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).
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.
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.
In the world of marketing, the “Product” is the engine that pulls the rest of the marketing program. It is the most critical element of the marketing mix because if the product fails to deliver value, no amount of clever pricing or promotion can save it.
This comprehensive article covers the entire journey of a product: from its policy and planning to its development and eventual life cycle in the market.
What is a Product? (Concepts & Levels)
A Product is anything that can be offered to a market to satisfy a want or a need. It is not just a tangible object; it includes services, events, persons, places, organizations, and even ideas.
According to Philip Kotler:
“A product is anything, tangible or intangible, which can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.”
The 5 Levels of a Product (Customer Value Hierarchy)
To understand what a customer truly buys, marketers analyze a product on five levels:
Core Benefit: The fundamental service or benefit that the customer is really buying. (e.g., For an Air Conditioner, the core benefit is “Cooling and Comfort”).
Generic Product: The basic version of the product that performs the function. (e.g., The AC machine itself with basic components).
Expected Product: The set of attributes and conditions buyers normally expect when they purchase this product. (e.g., Remote control, warranty, quiet operation, cooling speeds).
Augmented Product: Additional features, benefits, or services that exceed customer expectations and set the product apart from competitors. (e.g., Free installation, 24/7 customer support, smart-home connectivity). Competition mostly happens at this level.
Potential Product: All the possible augmentations and transformations the product might undergo in the future. (e.g., An AC that runs on solar power, purifies air like a tree, and is completely silent).
What is Product Policy Decisions? (Nature & Scope)
Before a single product is made, top management must set the ground rules. This is called Product Policy.
Product Policy refers to the broad guidelines and rules set by top management that determine the nature, volume, and timing of the products a company offers. It acts as a compass for all product-related decisions, ensuring they align with the company’s long-term goals.
Nature of Product Policy:
Strategic Guide: It is a long-term strategic plan, not a short-term tactic.
Top Management Function: Critical decisions (like entering a new market or dropping a product line) are taken by the Board of Directors.
Focus: It balances maximizing customer satisfaction with ensuring profitability and growth.
Objectives of Product Policy:
Survival: To keep the company viable in a competitive market.
Growth: To increase sales volume and market share over the long run.
Flexibility: To remain adaptable to changing customer needs and technology.
Resource Utilization: To optimize the use of production capacity, finance, and marketing networks.
Scope of Product Policy (What it covers):
Product Mix Decisions: Broadening or narrowing the product mix.
Product Line Decisions: Stretching or filling the product line.
Product Differentiation: How to distinguish the product (branding, packaging).
Product Innovation: Policies regarding R&D for new products.
Product Mix (Product Assortment)
Most companies do not sell just a single product. They sell a variety of goods to satisfy different market needs. The total set of all products and items that a particular seller offers for sale is called the Product Mix, also known as Product Assortment.
To understand this concept, let’s look at two real-world examples: Patanjali and Nestlé.
Real-World Examples
1. Patanjali Ayurved: Patanjali does not just sell toothpaste. Its “Product Mix” is massive.
It sells Personal Care (Dant Kanti, Soaps, Shampoos).
It sells Food Products (Atta, Ghee, Biscuits, Noodles).
It sells Home Care (Dishwash bar, Detergents).
It sells Medicines (Ayurvedic supplements).
2. Nestlé India: Nestlé is a classic example of a deep and wide product mix.
A product mix is defined by four dimensions: Width, Length, Depth, and Consistency.
1. Product Mix Width (Breadth)
This refers to the number of different product lines the company carries.
Example: Patanjali has a wide mix because it deals in Medicine, Cosmetics, Grocery, and Garments (Paridhan).
Strategy: Companies increase width to diversify risk and capitalize on their brand reputation.
2. Product Mix Length
This refers to the total number of items in the mix. It is the sum of all the products within all the lines.
Example: If Nestlé has 5 milk products, 5 beverages, and 10 chocolates, the “Length” of its mix is 20.
3. Product Mix Depth
This refers to the number of versions offered of each product in the line. It includes different sizes, flavors, and formulations.
Example:Maggi Noodles comes in Masala, Chicken, Atta, Oats, and varied pack sizes (single pack, family pack). This variety represents the depth of the Maggi line.
