaluated prior to its purchase. You
cannot see them, feel them, and touch them. The central distinguishing feature of services
is their intangibility and it is from this that their other unique features emerge. The actual
purchase and consumption of a service takes little time and experimental in nature. For
example, you cannot view the play/ arts event and then decide to go. You may read
reviews and other indirect sources of information in making the decision to attend, but
you cannot directly evaluate the service without purchasing it. Once there, you
experience the play for a few hours at most. You do not use or apply the play. Finally,
upon leaving the theatre you do not take the service home with you. Other than a felling
of satisfaction or dissatisfaction and having something to talk about, no further utility is
available from the play.
Like goods, a buyer cannot assess services using any of the physical senses because
services have no tangible properties and as such service quality can be measured only in
the minds of consumers. Similarly, buyers cannot examine the service prior to purchase.
The intangible process characteristics that define services such as reliability, personal
care, attractiveness of staff, friendliness of staff, can be verified only once a service has
been purchased and consumed. While service marketers seek to add tangible evidence to
their product, pure goods marketers often seek to augment their products by adding
intangible elements such as after sale service and improved distribution.
2. Pershibality
Many services cannot be stored for future sales. Many services take on a perishable
nature because of their nonstorage aspect. A service that is available at a particular time
but not purchased is lostbut the firm still incurs its costs. Empty seats at a theater or on
an airplane, missed dental appointments, and empty barber chairs are examples of
services that perish in the absence of purchase. Airline/Amusement ride Number of hair
cut hours in one week: i.e., if Christies employs 3 people, who work forty hours per
week, they have potentially 120 hair cut hours to offer. If they do not have any customers
at a particular period during the day, they will lose the opportunity to cut hair at that time
and therefore the opportunity to generate revenue...the opportunity has perished...they no
longer have the ability to earn revenue from 120 hair cut hours that week.
The producer of a service that cannot sell all of its output produced in the current period
gets no chance to carry it forward for sale in a subsequent period. A train operator that
offer seats on the 8.10 a.m. train from Jogbani to Delhi cannot sell any empty seats once
the train has departed: the service offer disappears and spare seats cannot be stored to
meet a surge in demand which may occur tin the day. Very few services face a constant
pattern of demand through time. Many show considerable variation, which could follow a
daily, weekly, seasonal, or unpredictable pattern of demand. The perishability of services
results in greater attention having to be paid to the management of demand and by
scheduling service production to follow this pattern as far as possible. Price and
promotion are two of the tools commonly adopted to resolve demand and supply
imbalances.
3. Lack of Inventory
because of their intangible nature, services cannot be inventoried and stored. That is,
Services are characterized by lack of inventory. The necessary equipment and labor can
be held in readiness to result, service organizations must be careful to vary capacity as
demand changes. Many tax accountant firms, for example, increase their staffs during the
tax season and cut back the rest of the year. Services cannot be stockpiled. Need to avoid
excess unsatisfied demand and excess capacity leading to unproductive use of resources.
4.
Inseparability of Production and Consumption
Inseparately means that as an act performed for the benefit of the buyer a service is
produces and consumed simultaneously. Customer contact is often the integral part of the
service...Legal services/hair dresser, therefore often a direct channel of distribution. This
feature often allows the buyer to actually take part in the production process. A buyer can
guide the service provider to fit the service more precisely to his or her desires. A haircut
is an example. Thus, customizes offerings are more often available in the service sector.
The consumption of a service is said to be inseparable from its means of production.
Producer and consumer must interact in order for the benefits of the service to be
realized. Both must normally meet at a time and a place that is mutually convenient in
order that the producer can directly pass on service benefits. In the extreme case of
personal care services, the customer must be present during threw entire production
process. A surgeon cannot provide a service without the involvement of a patient.
Inseparability occurs whether the producer is human (health care service) or a machine
(ATM machine). The service of the ATM machine can be realized only if the producer
and consumer interact. In some cases, it has been possible geographically to separate
production and consumption, especially where there is a low level of personal contact.
This has happened in the case of banking sector, where many banks has replaced local
branches(where there is face to face interaction between producer and consumer) with
centralized telephone call centers (where interaction takes place through the medium of
telephone) or internet banking.
5. Heterogeneity/Variability
In service quality, lack of standardization, because services are labor intensive. Services
are less standardized than products. Different suppliers vary in the nature and quality of
the type of service they provide. For example, we can all think of a favorite hairdresser or
barber who does our hair closest to the way we like it. But even the same supplier may
differ in the quality of service provided from one occasion to the next. Of course, the
opportunity for the buyer to take part in the production of services also contributes to the
heterogeneity of services.
Sales of goods and services are frequently connected, i.e. a product will usually
incorporate a tangible component (good) and an intangible component.
Unlike goods, services cannot be produced with high standards of consistency. Consumer
has experienced high levels of variability. Because consumers are generally involved in
the production process for a service at the same time as they consume it, it can be
difficult to carry out monitoring and control to ensure consistent standards. This is true of
many labor intensive personal services provided in a one-to- one situation, such as
personal health care. The opportunity for pre-delivery inspection and rejection that is
open to the goods manufacturer is not normally possible with services. However, many
service organizations have sought to reduce variability by adopting equipment-based
production methods. Therefore, the tendency today is for equipment based services to be
regarded as less variable than those involving a high level of personal intervention in the
production process. Replacements of human telephone operators with computerized voice
systems and branch-based banking with internet banking are typical of this trend.
Sometimes reduces personnel variation has been achieved by passing on part of the
production process to consumers, in the way that self-service petrol filling stations are no
longer dependent on the quality of service of forecourt staff. The variability of service
output can pose problems for brand building in ser5vices compared with tangible goods.
6. Lack of Ownership
Customer has access to but not ownership of facility or activity. The service provider
should stress advantages of non-ownership such as easier payment scheme. When the
service is performed, no ownership is transferred from the seller to the buyer. The buyer
is merely buying the right to a service process, such as the use of a car park or an
accountants time. Due to the inability to own service, direct distribution methods are
more common and, where intermediaries are used, they generally act as a co-producer
with the service provider.
Major differences between goods and services are:
Special Considerations for Service Marketing
Must consider how the intangible/inventory/inseparable/inconsistency component effect
the service.
Intangibility
Prior to purchase, much service promotion must rely on performance attributes which can
only be measured after a purchase experience (tangible goods have search qualities). Also
professional services have credence qualities. Need to use promotion to help customers
perceive a service as highly tangibility.
Develop tangible representation of the service, ie credit card serves as the
physical product with own image and benefits. Make advertising easier. Airlines
use an aircraft. Travellers umbrella.
develop a brand image--seek out U Haul as opposed to a truck service
Cite 3rd party endorsements...need endorsements from those that have
experienced the service.
Word of mouth very important due to intangibility.
Offer discounts and free samples/service to customers who encourage friends to
come.
offer tangible benefits in sales promotions, must be consistent with customers
needs/wants
Establish a clear product position, ie 24 hour outside service for repair of
industrial equipment.
Intangibility also presents pricing problems. How should an auto mechanic charge
for his/her services?
Visibility of the service may be a problem. Although a problem may have been
fixed, you don't understand why (CAR). Need to explain the time needed for
repair, and functions that were performed if you want the repair to be more
tangible.
Psychological role of price is magnified since customers must rely on price as the
sole indicator of service quality when other quality indicators are absent.
Discusses the seasonal demand patterns of ski resorts, and what ski resorts are
doing to develop demand for their service in the summer months. To resolve
inventory issues:
market services to segments with different demand patterns
market new services having counter cyclical demand patterns from existing
services
market new services to compliment existing services
market service extras at non-peak times
market new services not affected by existing capacity constraints
train personnel to do multiple tasks
hire PT employees during peak hours
educate consumers to use service at non peak hours
offer incentive, ie. reduce price at non peak times, this will not work in all
instances, ie, travel at non peak hours.
Inconsistency
Lawn care service cannot mow a lawn precisely the same way each time, but need
to make the service as efficient and consistent as possible. Remedy--use
technology to help make the service provider more consistent...or replace workers
with technology.
Inseparability
Leads to direct (short) channels of distribution. In some cases it is possible to use
intermediaries, travel agents, ATMs etc. Close provider-customer relationship-employee interpersonal skills very important. "Relationship managers", quality of
relationships determines the probability of continued interchange with those
parties in the future. Customers may become loyal to a particular employee as
opposed to the company, prevalent in the advertising industry. Therefore must
make sure that multiple employees are capable of performing the same tasks.
The extent of services in the economy
US is the worlds first service economy. More than 75% of the workforce in the
private sector is employed in the service industry. Accounts for more than $3bn in
output and contribute 60% of GNP. 60% of services are consumed by the final
consumer.
The increase in the service sector is a result of LT growth in the US economy

