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WHAT IS PRODUCT?
1.1 INTRODUCTION:
A Product is a set of tangible or intangible attributes that leads to customer satisfaction. A tangible product
is a physical object that can be perceived by touch such as a building, vehicle, gadget, or clothing. An
intangible product is a product that can only be perceived indirectly
such as an insurance policy.
Products that are marketed include physical goods, services,
experiences, events persons, places, properties, organisations,
information and ideas.
In marketing, a product is anything that can be offered to
a market that might satisfy a want or
need.
In retailing, products are called merchandise.
In manufacturing, products are bought as raw materials and sold as finished
goods. Commodities are usually raw materials such as metals and agricultural
products, but a commodity can also be anything widely available in the open
market.
In project management, products are the formal definition of the project deliverables that make up or
contribute to delivering the objectives of the project. In insurance, the policies are considered products
offered for sale by the insurance company that created the contract.
In economics and commerce, products belong to a broader category of goods. The economic meaning of
product was first used by political economist Adam Smith.
Dangerous products, particularly physical ones that cause injuries to consumers or bystanders may be
subject to product liability.
1.2 DEFINITION:
“A product is anything that can be offered to a market for attention, acquisition, user or consumption that
might satisfy a want or need.” – Philip Kotler.
“A product is a set of tangible attributes including packaging, colour, price, quality and brand plus the
services and reputation of the seller. A product may be good, service, place, person or idea.” – William
Stanton.
―A product is any good, service or idea that satisfied a need or wants and can be offered in an exchange.‖ -
Skinner.
“A product is the item offered for sale. A product can be a service or an item. It can be physical or in virtual
or cyber form. Every product is made at a cost and each is sold at a price. The price that can be charged
depends on the market, the quality, the marketing and the segment that is targeted. Each product has a useful
life after which it needs replacement, and a life cycle after which it has to be re-invented. In FMCG
parlance, a brand can be revamped, re-launched or extended to make it more relevant to the segment and
times, often keeping the product almost the same.‖ - The Economic Times.
―A good or service that most closely meets the requirements of a
particular market and yields enough profit to justify its continued existence.‖ - Business Dictionary
1.3 OBJECTIVES OF STUDY:
1) To study in depth about the product and its development.
2) To find out the need of the new product in the market.
3) To study in detail about Tata Nano, the ‗people‘s car‘.
1.4 SCOPE OF THE STUDY:
Today‘s world is running towards new technologies and globalisation. The wants and needs of the people of
this generation are changing every now and then. So it is a challenge for the entrepreneur to invent more and
more product and bring them at the service of the people. This will result in new product development. To
capture the market share and profitability in the market, the companies are trying to develop a new product
or make modification in the product. There is scope to make study about the product, product planning and
process of new product development.
1.5 RELEVANCE OF THE STUDY:
The present study is based on secondary data collection. The outcome of the study will definitely useful in
the marketing field to take appropriate marketing decisions.
This study will help you to understand how the entrepreneurs with their one thought can change the history
of the production and marketing world. This study will show you how one thought generated in the mind of
the Mr. Ratan Tata and made him to produce a new, ‗people‘s car‘ with a very affordable price to middlelower
and lower class people.
1.6 PRODUCT TYPES
Product refers to anything that can be offered to a marketer for attention, acquisition, use or consumption
that might satisfy a want or need. A product is a set of tangible and intangible attributes, which may include
packaging, colour, price, quality, brand and seller‘s services and reputations.
1.6.1. CONSUMER PRODUCT:
Product bought by final consumer for personal consumption. There are four types of consumer goods.
1.6.1a. Convenience Product: Those products your customers buy often and without much thought or
planning are classified as convenience goods. Soap, condiments and toothpaste are common examples of
convenience goods. Consumers typically make a choice once on their brand preference for these products
and repeat that choice over many purchases. Making your convenience goods available for impulse or
emergency purchases can be particularly effective. Because of the high purchase volume, pricing per item
tends to be relatively low and consumers often see little value in shopping around since additional effort
yields minimal savings. From the marketer‘s perspective the low price of convenience products means that
profit per unit sold is very low. In order to make high profits marketers must sell in large volume.
Consequently, marketers attempt to distribute these products in mass through as many retail outlets as
possible.
1.6.1b. Shopping Product: These are products consumers purchase and consume on a less frequent
schedule compared to convenience products. Consumers are willing to spend more time locating these
products since they are relatively more expensive than convenience products and because these may possess
additional psychological benefits for the purchaser, such as raising their perceived status level within their
social group. Examples include many clothing products, personal services, electronic products, and
household furnishings. Because consumers are purchasing less frequently and are willing to shop to locate
these products, the target market is much smaller than that of convenience goods. Consequently, marketers
often are more selective when choosing distribution outlets to sell their products.