4. Product Mix Consistency
This refers to how closely related the various product lines are in end-use, production requirements, or distribution channels.
Example:Amul has high consistency because almost all its products (Milk, Butter, Cheese, Ice Cream) are dairy-based and use a cold-chain distribution network.
Example:Samsung has lower consistency because it sells everything from Smartphones (Consumer Electronics) to Heavy Ships and Insurance.
Product Line Decisions
A Product Line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, or fall within given price ranges. Product managers must constantly decide whether to expand or cut their product lines.
1. Line Stretching
This occurs when a company lengthens its product line beyond its current range. This can be done in three ways:
Downward Stretch: A company located at the upper end of the market introduces a lower-priced line.
Reason: To plug a market hole that would otherwise attract a new competitor or to respond to an attack on the high end.
Example:Mercedes-Benz introducing the A-Class (a smaller, cheaper car) to compete in the lower-luxury segment.
Risk: It might cheapen the brand image.
Upward Stretch: Companies at the lower end of the market may enter the higher end.
Reason: Higher margins and faster growth rates at the top.
Example:Maruti Suzuki, known for budget cars (Alto, WagonR), launched the Nexa channel to sell premium cars like the Ciaz and Grand Vitara.
Risk: Customers may not believe the “budget” brand can produce “premium” quality.
Both-Way Stretch: Companies in the middle range may decide to stretch their line in both directions.
Example:Titan Watches sells Sonata for the budget segment and Nebula (gold watches) for the luxury segment, while keeping Titan in the middle.
2. Line Filling
This involves adding more items within the existing range of the product line.
Reason: To reach for incremental profits, satisfy dealers who complain about missing items, utilize excess capacity, or keep out competitors.
Risk: If overdone, it results in “cannibalization” (new products eating the sales of old ones) and customer confusion.
3. Line Pruning
The opposite of stretching. This involves cutting down the number of items in the product line.
Reason: When products are dead weight (unprofitable) or when production capacity is short.
Example:P&G significantly pruned its “Head & Shoulders” shampoo line from 31 items down to 15 to reduce complexity and focus on best-sellers.
New Product Development (NPD) Process
Innovation is key to survival. However, new products have a high failure rate. To minimize risk, companies follow a systematic New Product Development (NPD) process.
The 7 Stages of NPD:
Idea Generation: The systematic search for new product ideas. Sources include internal employees, customers, competitors, and distributors.
Idea Screening: Filtering the ideas to spot good ones and drop poor ones as soon as possible. (e.g., Is it feasible? Is there a market?).
Concept Development & Testing: A “product idea” is a possible product; a “product concept” is a detailed version of the idea stated in meaningful consumer terms. This concept is then tested with a group of target consumers to gauge their reaction.
Business Analysis: A review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives.
Product Development: Turning the product concept into a physical product (prototype) to ensure the idea is workable and safe. This involves R&D and engineering.
Test Marketing: Introducing the product and marketing program into realistic market settings (a few select cities) to test consumer response before a full-blown launch.
Commercialization: The full-scale launch of the product into the market. This involves high costs for advertising and distribution.
The Product Life Cycle (PLC)
The Product Life Cycle (PLC) is a concept that describes the stages a product goes through from when it was first thought of until it finally is removed from the market.
According to Philip Kotler:
“The PLC is an attempt to recognize distinct stages in the sales history of the product… corresponding to these stages are distinct opportunities and problems with respect to marketing strategy and profit potential.”
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The PLC typically has four stages: Introduction, Growth, Maturity, and Decline.
Stage 1: Introduction Stage
This starts when the new product is first launched.
Sales: Low and slow. It takes time for the product to roll out to markets and for dealers to stock it.
Profits: Negative or low. Distribution and promotion expenses are at their highest.
Competition: Low. Few or no competitors.
Marketing Objective: Create product awareness and trial.
Strategic Decisions in Introduction:
Rapid Skimming Strategy: Launching at a High Price with High Promotion. (Example: Apple iPhone launches).
Slow Skimming Strategy: Launching at a High Price with Low Promotion. Used when the market size is limited and competition is not expected soon.