deriving demand for additional services
Travel
Financial services
Entertainment
Personal care etc.
Dual income families need for convenience. Increase in health awareness.
Services Marketing Strategies

1.
Product Strategy
The counterpart to product strategy in a service organization is the strategy it develops for its
service offerings. There are many similarities in the issues faced by both product and service
marketers in developing a product strategy. However, the important differences between a
product strategy and a service strategy are in large part due to the intangibility of services. In
some respects this intangibility make product strategy development in services more focused.
Marketing consideration in the physical nature of a product color, shape, texture are
nonexistent for a service. But this increases the relative importance of other considerations.
Image becomes a central factor in a service firms efforts to differentiate itself from competitors.
This, in turn, underscores the importance of brand name as an element in the service firms
strategy. The customer must be able to link a specific image with a specific brand name if a
service firm is to successfully differentiate itself.
There are many similarities in the issues faced by both product and service marketers in
developing a product strategy. However, the importance differences between a product strategy
and a service strategy are in large part due to the intangibility of services. In some respects, this
intangibility makes product strategy development in services more focused. Marketing
considerations in the physical nature of a product color, size, shape, texture are nonexistent
for a service. But this increases the relative importance of other considerations. Image becomes a
central factor in service firms efforts to differentiate itself from competitors. This, in turn,
underscores the importance of brand name as an element of service firms strategy. The customer
must be able to link a specific image with a specific brand name if a service firm is to
successfully differentiate itself.
2. Distribution Strategy
The intangibility and production-consumption inseparability of services result in rather unusual
(e.g. electronic) or direct channel of distribution. Without a physical flow or the need for
inventory and storage, resellers do not play a role in the distribution of services. However, in
some service industries agent intermediaries are a key feature of the distribution system. Travel
agencies, insurance agencies, stockbrokers and entertainment agents are intermediaries that
enhance the exchange process for producers and buyers. In general, intermediaries in the channel
of distribution are feasible for services that so not require direct contact between originator and
consumer of the service (Donnelly, 1976).
One important consideration in the distribution strategy for many service firms is location.
Services that require the consumer to go to the producer must be as accessible as possible. Often,
this calls for the establishment of branch offices for consumer service producers (banks, health
clinics, hair stylists). Some service arte distributed through franchise systems (dance studios, car
washes).
Services should have distinct channels of distribution. Because production and consumption of
services occur simultaneously, traditional channels of distribution involving a flow of goods may
not exist for services. Distinct channels of distribution may exist. For people based services, the
channel is usually short and direct. For equipmenr0based services, unusual forms of distribution
can exist. Electronic means of providing a service exist for information-oriented services (e.g.
stockbrokers). And banks and other financial institutions are locating customer service outlets in
other retail businesses, such as supermarkets and department stores.
A service organization has to select the channel of distribution and provide good location for the
distribution of services while designing distribution strategies. Distribution channels for product
marketing are not likely to be useful services because of the inseparability characteristic of the
services from the service providers. The service providers used the agents or brokers or makes
use of the direct sales channel. Most service organizations use direct channel of distribution
because a service usually cannot be separated from its service provider. Many services are
created/produced or sold and consumed simultaneously e.g. barbers, dentists, TV repair etc. The
channel of distribution for all these services is from producer directly to consumer. No
middlemen are involved.
The other frequently used and the dominant channel of service sector include one agent
middlemen. Agents and brokers function as intermediaries between the service provider and the
consumer. Airlines, securities, and hotels have long used agents or brokers as intermediaries to
make it more convenient for consumers to obtain their services. Indirect distribution of services
may be made possible by a tangible representation or a facilitating good e.g. a bank credit card.
The location is likely to play an important role in the channel selection decision. A good location
is essential for the distribution of service, especially because consumers are so convenience
oriented. The service provider has to talk into account locational considerations in providing
services for an effective distribution because it is considered as a critical factor in the final
purchase decision of many services.
3. Pricing Strategy
Price may be more important in the overall marketing strategy for a service than for a product. It
has been suggested that consumers depend on price information to choose between service
competitors to a greater extent than when choosing between brands of a product (Zeithmi). This
is because more nonprice information is available for evaluation of tangible goods. Service
marketers should realize this potentially greater informational role of price when developing
their marketing strategy. Cost oriented pricing is prevalent in public utilities where government
regulations constrain pricing practice. The purchase of industrial service is frequently based on
competitive bidding. A service marketer whose target market is quality conscious buyer may set
price according to the price quality relationship. The relationship may be stronger in the case of
services because of the absence of other quality related cues. Another demand oriented pricing
practice is the peak load price for electricity service. Many other pricing practices can be applied
to service equally well. Quantity discounts are certainly possible. For example, a season ticket to
a concert series usually costs less than the sum of the price for each individual concert. Price
penalties are often incurred as when a monthly bill is paid after a certain date. And prices for
services may vary according to when the service is provided, weekend rates for repair usually
exceed weekday rates, for example. Finally seasonally variations in the demand for some
services, coupled with their perishability, may require price fluctuations to smooth out demand.
Setting a price of a service is very difficult because services are perishable, they cannot be
stored, and demand for them often fluctuates considerably. Service intangibility may further
complicate the setting of prices. Furthermore, many a time consumers link the price with service
quality. Consumers must rely on price as the sole indicator of service quality when other quality
indicators are absent. It is the perceived quality of the service by the consumers that influences
pricing to a large extent. When pricing physical goods, management can look to the cost of
production (direct and indirect materials, direct and indirect labor and overhead) as an indicator
of price. It is often difficult to determine the cost of service provision and thus identify a
minimum price. Moreover, many services are situation specific. Thus, neither the service firm
nor the consumer knows the extent of service prior to production and consumption. Because cost
is unknown beforehand, price is difficult to set.
Cost plus pricing is most commonly used by service providers followed by competition based
pricing. Painters, plumbers, electricians frequently price their services on a cost plus basis. Price
competition is severe in many service areas characterized by standardization. Airlines tend to
meet competitors prices.
Prices of services can also help smooth fluctuations in demand due to the perishability of service
products. A high price may be used deter demand during peak periods, and a lower price nay be
used to stimulate demand during slack periods.
A flexible pricing strategy is used by many service organizations. Museums, movie theatres and
airlines offer lower prices for children and senior citizens. Airlines offer reduced fares if you buy
2 tickets at once. Private educational institutions charge different tuition fees whereas TU follow
a one price strategy. Discount strategies are widely used in marketing services.
4. Promotion Strategy
Service marketing uses many of the same promotional tools as product marketing. The
intangibility of services usually eliminates packaging as a form of promotion, but advertising,
personal selling, publicity, and sales promotion are all available for developing an overall
promotional plan. Personal selling with respect to services is different from that of products.
Personal selling is inherent in the promotion of services. The inseparability of production and
consumption often requires personal, face to face contact between buyer and seller. Even when a
service is provided through mechanical or electronic means, there is usually an initial personal
contact. In general, the degree of personal interaction between a buyer and a seller is
proportionally greater than in the case of a product. Furthermore, service personnel frequently
perform the dual roles of production and personal selling. Careful training of personnel for the
dual role of production and personal selling becomes imperative for the service firm. The
advertising strategy for a service requires the same decisions as a product advertising strategy.
Budgeting, media selkection and message content must be determined with specific advertising
objectives in mind. However, the major difference from product oriented advertising is in the
creative area of message content. Servoces are difficult to show or describe in an advertisement.
Personal selling plays a dominant role/powerful in the promotional programs of most service
firms because this form of promotion lets consumers and salespeople interact. When consumers
interact into a service transaction, they must interact with service firm employees. Customer
contact personnel can be trained to use this opportunity to reduce customer uncertainty, give
reassurance, reduce dissonance, and promote the reputation of the organization (George and
Kelly, 1983:14-20, Business, The Promotion and Selling of Services July). This, in effect,
involves/ emphasizes the importance of properly managing contact personnel/ a sales force
including recruiting, training and supervision. Selling a service is different from selling a
product. The seller of a service has to establish a personal relationship with the prospective
consumer. He should have professional orientation of selling and use indirect selling techniques
to promote intangible aspects. Consumer in the case of services would prefer more personal
information. He is unlikely to buy without adequate information of services. Consumer service
