Product Policy, NPD Process & PLC Stages
What is a Product? (Concept & Levels)
A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It is a bundle of utilities consisting of various features and services.
Philip Kotler defines 5 Levels of a Product:
Core Benefit: The fundamental service or benefit the customer is really buying. (e.g., A hotel guest is buying “rest and sleep”).
Basic Product: Turning the core benefit into a basic product. (e.g., A hotel room includes a bed, bathroom, and towels).
Expected Product: Attributes buyers normally expect. (e.g., Clean sheets, working lights).
Augmented Product: Additional features that exceed customer expectations. (e.g., Free Wi-Fi, fresh flowers, rapid check-in).
Potential Product: All possible augmentations and transformations the product might undergo in the future. (e.g., A suite where you can control the ambiance with your voice).
Product Policy: Nature & Scope
Product Policy involves the strategic decisions regarding the company’s product offering. It defines the type, volume, and timing of products a company offers for sale.
Scope of Product Policy Decisions:
Individual Product Decisions: Decisions about attributes (Quality, Features, Style), Branding, Packaging, and Labeling.
Product Line Decisions: A group of products that are closely related (e.g., Colgate Toothpaste, Colgate Gel, Colgate Herbal). Decisions involve line stretching (adding higher/lower-end products) or line filling.
Product Mix Decisions: The total assortment of products a company sells.
Width: Number of different product lines (e.g., Soap, Detergent, Cosmetics).
Length: Total number of items in the mix.
Depth: Variants of each product (e.g., Lux in Pink, White, Blue).
Consistency: How closely related the lines are.
Types of Product (Global Marketing Context)
Products can be classified based on their potential for marketing across different geographies. This classification helps managers decide whether to standardize or adapt their products.
Local Products: These are seen as suitable only for a single market. They are specific to a culture or region and may not have demand elsewhere.
International Products: These are products seen as having extension potential into other markets. They start locally but can be sold in other countries with minimal changes.
Multinational Products: These are products adapted to the perceived unique characteristics of specific national markets. The product changes to fit the local needs of each country.
Global Products: These are products designed to meet global segments. They are standardized and sold the same way worldwide (e.g., Sony Electronics).
Note on Quality: Maintaining quality is a catchword in international marketing. Products must often meet standards like ISO 9000 as a prerequisite for export.
Features of a Product
A product is defined by several essential characteristics. These features help differentiate one product from another.
Tangible Attributes: The most obvious feature. It means the product can be touched, seen, and felt.
Example: Cycle, Book, Pencil, Table.
Intangible Attributes: The product may be in the form of a service which cannot be touched but is experienced.
Example: Banking, Insurance, Repairing services.
Exchange Value: Every product must be capable of being exchanged between a buyer and a seller for a mutually agreed consideration (Price).
Utility Benefits: A product is essentially a “bundle of potential utility.” It must provide a benefit or solve a problem.
Differential Features: A product should be distinguishable from others. Packaging, branding, and design create this Product Differentiation.
Consumer Satisfaction: The product must have the ability to deliver value and satisfaction to the consumers it is intended for.
Business Need Satisfaction: From the company’s view, the product must satisfy a business need (like generating revenue or utilizing resources).
Importance of Product
Product decisions are the most crucial because the product is the engine that pulls the rest of the marketing program.
Centre of All Marketing Activities: The product is the pivot. All other activities—advertising, distribution, buying, selling—cluster around it. Without a product, there is no marketing.
Starting Point of Marketing Planning: Products are the building blocks of a marketing plan. Decisions on Price, Place, and Promotion can only be made after the product is defined.
Key to Market Success:
Quote: “If the first commandment in marketing is: know the customer, the second is know the product.”
If the product is faulty, it will ultimately fail, no matter how good the marketing is.
Centre of Consumption and Satisfaction: From a consumer’s viewpoint, the product is the source of satisfaction. If the product fails to fulfill this, government agencies may intervene to safeguard consumer interests.
Importance from Social Viewpoint: Products satisfy societal needs and provide employment and a standard of living to millions of people.
Corporate Need Satisfaction: The basic corporate need for profits is satisfied by products. It is the vehicle through which a company generates sales volume and revenue for survival.
A Competitive Weapon: The product has great potential as a tool to fight competition. Companies gain advantages by changing packaging, color, size, quality, or innovation.
Levels of Product
A product is not just one thing; it consists of five different levels that add value. Marketing planners need to think about the product at these five levels.
1. Basic Product Level (Core Benefit)
This explains the fundamental reason why a customer buys. It addresses the core problem-solving benefit.
Example: For a car, the core benefit is transportation. For a mobile, it is communication.
2. Generic Product Level
This is the actual product with its basic qualities. It includes the generic ingredients required to deliver the core benefit.
Attributes: Quality level, Features, Design, Brand name, Packaging.
Example: A car must have wheels, an engine, and seats.
3. Expected Product
This refers to the set of attributes and conditions that buyers normally expect when they purchase this product.
Example: A hotel guest expects a clean bed, working lights, and fresh towels.
4. Augmented Product
This is where the competition happens. It refers to additional factors that set the product apart from competitors. It creates a “bundle of benefits” that exceeds customer expectations.
Includes: Home delivery, Installation, After-sales service, Customer education, Warranties.
5. Potential Product
This refers to the future. It encompasses all the possible augmentations and transformations the product might undergo in the future.
Example: Levels of Product for Coca-Cola
To understand these levels, let’s look at a bottle of Coca-Cola:
Core Benefit: To quench thirst.
Generic Product: A burnt vanilla-smelling, black, carbonated, sweetened fizzy drink.
Expected Product: The customer expects the drink to be cold and carbonated. If it is warm or flat, expectations are not met.
Augmented Product: Brand image, global availability, sponsorship of events, emotional connection (“Open Happiness”).
Potential Product: New flavors (Zero Sugar, Diet), new sustainable packaging, or personalized dispensing machines.