Product, Price, and Branding Strategies in Marketing
Product
Definition
A product is a set of benefits and services offered by a trader in a market. It encompasses everything a person receives in an exchange, including tangible and intangible attributes (packaging, color, price, manufacturer’s reputation) that satisfy consumer desires or needs.
Classification of Products
Consumer Products
These products are intended for purchase and use by consumers, based on their wishes and needs. They can be used without further manufacturing and are typically consumed or used at home. Consumer products are further categorized into:
- Durable and Non-durable: Durable goods are tangible items used daily (e.g., TVs, refrigerators). Non-durable goods have a short lifespan (e.g., food).
- Convenience and Routine: Consumers purchase these regularly without much planning (e.g., toothpaste, candy).
- Choice or Purchase: Consumers compare attributes before selecting and purchasing these (e.g., clothing, perfumes).
- Special or Specialty: Consumers are willing to make significant sacrifices to acquire these, often showing strong brand loyalty (e.g., cars, computers).
- Unsought: Consumers don’t actively seek these out, but purchase them out of necessity (e.g., coffins, insurance).
Industrial Products
These are goods or services used in producing other articles, not sold directly to consumers. Examples include supplies, accessories, services, equipment, and even factories. Industrial goods are classified as:
- Facilities (e.g., industrial plants, land)
- Equipment (e.g., tools)
- Operating Materials (e.g., oil, stationery)
- Services (e.g., accounting firms, banks)
Positioning of a Product
Positioning refers to the overall marketing program that influences consumers’ mental perception (feelings, opinions, impressions) of a brand, product, or company, relative to the competition. It’s crucial for companies to strategically develop marketing programs to create and reinforce desired positions.
Positioning Strategies
- Attribute-based Positioning: Highlighting specific product features (e.g., Volkswagen positioning as a small car).
- Benefit-based Positioning: Focusing on the advantages consumers gain from using the product (e.g., toothpaste promoting cavity protection).
- Usage Occasion Positioning: Associating the product with specific situations or times of use (e.g., promoting turkey for Christmas).
- User-based Positioning: Targeting specific consumer segments (e.g., promoting cereal as the “Breakfast of Champions” for athletes).
Product Line and Mix
Product Line
A product line is a group of closely related products that satisfy a similar need or are used together (e.g., white goods, cosmetics).
Product Mix
A product mix is the complete list of products offered by a company. It has two dimensions:
- Breadth (or width): The number of product lines offered.
- Depth: The range of sizes, colors, models, prices, and quality within each product line.
Factors Affecting Changes in Product Mix
- Consumer and industrial user demographics
- Purchasing power
- Consumer behavior (motivation, attitudes, preferences)
Product Portfolio
A product portfolio is the set of all products, grouped into lines, that an organization offers. It has four characteristics:
- Breadth: Number of product lines.
- Depth: Number of variants within each product line.
- Length: Total number of products in the portfolio.
- Consistency: How closely related the product lines are in terms of use, production, distribution, etc.
Portfolio Analysis: The BCG Matrix
The Boston Consulting Group (BCG) matrix analyzes a company’s product portfolio based on market share and market growth. It categorizes products into four quadrants:
- Question Marks (or Problem Children): Low market share, high market growth. Require significant resources but have potential.
- Stars: High market share, high market growth. Profitable and may become “Cash Cows.”
- Cash Cows: High market share, low market growth. Generate strong cash flow and require less investment.
- Dogs: Low market share, low market growth. May consume more resources than they generate.
Stages of the Product Life Cycle
Introduction Stage
Sales are low, product availability is limited, and competition is minimal. The focus is on creating awareness and building initial demand.
Growth Stage
Sales increase rapidly, distribution expands, and profits rise. Competition intensifies as the market becomes more attractive.
Maturity Stage
Sales growth slows or stabilizes, competition is strong, and profitability peaks. Companies focus on defending market share and extending the product’s life.
Decline Stage
Sales decline due to factors like technological advancements or changing consumer preferences. Companies may reduce prices or discontinue the product.
Brand
Definition
A brand is a name, term, symbol, or design that identifies and differentiates a seller’s products or services from competitors.
Purpose of a Brand
- Differentiate from competitors
- Signal warranty and quality
- Enhance manufacturer’s prestige
- Facilitate product sales through promotion
- Establish a strong position in the consumer’s mind
Features of a Good Brand
- Short and memorable
- Visually appealing
- Adaptable to various media
- Legally protectable
Classification of Brands
- Family Brand: Used for all of a company’s products (e.g., Nestle).