firms have little opportunity to go out into the field and solicit business from all potential
consumers because the very large number of potential consumers and the high cost per sales call
rule out such efforts. On the other hand, marketers of industrial services are dealing with a much
more limited target market and may find personal selling the most effective way of reaching
customers. Therefore, develop personal relationship with prospective customer. This can result in
satisfaction and purchase of services.
As intangible-dominated products, services are not easily advertised. The intangible is difficult to
depict in advertising whether the medium is print, television or radio. Service advertising should
thus emphasize tangible cues that will help consumers understand and evaluate the service. The
cues may be the physical facilities in which the service is performed or some relevant tangible
object that symbolizes the service itself (George and Berry, 1981:52-56, Guidelines for the
Advertising of Services, Business Horizons, July-August). Furthermore, employees in a service
organization are an important secondary audience for service advertising. Variability in service
quality, which varies from the labor intensive nature of many services, is a problem for service
marketers, and that consumers often associate the service with the service provider. Advertising
can have a positive effect on customer contact. Personnel, it can shape employees perceptions of
the company, their jobs, and how management expects them to perform, and it can be a tool for
motivating, educating and communicating with employees (George and Berry:55-70).
Word of mouth communication is important. Word of mouth can be stimulated by encouraging
consumers to tell their friends about satisfactory performance. Some service providers give their
regular consumers discounts or free services for encouraging friends to come in for a service
(e.g. hair cut).
Some sales promotion tools are feasible for service firms e.g contests but other types of
promotions are more difficult to implement. How do you display a service? How do you give a
free sample without giving away the whole service? Quantity promotion can help e.g. group
discounts for travel. Tying promotion with a privilege can be frequently used as a promotional
method e.g. user of a travel service being given a bonanza of an extended holiday or an
additional product.
Although the role of publicity and the implementation of a publicity campaign do not differ
significantly in the goods and the services sectors, service marketers appear to rely on publicity
much more than goods marketers do (Rathmell, 1974:100, Marketing in the services Sector
Cambridge) Hospitals and other health care providers use consumer education programs and
health fairs as a major component in their promotion more. In fact, certain segments of the
service sector made publicity their single communications medium (Rathmell)
5. People
People were added as the fifth element in the services market mix by Judd in 1987. His argument
was that, since services are to be provided by the employees, the firm has to first market the
service to hem to be effective. In other words, Judd was referring to internal market aspects.
Employees of a service organization act as contact personnel with customer. They play an
important role in marketing the services, thus, it is always desirable that these employees
appreciate the service first before marketing it to others. The concept of people in services
marketing mix has been endorsed by a number of authors. There are two objective levels of
internal marketing-strategic objective and tactical objective. According to Parsuraman and Berry,
service cannot be divorced from the people who are offering it. Its performance cannot be
separated from the people. If the people do not meet customers expectations, the service will
also not meet. Hence it would be better as investing in people quality in service business as
opposed to product quality in product marketing. Internal marketing of a service firm should lead
to attraction, development, motivation products. Internal marketing should pave the way for
external marketing of the services.
For most services, people are a vital element of the marketing mix. It can be almost a clich to
say that for some businesses the employees are the business if these are taken away the
organization is left with very few assets with which it can seek to gain competitive advantage in
meeting customers needs. For some organizations, the management of personnel can be seen as
just one other asset to be managed. For others, human resource management is so central to the
activities of the organization that it cannot be seen as a separate activity. In service industries, all
employees are what Gummeson (2001) has called part time marketers, in that their actions have a
much more direct effect on the output received by customers because (1) most service production
process require organizations own personnel to provide significant inputs to the service
production process. (2) Many service processed require the active involvement of consumers of
the service, and consumers therefore become involved as co-producers of the service. At its
simplest, this can involve consumers merely presenting themselves or their objects to the service
provider in order for the service to be provided. (3) Other people who simultaneously consume a
mass- produced service can affect the image of the service. And, the presence of other
consumers, who became co-producers of the service offering, in the service production- delivery
process means that the quality of the service that any customer received is dependent on the
performance of other consumers. Fellow consumers have an important role to play in enhancing
the quality of the service offering.
Any person coming into contact with customers can have an impact on overall satisfaction.
Whether as part of a supporting service to a product or involved in a total service, people are
particularly important because, in the customer's eyes, they are generally inseparable from the
total service. As a result of this, they must be appropriately trained, well motivated and the right
type of person. Fellow customers are also sometimes referred to under 'people', as they too can
affect the customer's service experience, (e.g., at a sporting event).
6. Physical Evidence
According to Shostack, A physical object is self-defining a service is not. Hence in a service
industry the marketing task is defining for the services what it cannot define for itself. The
physical evidence refers to physical environment, facilities and atmosphere. Evidence for a
service can be both peripheral and essential. The peripheral evidence like exterior of buildings,
furniture, layout, colour, interiors, carry bags, cash memos, labels, tickets, etc. are part of the
service but have little value with respect to core services. However, they can supplement the core
service. For example, when a Ford Icon or a Mitsubishi Lancer is taken to the authorized service
station or outlet, peripheral evidence does make an impression on the customer. However, it has
to be appreciated that for the core service sought physical evidence cannot act as a substitute.
Essential evidence refers to those that cannot be possessed. If you take a car rental service, the
car taken on rent can be quoted as the essential evidence. According to berry and Parsuraman,
physical environment is one of the three elements of service evidence. The other two are
communication and price. Baker has summarized physical environment into three factors:
ambient, design, and social. These are shown in Fig 3.3.
Physical evidence can support the marketing program by providing adequate service to a
customer and influencing his perception. It can make the service tangible. Communication can
also be used to make the service tangible by word-of-mouth or creative advertising or providing
other service guarantees. These can help in rendering the message tangible whereas essential
evidence can make the service tangible.
The tangible nature of a service means that potential customers are unable to judge service
before it is consumed, increasing the riskiness of a purchase decision. An important element of
marketing planning is therefore to reduce this level of risk by offering tangible evidence of the
promised service delivery. This evidence can take a number of forms. At its simplest, a brochure
can describe and give pictures of important elements of the service product a holiday brochure
gives pictorial evidence of hotels and resorts for this purpose. The appearance of staff can give
evidence about the nature of a service a tidily dressed ticket clerk for an airline gives some
indication that the airline operation as a whole is run with care and attention. Buildings are
frequently used to give evidence of service characteristics. Fast food and photo processing
outlets often use red and yellow color schemes to convey an image of speedy service.
Unlike a product, a service cannot be experienced before it is delivered, which makes it
intangible. This, therefore, means that potential customers could perceive greater risk when
deciding whether or not to use a service. To reduce the feeling of risk, thus improving the chance
for success, it is often vital to offer potential customers the chance to see what a service would be
like. This is done by providing physical evidence, such as case studies, or testimonials.
7. Process Management
Process management issues are availability of services and their consistent quality. According to
Shostack, the issues in process management go from process planning and control, operations
planning, facilities design, scheduling, inventory planning and control, quality control, operation
control to forecasting and long term planning. These are given in Table 3.5.
As may be seen, these steps and sequences refer to the complexity of the process, and the
variability or latitudes of these steps and sequences refer to the divergence. Hence the service
process is the combination of complexity and divergence. Services can be a combination of high
or low degree of complexity and high or low divergence. For example, process of high
complexity and low divergence can be a housing loan from housing loan from a financial agency.
Customized service can be example for low complexity and high divergence thus for service
marketers, process design can substantially increase the impact of the services.
This is the process(es) involved in providing a service and the behaviour of people, which can be
crucial to customer satisfaction.
Branding
Meaning of Branding
1. Importance to Customers/ Reasons for Branding
A) Assurance of Uniform/Consistent Quality
A brand is among the main indicators of quality to the prospective customers. a buyer
associates certain level with brands. An assurance of uniform quality level either high or low.
a brand may symbolize a certain quality level to a buyer. An indicator of quality.
Manufacturers who brand their products are concerned that their brand represent v certain
standard of quality and consistency. A brand helps buyers evaluate the quality of products
especially when people lack the ability to judge a product's characteristics. Consumers use
brands rather than price of products because it is not necessary that high priced products are
always of high quality but it is sure/certain that famous brands are always of high quality.
That is why consumers pay more price for branded products.
b) Feasible Shopping/easy to identify

