Marketing

Management

SUBJECT CODE – MS5CO07

COURSE – MBA II SEM
Contents to be Covered
Unit III (Product, Branding and Pricing Decision)
(a) Product and Branding Decisions: Product Levels, Product
Classification, Product Mix, Product Life Cycle – Concept and marketing
strategies for different life cycle stages;
• Branding decisions; Brand Equity, Packaging and Labelling Decisions.
(b) Pricing Decisions: Factors in setting pricing policy, Pricing Strategies,
Initiating and responding to price changes.
What is a product??
Definition: A product may be defined as a set of tangible, intangible and
associate attributes capable of being exchanged for a value with the
ability to satisfy consumers and business needs
• OR
Definition by Rustam S. Davar: “A product may be regarded from the
marketing view point as a bundle of benefits which is being offered to
consumers
Product Classifications
Marketers classify products on the basis of
1) On the basis of Durability, tangibility
2) On the basis of Use (consumer or industrial).
Each type has an appropriate marketing-mix strategy.
According to DURABILITY AND TANGIBILITY, products fall into three groups:
1)Durable goods are tangible goods that normally survive many uses: refrigerators, machine, tools, and
clothing. Durable products normally require more personal selling and servicing, command a higher margin,
and require more seller guarantees.
2) Nondurable goods are tangible goods normally consumed in one or a few uses, such as beer and
shampoo. Because these goods are purchased frequently, the appropriate strategy is to make them
available in many locations, charge only a small mark-up, and advertise heavily to induce trial and build
preference.
3) Services are intangible, inseparable, and perishable products that normally require more quality control,
supplier credibility, and adaptability. Examples include haircuts, legal advice, and appliance repairs.
On the basis of Use: CONSUMER-GOODS CLASSIFICATION
Product Levels: The Customer-Value
Hierarchy
In planning its market offering, the marketer needs to address five product levels. Each level adds more customer
value, and the five constitute a customer-value hierarchy.
1. The fundamental level is the core benefit: the service or benefit the customer is really buying. A hotel guest is
buying rest and sleep. The purchaser of a drill is buying holes. Marketers must see themselves as benefit
providers.
2. At the second level, the marketer must turn the core benefit into a basic product. Thus a hotel room includes a
bed, bathroom, towels, desk, dresser, and closet.
3. At the third level, the marketer prepares an expected product, a set of attributes and conditions buyers
normally expect when they purchase this product. Hotel guests minimally expect a clean bed, fresh towels,
working lamps, and a relative degree of quiet.
4. At the fourth level, the marketer prepares an augmented product that exceeds customer expectations. In
developed countries, brand positioning and competition take place at this level. In developing and emerging
markets such as India and Brazil, however, competition takes place mostly at the expected product level.
5. At the fifth level stands the potential product, which encompasses all the possible augmentations and
transformations the product or offering might undergo in the future. Here is where companies search for new
ways to satisfy customers and distinguish their offering.
Product Levels: The Customer-Value Hierarchy
Customer Value Hierarchy: Example
Products offered by ITC Ltd.
ITC Example
Product Mix- Slide 1
Definition: Product mix, also known as product assortment, refers to the total range of products
offered by a company
A product line is a group of related products all marketed under a single brand name that is sold by
the same company. Companies sell multiple product lines under their various brand names, seeking
to distinguish them from each other for better usability for consumers
Width
The width of the mix refers to the number of product lines the company has to offer.
For e.g., If a company produce only soft drinks and juices, this means its mix is two products wide.
Coca-Cola deals in juices, soft drinks, and mineral water and hence the product mix of Coca-Cola is
three products wide.