- Individual Brand: Unique name for a specific product, even if the company produces other items (e.g., Nestle Milo).
Advantages of a Brand
- Easy product identification
- Quality assurance for consumers
- Enables product comparison
- Encourages product improvement
Importance of a Brand
- For Consumers: Helps identify products and assess quality.
- For Sellers: Enables product promotion, market expansion, and brand control.
Container and Packaging
Definition
Packaging involves designing and producing the container for a product. It can include three levels:
- Primary Packaging: The immediate container of the product (e.g., a lotion bottle).
- Secondary Packaging: Protects the primary packaging and may be discarded after use (e.g., a cardboard box holding the lotion bottle).
- Shipping Packaging: Used for storage, identification, and transportation (e.g., a corrugated box containing multiple lotion bottles).
Objective of Packaging
Protect the product, facilitate handling and transportation, and promote the product.
Classification of Packaging
- Untouchables: Packaging that remains unchanged for long periods (e.g., beer bottles).
- Ephemeral: Packaging that changes frequently, often serving as a promotional tool (e.g., detergent bags).
Packaging Regulations
Packaging must comply with relevant regulations, including displaying information like company name, origin, address, contents, health warnings, and manufacturing/expiry dates.
Packaging (Outer Packaging)
Packaging refers to the outer container used to group multiple products for easier handling and transportation. It can be boxes, bags, or containers used to protect goods during shipping and storage.
Features of Packaging
- Facilitates efficient transportation
- Utilizes art, science, and technology to protect goods
- Ensures product delivery in good condition at minimal cost
Objective of Packaging
Protect products during transportation from the factory to consumers.
Functions of Packaging
Protect against damage, moisture, dust, pests, theft; provide labeling and identification.
Classification of Packaging
- Export Packaging: Considers factors like product characteristics, market regulations, and transportation methods.
- Product Line Packaging: Uses identical or consistent packaging for all products in a line.
- Reusable Packaging: Designed for reuse after the product is consumed.
- Multiple Packaging: Groups multiple units in one package (e.g., multipack of soap).
Service
Definition
A service is a set of activities, benefits, or satisfactions offered for sale.
Characteristics of Services
- Intangibility
- Perishability
- Heterogeneity (lack of standardization)
- Simultaneous Production and Consumption
Price Strategy
Price
Price is the amount of money exchanged for a product and its accompanying services. Understanding the value consumers perceive in a product is key to pricing.
Importance of Price to the Economy
Balanced pricing contributes to a healthy economy.
Role of Prices
- Regulate production
- Regulate consumption
- Distribute production among society members
- Encourage research and development
Importance of Price for Companies
Price impacts company revenue, profits, market demand, competitive position, and market share.
Objectives of Pricing
- Maintain or increase market share
- Stabilize prices
- Achieve target return on investment
- Maximize profits
- Combat or avoid competition
- Penetrate the market
- Promote the product line
- Ensure survival
Factors Involved in Pricing
Cost
Cost is a crucial element in pricing as it determines profitability. It includes all expenses incurred in producing and selling a product.
Classification of Costs for Pricing
- Direct Material Costs: Cost of materials used in production.
- Direct Labor Costs: Cost of labor involved in production.
- Overhead Costs: Indirect expenses not directly tied to a specific product.
- Investment Costs: Costs of equipment, buildings, etc.
- Operating Costs: Costs of running the business.
- Distribution Costs: Costs of getting the product to the market.
- Fixed Costs: Costs that don’t vary with production volume.
- Variable Costs: Costs that change with production volume.
Break-Even Point
The break-even point is where total costs equal total revenue, indicating no profit or loss.
Demand and Supply
Market forces of demand and supply influence prices. Demand refers to the quantity of a product consumers are willing to buy at various prices. Supply refers to the quantity producers are willing to offer at different prices.
Competition
Pricing decisions must consider competitors’ prices and strategies. Companies may differentiate based on price, quality, service, or other factors.
Price War
A price war occurs when competitors aggressively lower prices to gain market share. Companies must carefully analyze the situation and consider various strategies to respond effectively.
Other Price Determinants
Product Life Cycle
Pricing strategies may vary depending on the product’s stage in its life cycle (introduction, growth, maturity, decline).