Rapid Penetration Strategy: Launching at a Low Price with High Promotion. Used to capture a large market share quickly in a price-sensitive market. (Example: Reliance Jio launch).
Slow Penetration Strategy: Launching at a Low Price with Low Promotion. Used when the market is price sensitive but not promotion sensitive.
Stage 2: Growth Stage
If the new product satisfies the market, it enters the growth stage.
Sales: Climb rapidly. Early adopters continue buying, and more consumers follow.
Profits: Increase rapidly as promotion costs are spread over a larger volume and unit manufacturing costs fall.
Competition: New competitors enter, attracted by the opportunities for profit. They introduce new product features.
Strategies for Growth:
Product Improvement: Improve quality and add new product features or styling.
New Models: Add new models and flanker products (different sizes, flavors) to protect the main product.
New Segments: Enter new market segments.
New Channels: Enter new distribution channels (e.g., moving from online-only to retail stores).
Shift in Advertising: Shift from building product awareness to building product conviction and purchase.
Price Cuts: Lower prices slightly to attract the next layer of price-sensitive buyers.
Stage 3: Maturity Stage
This is the longest stage for most products. Sales growth slows down or plateaus.
Sales: Peak sales. The market is saturated (most people who want the product already have it).
Profits: Begin to decline. Competition is fierce, leading to price wars and increased advertising spending to defend market share.
Competition: Intense. Weak competitors drop out.
Strategies for Maturity:
Market Modification: Try to increase consumption by finding new users or new segments (e.g., Johnson & Johnson marketing baby oil to adults).
Product Modification: Change characteristics such as quality, features, or style to attract new users (e.g., Car manufacturers launching “facelift” versions of existing models).
Marketing Mix Modification:
Price: Cut prices to match competitors.
Distribution: Seek more outlets.
Promotion: Use aggressive sales promotion (contests, discounts).
Stage 4: Decline Stage
The sales of most product forms and brands eventually dip. This can happen slowly (oatmeal) or rapidly (VHS tapes).
Sales: Declining.
Profits: Eroding.
Reason for Decline: Technological advances (CDs replacing Cassettes), shifts in consumer tastes, or increased competition.
Strategies for Decline:
Maintain: Continue hoping that competitors will leave the industry. (Example: P&G remained in the liquid soap business while others withdrew, eventually making good profits).
Harvest: Reduce various costs (R&D, advertising, sales force) and hope that sales hold up. This is also called “milking the brand.”
Divest: Drop the product from the line. Sell it to another firm or liquidate it.
Example Case Study:
Introduction: 3G Mobile Phones (High price, low awareness initially).
Growth: 4G Smartphones (Rapid adoption, many competitors like Samsung, Apple, Xiaomi).
Maturity: Laptops (Everyone has one, competition is on price and minor features).
Decline: Landline Telephones / Typewriters (Replaced by newer tech.
Product Improvement & Diversification
Companies cannot rely on one product forever. They must improve existing products and find new markets.
Product Improvement
This is the process of making meaningful changes to an existing product to satisfy customers better or combat competition. Unlike NPD, this focuses on upgrading what you already have.
Why Improve Products?
To extend the Product Life Cycle (especially during the Maturity stage).
To create a “new” talking point for advertising (e.g., “New and Improved Formula”).
To fix customer complaints or defects.
3 Main Strategies for Product Improvement:
Quality Improvement: Increasing the durability, reliability, or speed. (e.g., A smartphone using stronger glass).
Feature Improvement: Adding new functions that make the product more versatile or safe. (e.g., WhatsApp adding “Delete for Everyone”).
Style/Aesthetic Improvement: Changing the look, feel, or color without changing functional performance. (e.g., A car facelift with new headlights).
Product Diversification
Diversification is a growth strategy where a company enters a new market with a new product. It is high-risk but high-reward.
Types of Diversification:
Concentric Diversification: Adding new products that are related to existing products (technology/marketing). Example: A shoe company starting a line of socks.
Horizontal Diversification: Adding new products that are unrelated to current products but appeal to the same customer group. Example: A gym selling protein shakes.
Conglomerate Diversification: Adding new products that are totally unrelated to current products and markets. Example: Tata Group moving from Steel to Salt to Software.
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