Brands facilitate purchase of items that satisfy individual needs by identifying important
product attributes and differentiating it from competitors. There are a large number 0d items
produced by various manufacturers. Without branding, merits and demerits of products to be
purchased are identified and consumers select products by touching, tasting, and smearing
the products. It is not only difficult but also impossible. Since branding provides valuable
information such as who are the manufacturer or distributor, who are responsible for brands
and products, it is unnecessary to inspect, examine, and evaluate every product. It simplifies
and expedites purchasing. It enables a consumer to make a decision with a minimum of effort
by identifying products that they do and do not like. A good deal of time and effort can be
saved in shopping. Consumers can choose the best brands from among the many offerings
with the help of brands by identifying each offering.
c) Legally Protectable
D) Add Prestige to Otherwise Ordinary Commodities /Social Prestige
A brand can give the consumer pride and satisfaction from owning a well-known and high
quality brands which symbolizes status. Brands are indicators of a prestige-builder and status
evaluator of consumers. Such brands matter for prestige conscious individuals. Such
individuals have a feeling that they belongs to a special class of society. Rolex, MercedesBenz Car falls under this category.
e)
Attraction to New Products
2. Importance to Manufacturers or Sellers

a) Simplify Promotion
Effective promotion depends heavily on identifying the product and brand establishes the
single way of identifying products. Branding encourages repeat purchased and demand for
the product by effectively using promotion. Brands can be easily recognized when displayed
in a store or in advertising. When brand name is firmly fixed in the public's mind,
promotional campaign is apt to be more effective and less expensive. It facilitates
promotional efforts because promotion of all branded products indirectly promotes all other
products that are similarly branded. It also helps an organization to introduce a new product
that carries the name of one or more of its existing products because buyers are already
familiar with the firm's existing brands. Brand name would give these new products quicker
recognition and trial in the market than an unfamiliar brand name.
b) Minimize/Reduce Price Comparison
Branding enables manufacturers to determine their own prices by differentiating the
products from that of competitors. The price cannot be easily compared with the competitors'
prices. The price of two separate brands cannot be compared. It reduces price comparisons
because brands are
another factor that needs to be considered in comparing different
products. It allows/enables manufacturers to determine more than or less than the

competitors' price by not reducing the sale of own products. It enables manufacturers to
charge more or less price for a product than its competitors without suffering drop in sales.
c) Market Control
Branding can assist the seller in obtaining a significant share of the market for its product
and helps in controlling market. Manufacturers can control the demand for products that are
branded. It is because branded products can be purchased only from a single source. It
prohibits substitution of branded products. Substitution of branded products is almost
impossible. Developing and creating a brand loyalty of its customers helps sellers not only in
planning marketing mix by protecting the sellers from competitors but also in charging a
premium price for the product.
d) Brand Image
Brand Image refers to the consumers' liking for a particular brand of the product due to
certain good impressions. The consumer will have certain set of feelings, ideas and
impressions which will make him prefer and like a particular brand. It is the impression of a
particular product that has formed in the consumer's mind. The image leads to increased
demand for the product. The manufacturer's reputation in the market, advertisement and
actual use of the brand by the consumer may create e brand image. Such brand image
contribution makes the consumer determine to buy the brand.
E) Aid in Market Segmentation
Reasons against Branding