1.6.1c. Speciality Product: Consumer product with unique characteristics or brand identification for which
a significant group of buyers is willing to make a special purchase effort. These are products that tend to
carry a high price tag relative to convenience and shopping products. Consumption may occur at about the
same rate as shopping products but consumers are much more selective. In fact, in many cases consumers
know in advance which product they prefer and will not shop to compare products. But they may shop at
retailers that provide the best value. Examples include high-end luxury automobiles, expensive champagne,
and celebrity hair care experts. The target markets are generally very small and outlets selling the products
are very limited to the point of being exclusive.
1.6.3d. Unsought product: Consumer products that the consumer either does not know about or do not
want to think normally before buying. It has some emotional feelings. These are products whose purchase is
unplanned by the consumer but occur as a result of marketer‘s actions. Such purchase decisions are made
when the customer is exposed to promotional activity, such as a salesperson‘s persuasion or purchase
incentives like special discounts offered to certain online shoppers. These promotional activities often lead
customers to engage in Impulse Purchasing
1.6.1e. Emergency Products – These are products a customer seeks due to sudden events and for which
pre-purchase planning is not considered. Often the decision is one of convenience (e.g., whatever works to
fix a problem) or personal fulfilment (e.g., perceived to improve purchaser‘s image).
1.6.2. INDUSTRIAL PRODUCT:
Product bought by individuals and organization for further processing or for use in conducting a business.
1.6.2a Materials and parts: Raw materials are the basic materials that actually become part of the product.
They are provided form mines, forests, oceans, farms and recycled solid wastes.
1.6.2b. Capital Items: Capital items consist of office accessories and operating materials.
1.6.2c Supplies: Supplies facilitate productions, but they do not become part of the finished product. Paper,
pencils, oils, cleaning agents and paints are examples.
1.6.3d Industrial Services: Industrial services include maintenance and repair services such as machinery
repair and business advisory services such as legal, management, consulting, advertising, marketing research
services. These services can be acquired internally as well as externally.
1.7 NATIONAL AND INTERNATIONAL PRODUCT CLASSIFICATIONS
Various classification systems for products have been developed for economic statistical purposes. The
NAFTA signatories are working on a system that classifies products called NAPCS as a companion to North
American Industry Classification System (NAICS). The European Union uses a "Classification of Products
by Activity" among other product classifications. The United Nations also classifies products for
international economic activity reporting.
The Aspinwall Classification System classifies and rates products based on five variables:
Replacement rate (How frequently is the product repurchased?)
Gross margin (How much profit is obtained from each product?)
Buyer goal adjustment (How flexible are the buyers' purchasing habits with regard to this product?)
Duration of product satisfaction (How long will the product produce benefits for the user?)
Duration of buyer search behaviour (How long will consumers shop for the product?)
The National Institute of Governmental Purchasing (NIGP) developed a commodity and services
classification system for use by state and local governments, the NIGP Code. The NIGP Code is used by 33
states within the United States as well as thousands of cities, counties and political subdivisions. The NIGP
Code is a hierarchical scheme consisting of a 3 digit class, 5 digit class-items, 7 digit class-item-groups and
an 11 digit class-item-group-detail. Applications of the NIGP Code include vendor registration, inventory
item identification, and contract item management, spend analysis and strategic sourcing.
PRODUCT LEVELS
According to Philip Kotler, who is an economist and a marketing guru, a product is more than a tangible
„thing‟. A product meets the needs of a consumer and in addition to a tangible value this product also has an
abstract value. For this reason Kotler states that there are five product levels that can be identified and
developed.
In order to shape this abstract value, Kotler uses five product levels in which a product is located or seen
from the perception of the consumer. These five product levels indicate the value that consumers attach to a
product. The customer will only be satisfied when the specified value is identical or higher than the expected
value.
2.1. CORE PRODUCT
This is the primary level of product and the focus is on the purpose for which the product is intended. It
constitutes the primary service or benefit that a customer is looking for. For example, a warm coat will
protect you from the cold and the rain, a buyer of a soft drink buys the refreshment, and a buyer of a book
buys knowledge, and a buyer of a luxury car buys the pride and distinction of owning a luxury car.
Therefore, in developing a product, the marketers must first define the core benefits that the product will
provide to the consumers.
2.2. BASIC (GENERIC) PRODUCT
The marketer must then think of the basic or actual product by keeping in mind the core benefit. This
represents all the qualities of the product. The basic product consists of features (shape, size, and colour),
design, quality, packaging, brand name and other attributes. For a warm coat this is about fit, material, rain
repellent ability, high-quality fasteners, etc.
2.3. EXPECTED PRODUCT
This is about all aspects the consumer expects to get when they purchase a product. That coat should be
really warm and protect from the weather and the wind and be comfortable when riding a bicycle.