1. Homogeneous Nature of Products
Cannot be physically differentiated from other products. Some items are not branded because
they cannot be physically differentiated from other firms' products.
2. Perishable Nature of Products
The perishable nature of products such as fresh fruits and vegetables tends to discourage
branding.
3. Inconsistent or Lower Quality Products
Unable or unwilling to maintain Consistent quality. Many firms do not brand their products
because they are unable or unwilling to maintain Consistent quality of their brands. Moreover,
Many firms do not brand their products because their brands re of lower quality in comparison
to competitors.
4. High Cost
Branding involves high costs. So, many firms do not brand their products. Unbranded
products are less expensive. The lower price is made possible by lower quality ingredients,
lower cost packaging, and lower advertising costs. The major virtue of unbranded products for
the consumer is the lower price. it is because of limited advertising, elimination of the cost of
markdowns, available in limited container size generally in the larger size, elimination of
color from paper products, inconsistent in color and quality. .
5. Unable or Unwilling to Promote the Brand
Many firms do not brand their products because they are Unable or unwilling to promote the
brand assume the responsibility of promoting the brand.
6. Legal Formalities
Types of Branding
1. On the Basis of Number of Products Covered (Product Line)
a) Individual Brand
Individual brands are those brands in which each product is named differently. If a company
gives different and dissimilar /separate names for each of its products such brands are known as
individual brands. A major advantage of individual brands is that when an organization
introduces a poor product, the negative images associated with it do not contaminate the
company's other products because brand failure is not easily associated with the company's name
or the names of its other products. If one brand does not sell or proves to be inferior, the
company's other brands are not victimized by the name. If a consumer is dissatisfied with a
brand, the dissatisfaction is not likely to spread to the firm's other brands. It also facilitates
market segmentation when a firm wishes to enter many segments of the same market. Separate,
unrelated names can be used, and each brand can be aimed at a specific segment. It also enables
a company to market several products that compete with each other. It also enables a company to
compete more effectively in markets where consumers frequently switch from one brand to
another. It also enables a company's products to meet different consumer taste and preferences.
The major drawback of individual brands is the costs of advertising and promoting a new
product that cannot capitalize on the established reputation of an existing brand name or
company name.
b) Family Brand
Family brands are those brands in which all of a firm's products are branded with the same
name. All products manufactured by the firm are branded with the same name. The family brand
name has several advantages. New brands are easier and less expensive to introduce because of
consumer awareness of the family brand and its quality image created in part by advertising. The
firm need not incur the expense of research for a brand name. More significantly, the advertising
and promotion costs for new brands are lower, since the public is already familiar with the brand
name and can be easily persuaded to try new offerings. The firm can capitalize on its reputation
and on the investment it made in advertising existing products. The family brand name does
haves some drawbacks. if one product using the brand name proves unsatisfactory to buyers, it
may damage the reputation and sales of other products using the same name. Firms that use the
family brand name assume a greater burden of maintaining consistent quality across all products
than do users of individual brand names.
2) On the Basis of Ownership
Manufacturer's Brand
A brand created and owned by the producer of a product or service (Kotler and Armstrong,
1996:284). For manufacturer brand, the producer is responsible for naming, promotion, pricing,
and product quality decisions. The marketers of manufacturer's brand stress quality, rely heavily
on advertising and sales promotion, and usually price products 10 to 20 percent higher than
distributor brand. Manufacturer brands are usually the best-known items in the productcategory. Manufacturers of branded products are sophisticated and effective marketers.
Manufacturer brands are initiated by producers and ensure that producers are identified with
their products at the point of purchase. Brand loyalty is created by promotion, quality control,
and guarantees; it is a valuable asset to a manufacturer.
Private Brand
A brand created and owned by a reseller of a product or service (Kotler and Armstrong,
1996:284). Despite the fact that private brands are often hard to establish and are costly to stock
and promote, private levels yield higher profit margins for middlemen. They also give
middlemen exclusive products that cannot be bought from competitors, resulting in greater store
traffic and loyalty (benefits). Private brands are also known as distributor's brand.
The major characteristic of private brands is that manufacturers are not identified on the
products. Retailers and wholesalers use private brands to develop more efficient promotion, to
generate higher profit margins, and to improve store images. Private brands give retailers and
wholesalers freedom to purchase products of a specified quality at lowest cost without
disclosing the identity of the manufacturer.
Resellers can avoid a large part of the developmental and promotional costs of manufacturers. By
selling their own brands under private labels, resellers can offer the product at a lower price and
still realize larger profit margins than would be afforded from the national brand.
Private brands are not heavily advertised, and their distribution is limited to areas to which the
retailer and wholesaler sells. Distributors brand products because they are highly profitable
compared to manufacturer's brands. Typically, such brands cost less for distributors to purchase.
Therefore, the gross margin is higher. The lower cost is possible because the distributor's brand
is not advertised or promoted heavily, and raw materials may be of lesser quality than the
manufacturer brand. The distributor has great control over the pricing of the product.
Licensed Brand
Licensed brand is a business arrangement in which the owner of a brand grants permission to
other firms to use its brand name and brand marks on their (licensee) products in return for a
royalty on manufacture and sales of those products. Companies allow approved manufacturers
to use their trademark on other products for a licensing fee. Royalties may be as low as 2
percent of wholesale revenues or better than 10 percent. Company has authorized use of its
name on unrelated products. Companies move into brand licensing in hopes of protecting its
trademark. The Coca-Cola name appears in fourteen different product areas including
glassware, radios, trucks and clothing. Generally, a company licensing its name receives from
the licensee royalties from 4 to 8.5 percent of wholesales, plus a minimum guarantee. The
licensee is responsible for all manufacturing, selling and advertising functions. If the
combination flops the licensee bears the costs. But if it works, the licensee makes a profit and
the licenser gets to move into new product areas without the usual outlay for new product
development. The major advantage of licensed brand includes extra revenues, little cost, free
publicity, new images, and trademark protection. The licensing royalties can be an important
source of revenues and thus contribute to overall revenues. Besides, brand licensing lets them
enter new distribution and advertising channels, reach new markets, increase sales of their
primary products. The major disadvantage of licensed brand includes a lack of manufacturing
control, which could hurt the company's name, and bombarding consumers with too many
unrelated products bearing the same name. Companies should be aware of potential pitfalls. For
a licensee, the renting of a famous name means, in effect, that the manufacturer gives up its own
corporate identity. In addition, licensing arrangements can fizzle because of poor timing,
inappropriate distribution channels, or mismatch of product and name. A licenser should be
particularly careful that the quality of the licensed product is satisfactory, otherwise the
company's reputation and core business are at risk. To boost brand awareness more and more
companies are using licensing to extend their brands into completely new product areas.
Products bearing licensed trademarks and brand names outsold all other licensing categories.
Licensed Brand
Companies allow approved manufacturers to use their trademark on other products for a
licensing fee. Although brand licensing once meant simply sticking the corporate logo on
drinking glasses or T shirts to boost brand awareness, more and more companies are using
licensing to extend their brands into completely new product categories. Generally if the
combination flops, the licensee bears the costs. But if it works, the licensee makes a profit and
development. A company licensing its name receives from the licensee royalties from 4 to 8.5
percent of wholesale sales, plus a minimum guarantee. The licensee is responsible for all
manufacturing, selling, and advertising functions. Although royalties can be a secondary source
of income, most companies cannot enter into brand licensing just for money. Instead, they find
that brand licensing lets them enter new distribution and advertising channels, reach new
markets, and increase sales of primary products.
The major advantages of licensing brand include extra revenues, little cost, free publicity, new
images and trademark protection. The major disadvantages include a lack of manufacturing
control, which could hurt the company's name and bombarding consumers with too many
unrelated products bearing the same name. The manufacturer gives up its own corporate image.
Licensing arrangements can file because of poor timing, inappropriate distribution channels, or
mismatch of product and name. A licenser should be particularly careful that the quality of the
licensed product is satisfactory; otherwise, the company's reputation and core business are at
risk. Today licensing is multi-billion dollar business and growing.
Companies allow approved manufacturers to use their trademark on other products for a
licensing fee. Although brand licensing once meant simply sticking the corporate logo on
drinking glasses or T shirts to boost brand awareness, more and more companies are using
licensing to extend their brands into completely new product categories. Generally if the
combination flops, the licensee bears the costs. But if it works, the licensee makes a profit and
development. A company licensing its name receives from the licensee royalties from 4 to 8.5
percent of wholesale sales, plus a minimum guarantee. The licensee is responsible for all
manufacturing, selling, and advertising functions. Although royalties can be a secondary source
of income, most companies cannot enter into brand licensing just for money. Instead, they find
that brand licensing lets them enter new distribution and advertising channels, reach new
markets, and increase sales of primary products.
The major advantages of licensing brand include extra revenues, little cost, free publicity, new
images and trademark protection. The major disadvantages include a lack of manufacturing
control, which could hurt the company's name and bombarding consumers with too many
unrelated products bearing the same name. The manufacturer gives up its own corporate image.
Licensing arrangements can file because of poor timing, inappropriate distribution channels, or
mismatch of product and name. A licenser should be particularly careful that the quality of the
licensed product is satisfactory; otherwise, the company's reputation and core business are at
risk. Today licensing is multi-billion dollar business and growing.
Co-Brand
Co-branding occurs when two established brand names of different companies are used on the
same product. One company licenses another company's well known brand to use in
combination with its own. Opportunities often arise for the owners of two quite different brands
to work together jointly to develop a new product that carries the brand name of both partners,
resulting in an otherwise unattainable gain to both. It offers many advantages. Because each
dominates in a different category the combined brands create broader consumer appeal and
greater brand equity because co-brandings adds to the distinctiveness and perceived value of the
product. It also allows company's to enter new market segment with minimal risk and
investment backed by substantial marketing support because of the owner of the brand get
exposure and distribution through a ne channel. Co-branding has its limitations. Such
relationship usually involves complex legal contracts and licenses. Co-branding partners must
carefully coordinate their advertising, sales promotion, and other marketing efforts. Finally,
when co-branding each partner must trust the other will take good care of its brand. A
previously loyal customer of the brand may have reduced his faith in the co-brand because of
different taste or image.
Essentials of Good Brand Name