2.4. AUGMENTED PRODUCT
This refers to all additional factors which sets the product apart from that of the competition. And this
particularly involves brand identity and image. Is that warm coat in style, its colour trendy and made by a well-known fashion brand? But also factors like service, warranty and good value for money play a major
role in this.
2.5. POTENTIAL PRODUCT
This is about augmentations and transformations that the product may undergo in the future. For example, a
warm coat that is made of a fabric that is as thin as paper and therefore light as a feather that allows rain to
automatically slide down.
3. PRODUCT PLANNING
3.1 INTRODUCTION:
Product Planning is the on-going process of identifying and articulating market requirements that define a
product‘s feature set. Product planning serves as the basis for decisions about price, distribution and
promotion. Product planning is the process of creating a product idea and following through on it until the
product is introduced to the market. Additionally, a small company must have an exit strategy for its product
in case the product does not sell. Product planning entails managing the product throughout its life using
various marketing strategies, including product extensions or improvements, increased distribution, price
changes and promotions.
Product planning is the process of searching ideas for new products, screening them systematically,
converting them into tangible products and introducing the new product in the market. It also involves the
formation of product policies and strategies.
Product planning includes improvements in existing products as well as deletion of unprofitable or marginal
products. It also encompasses product design and engineering which is also called product development.
Product planning comprises all activities starting with the conception of product idea and ending up with full
scale introduction of the product in the market.
It is a complex process requiring effective coordination between different departments of the firm. It is
intimately related with technical operations of the organisation, particularly with engineering, research and
development departments.
3.2 SIGNIFICANCE AND OBJECTS:
Product planning and development is a vital function due to several reasons. First, every product has a
limited life span and needs improvement or replacement after some time. Secondly, needs, fashions and
preferences of consumers undergo changes requiring adjustments in products.
Thirdly, new technology creates opportunities for the design and development of better products. Product
planning and development facilitate the profitability and growth of business. Development of new products
enables a business to face competitive pressures and to diversity risks. Product is the most important
constituent of marketing mix.
Thus, product planning is required for the following reasons:
(i) To replace obsolete products;
(ii) To maintain and increase the growth rate/sales revenue of the firm;
(iii) To utilise spare capacity;
(iv) To employ surplus funds or borrowing capacity; and
(v) To diversify risks and face competition.
3.3 PHASES OF PRODUCT PLANNING
3.3.1 DEVELOPING THE PRODUCT CONCEPT
The first phase of product planning is developing the product concept. Marketing managers usually create
ideas for new products by identifying certain problems that consumers face or various customers need. For
example, a small computer retailer may see the need to create a computer repair division for the products it
sells. After the product idea is conceived, managers will start planning the dimensions and features of the
product. Some small companies will even develop a product mock-up or model.
3.3.2 STUDYING THE MARKET
The next step in the product planning process is studying the competition. Secondary research usually
provides details on key competitors and their market share, which is the percent of total sales that they hold
in the marketplace. The business can then determine places in which it has an advantage over the
competition to identify areas of opportunity.
3.3.3 MARKET RESEARCH
Marketing research is systematic design, collection, analysis and reporting of data and findings relevant to
specific marketing situations facing an organisation. A simple view of marketing research is to find out what
the customers want, and to give them what they want. The goal of marketing research is to provide the facts
and directions that manager need to make their more important marketing decisions.
The marketing research can be classified into two categories. The first one is Exploratory Research and the
second one is Conclusive/Confirmatory Research. The conclusive research comprises descriptive research
and casual research. Exploratory research has the goal of formulating problems more precisely, clarifying
concepts, gathering explanation, gaining insights, eliminating impractical ideas and forming hypothesis.
Descriptive research is more rigid than a exploratory research and seeks to describe the users of a product,
determine the proportion of the population that uses a product and predict the future demand for a product.
In terms of data capture and analysis there are to two kinds of research – qualitative research and
quantitative research.
Qualitative research is a method of inquiry employed in many different academic disciplines, traditionally in
the social sciences, but also in market research and further contexts. Qualitative researchers aim to gather an in-depth understanding of human behaviour and the reasons that govern such behaviour. The qualitative
method investigates the why and how of decision making, not just what, where, when. Hence, smaller but
focused samples are more often used than large samples.
Quantitative research refers to the systematic empirical investigation of social phenomena via statistical,
mathematical or numerical data or computational techniques. The objective of quantitative research is to
develop and employ mathematical models, theories and/or hypotheses pertaining to phenomena.
3.3.4 PRODUCT INTRODUCTION
If the survey results prove favourable, the company may decide to sell the new product on a small scale or
regional basis. During this time, the company will distribute the products in one or more cities. The
company will run advertisements and sales promotions for the product, tracking sales results to determine
the products potential success. If sales figures are favourable, the company will then expand distribution
even further. Eventually, the company may be able to sell the product on a national basis.