A good brand name should:
Be easy to pronounce and remember, recognize/spell. short

Be distinctive/ Uniqueness
Be adaptable to New Products
Legally Protectable: Be Capable of Registration and Legal Protection. Not infringe existing
registered brand names.
The brand name should translate easily into foreign languages
Reflective to product attributes/ Evoke positive associations.
Packaging
Meaning of Packing and Packaging
1. Packing means wrapping of goods before they are transported or stored or delivered to a
consumer. On the other hand, packaging is the subdivision of the packing function of marketing.
Packaging is one among the activities of designing and producing the container or wrapper for a
product. The wrapper or the container is called package.(p.161, Pillai, R.S.N and Bagavathi,
Modern Marketing Principles and Practices)
2. Packing is a process that speaks of companys ability to contain economically manmade or
natural products for shipment, storage, sale or final use. It comprises the activities of wrapping or
creating the product for performing the marketing functions more easily and economically. In
simple words, Packing is the act of housing the product in the packages or containers like tins,
cans, bags, jars, bottles, boxes, kegs, casks, and the like.
3. A package is a wrapper or a container in which a product is enclosed, encased, housed or
sealed. Packaging on the other hand deals with activities of planning and designing of different
means of packing the products. What are clothes to human beings so are the packages for the
products. Packing embraces the functions of package selection, manufacture, filling, and
handling. It is worth noting, here, that the word packing is more comprehensive and hence,
covers packaging. Packing is concerned with product protection while packaging with product
promotion.(p.256,C.N.Sontakki, Marketing management).
4. A package is a wrapper or container in which a product is enclose placing products in suitable
packages for delivery of the product to customer or for the purpose of storage and transport. d,
encased, or sealed. Packaging, therefore, may be defined as an act of designing and producing
the package for a product.(p.209, J.C. Gandhi, marketing a Managerial Introduction).
5. Packing refers to covering, wrapping, crating, filling compressing of goods to protect them
from spoilage, pilferage, breakage, leakage etc. Various kinds of goods are placed or packed into
appropriate containers for protection and convenient handling. Thus packing implies. On the
other hand, packaging involves designing and producing appropriate packages for products.
Objectives of Packaging
Protection
Information
Positioning
Storage
Promotion
Functions of Packaging
Protection
The most basic and original purpose of packaging is to protect the product in transport and
storage at the manufacturer, wholesaler, retailer and consumer levels. They protect the product
and maintain its functional form. The product may be exposed to extremes of cold, heat,
moisture, during transportation and storage. It must be protected against being crushed,
dropped, and punctured during its physical handling. Packaging protects the product from
leaks, breaks, spills, spoils, vaporization, mix, discolor from the time of production to the time
of consumption or use. Disgruntled consumers and shoppers change brands quickly if the
package is so inadequate. It could reduce damage that could affect the product's usefulness
and increase costs.
Identification
Packaging also identifies and differentiates product from that of competitors. The information
on the package identifies the brand, contents and ingredients of the product. It also gives the
price of the product, instructions for use, safety warnings, limitations on use, and the
guarantee or warranty, name and address of the manufacturer or distributor and a promotional
message in the form of words and graphics. Such information creates individuality and helps
identify the product. Consumers can choose and select the desired brand. Middlemen can
locate the brands from warehouse to fulfill customer orders.
Convenience
Products should be loaded, unloaded, carry, bring, carry and store at the warehouse several
times during the flow of goods from the manufacturer to middlemen, and from middlemen to
consumers. The size, shape, and other physical properties of packaging should make
manufacturer and middlemen convenient for handling, transporting, storing, opening, selling
and disposing of products. Consumers constantly seek packaged items so that they are easy to
handle, easy to open, and close, easy to dispose of, or reuse, easy to purchase and carry, easy
to return and easy to decorate. It also prevents waste and facilitates storage.
Promotion
A fourth function of packaging is to promote the product by communicating its features,

benefits, uses, and image. If packages are of attractive design, multi-colored good-looking,
and if it contains attractive pictures, it can translate the attention of customers to interests.
Since the design, size, and shape of packages informs customers about the features and
characteristics of products, it promotes product to consumers while buying products. It also
promotes products as an advertising media. Attractive packaging can be an effective way to
attract new customers. Generally purchasers of cosmetic and toiletry products switch brands
for a better package. It can be used as in-store or point-of-purchase promotion for the product.
Through verbal and nonverbal symbols, the package can inform potential buyers about the
product's content, features, uses, advantages and hazards. To develop a package that has
definite promotional value, a designer must consider size, shape, texture, color and graphics.
Types of Packaging
Primary Package
Primary package refers to the product's immediate container. In some cases, the primary
package will hold the product until the consumer is ready to use it after which it will be
discarded. In other situation, the primary package is kept throughout the entire life of the
product (toothpaste tube, detergent box).
Secondary Package
Secondary package refers to additional layers of protection that they are removed once the
product is ready to use. For example, a tube of toothpaste usually comes in a cardboard box.
When consumers begin using the toothpaste, they will dispose of the box but retain the
primary package.
Shipping Package
Shipping Package refers to any further packaging components necessary for storage,
transportation or identification. . Thus, the toothpaste manufacturer typically ships the goods
to retailers to corrugated boxes of 24 packages, each containing a tube of toothpaste. The
retailer may discard the corrugated box once the toothpaste arrive or use it for easier storage if
shelf space is limited.
Essentials of Good Packaging

1. Functional Attributes
A good package should be able to protect the product, convenient to use and handle, easy to
identify, and effective to promote the product. A package should have the ability of protecting
product whatever risk becomes visible. Package should be convenient in filling, closing, and
transporting product. Package should be identified by the consumer at the first sight. Package
should be able to promote the product.
2. Attractive
Packaging should be eye-catching in the eyes of customer. A package should be capable of
attracting attention of customers, as it is a promotion tool and it can play the role of reticentseller to the middlemen. Package design, weight, material, color combinations, graphics, texture,
topography, illustrations are to be pleasing to eyes and appealing to brain. A well design package
can make a product more alluring. A package would be attractive if the shape, size, design, color;
brand name should be presented in an integrated manner and in accordance with the need of the
target market segment. Such attractive package can generate impulse buying by translating the
attention and interest of consumers into desires.
3. Informative/ Communicative
Packaging should be informative. Consumers want to purchase products quickly due to their
busy schedule and they do not want to stay more time in the shop. brand, price, weights,
illustrations, pictures, directions for use, and other information should be mentioned clearly,
effectively and attractively so that such product information can be read and see hurriedly. So far
as possible a package should be such that product can be seen from the outside.
4. Economy
Packaging should be economical and less expensive because it increases cost and price of
products. Packaging cost is involved in selling price of producers and middlemen, and purchase
price of consumers. A poor packaging (Under-packaging) increases costs and results in slow and
small selling due to the damage of the product and less attractive package. A good packaging
(Over-packaging) is also expensive and costly due to high investment in packaging but does not
benefit accordingly. These both forms of packaging are not appropriate. The packaging which
reduces the cost of transportation and storage is appropriate. Shipping, distribution, and storage
costs are kept low by durable packaging, and food and other perishables keep fresher longer.
Packaging must perform a variety of functions at low costs.
5. Reusable
Reusable packages should be developed. A company should develop a reusable packaging.
Reusable package is a package which is used for one purpose can be used to serve another
purpose. The packaging must be such that it should help to repeat sales.
6. Environment-Friendly
Packaging has created environmental problems particularly through the discarded packages. It
increased the pollution in the environment. Manufacturer should use bio-degradable materials
that minimize pollution problems. It should permit recycling of packaging materials to do away
with garbage. Of the total amount of solid waste that Americans produce, close to 40 percent is
comprised of packaging. Such solid waste existed in sidewalks, waterways, and open park land
in the form of broken bottle, crushed cartoons, wads of plastics and bent cans. Environmental
problems created by package waste need solving.
Labeling
Meaning of Labeling
The term labeling means putting labels on the package or the product. A label is a small slip
placed on or near anything (product) to denote its nature, contents, ownership, destination etc.
The function of standardization is made perfect and known to the users trough labels. Packages
afford a place where the labels could be affixed. It is a medium through which the manufactures
give necessary information to the user or the consumer. It is defined as a part of a product which
carries verbal information about the product of the seller. A label plays an important role in
making the packaging and branding functions meaningful. Hence these functions are closely
related. Furthermore, any legal restrictions imposed are evidenced through labeling. The
provision of showing details about the details of the commodity, its weight, date of manufacture
etc is carried out with the help of labeling.
Functions of Labeling
Identification of a Product
It gives definiteness to the product and therefore identification of a product is easy.
Indicator of Quality
It stresses the standard and other special features of the product which are advertised. It
encourages manufacturers to produce only standardized and quality products.
Proper Use
It enables the manufacturer to give clear instructions to the consumer about the proper use of his
product.
Avoid Price Variations
By mentioning prices, undue price variations caused by the intermediaries are avoided. In other
words, price is recorded, registered, and maintained.
Method to Contact with the Customer
It provides a method for the manufacturer by which a contact with the customer is established.
Types of Labels
Brand Labels
These labels are exclusively meant for popularizing the brand name of the product. Cosmetics
manufacturers prefer to use this kind. They are interested in popularizing the brand names for
their products.
Grade Labels
These labels give emphasis to standards or grades. This is used as an indirect method of product
identification e.g. cloth, leaf tea, dust tea.
Descriptive Labels
the labels which are descriptive in nature are typified as descriptive in nature. In addition to the
product feature they explain the various uses of the product. Most of the milk food products and
other similar household products invariably have descriptive labels.
Informative Labels
The main object of these labels is to provide maximum possible information. These may contain
the products characteristics, and in addition the method of using it properly. In the case of
medicines detailed labels are attached which even specify the side effects of using them.
Advantages of Labeling
It is a social service to customers who very often do not know anything about the products
characteristic features. False claims are prevented by using labels.
It avoids price variations by publishing the price on the label.
It helps advertising activity of the organization.
It helps the customers to assess the superiority of a product.
It is a guarantee for the standard of the product. Hence it raises the prestige of the product and
of the manufacturer.
Disadvantages of Labeling
For an illiterate people this is of no use.
It increased the cost of the product, since labeling involves expenditure on the part of the
manufacturer. Labeling is effective only where standardization is compulsory.
It enables the customer to weigh and compare the advantages of products before they are used.
This ultimately ends in discarding one product in favor of the other.

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Chapter VI

All combined to carefully deliver the core benefit(s).

It offers additional consumer benefits and services.

Since price is usually low, every transaction is not regarded as important.

Stores are Clustered

Short Channel of Distribution

Price is generally high because the product is new.

Arrangement of Adequate Supply

Standardization and Grading

b) Fabricating Parts and Materials

Company reputation as well as brand name play important role in marketing.

Product Life Cycle

Stages of the Product Life Cycle

Low Sales Volume

High Sales Rate

Promotion Emphasis on differentiation and building of brand loyalty. Incentives to get

Importance of New Product

Technology can be exploited

Cos often seek technological breakthroughs. As an illustration cannon developed simple,

New Product Development Process

Rejecting an idea that could become a very successful product.

Where Market Potential = N*R*AP. N = Number of people. R = Average quantity of purchase

Reasons for New Products Failure

Lack of Differentiating Advantage

A product is likely to be perceived as unique if satisfied a new function; if it satisfies an

Poor Marketing Plan

Target Market too Small /Small Market Size

Poor Product Quality

Lack of Channel Support

Changes in Consumers Tastes

Product Adoption and Diffusion

Product Line and Mix Strategies

1. Product Line Decisions

Product Line Length

a) Product Line Expansion

2. Product Mix Decisions

Inseparability of Production and Consumption

The increase in the service sector is a result of LT growth in the US economy

Dual income families need for convenience. Increase in health awareness.

Services Marketing Strategies

b) Feasible Shopping/easy to identify

Attraction to New Products

2. Importance to Manufacturers or Sellers

products. It allows/enables manufacturers to determine more than or less than the

Reasons against Branding

Essentials of Good Brand Name

Be easy to pronounce and remember, recognize/spell. short

Reflective to product attributes/ Evoke positive associations.

A fourth function of packaging is to promote the product by communicating its features,

Essentials of Good Packaging

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Where Market Potential = NRAP. N = Number of people. R = Average quantity of purchase