Length
Length of the product mix refers to the total number of products in the mix. That is if a company has 5
product lines and 10 products each under those product lines, the length of the mix will be 50 [5 x 10].
Product Mix- Slide 2
Depth
The depth of the product mix refers to the total number of products
within a product line. There can be variations in the products of the
same product line. For example – Colgate has different variants under
the same product line like Colgate advanced, Colgate active salt, etc.
Consistency
Product mix consistency refers to how closely products are linked to
each other. Less the variation among products more is the consistency.
For example, a company dealing in just dairy products has more
consistency than a company dealing in all types of electronics.
(Patanjali Product Mix)
Product Mix of APPLE
Product Life Cycle – Concept
• The product life cycle is an important concept in marketing which describes the stages a
product goes through from when it was first thought of until it finally is removed from
the market.
• Not all products reach this final stage. Some continue to grow and others rise and fall.
What are the main stages of the product life cycle?
1. Research & development(incubation) - researching and developing a product before it
is made available for sale in the market
2. Introduction – launching the product into the market
3. Growth – when sales are increasing at their fastest rate
4. Maturity – sales are near their highest, but the rate of growth is slowing down, e.g.
new competitors in market or saturation
5. Decline – final stage of the cycle, when sales begin to fall
Example of I-phone Life cycle
Marketing Strategies for different Life
Cycle Stages
Definitions
Branding:
Endowing product or services with the power of a brand
Brand Management:
• In marketing, brand management is the analysis and planning on how a brand is perceived in
the market.
• Developing a good relationship with the target market is essential for brand management.
Tangible elements of brand management include the product itself; its look, price, and
packaging, etc
Brand Resonance
• The Brand Resonance refers to the relationship that a consumer has with the product and
how well he can relate with it.
• The resonance is the intensity of customer's psychological connection with the brand and the
randomness to recall the brand in different consumption situations.
The Role Of Brand
• Identification of the source of product
• Risk reducer
• Promise, bond, or pact with maker of product
• Customer retention
• Signal of quality
• Profit generation
Brand Equity
Definition: The value that derives from consumer perception of the brand name of a
particular product or service, rather than from the product or service itself
OR
Brand equity, in marketing, is the value of a brand in people’s mind i.e the social value
of a brand
OR
Brand equity refers to the additional value that a consumer attaches with the brand that
is unique form all the other brands available in the market
• A point to ponder, relating to the brand is that Brand equity
is not equal to brand value.
• Brand equity is consumer focused, as its value is derived
from consumer’s perceptions, experiences, memories and
associations concerning the brand.
• Brand Equity is said to be positive when consumer are
fully satisfied with the product offered under the brand
name and in such a way that they use the brand name,
as a synonym of the product itself, or the image that
pops up in the minds of the consumer when they think
of the particular product, such as Dettol for antiseptic
lotion, Dalda for hydrogenated vegetable oil,
Bisleri for mineral water, etc.
Components of Brand
Equity
Customer based approach to Brand
Equity
• The brand is viewed from the perspective of the customer, an
individual or an organization.
• The power of the brand lies in what customers have seen, read,
heard, learned, thought and thought about the product over time.
• A brand is said to have positive brand equity when consumers react
favourably to a product.
• A brand is said to have negative brand equity if consumers react less
favourably to the product.
Packaging and Labelling Decisions.
PACKAGING
• Packaging is the science, art and technology of enclosing or protecting products
for distribution, storage, sale, and use.
• Packaging also refers to the process of designing, evaluating, and producing
packages.
• According to William J Stanton, “Packaging may be defined as the general group of activities
in product planning which involves designing and producing the container or wrapper of
product.”
Purpose of Packaging
• Product Protection.(breaking, theft)
• Product Attractiveness/Visibility.
• Product Differentiation.
• Product Convenience.
• Effective Sales Tools.
• Information transmission.
Examples: Innovative
packaging(Clay Mango)
Examples: Innovative
packaging(with seeds)
Examples of Poor/bad packaging
Types of packaging (paper material)
There are three major types of paper
packaging: corrugated boxes, boxboard
or paperboard cartons, and paper bags
and sacks.
• Corrugated Boxes:
Corrugated boxes are commonly used
to carry heavier products such as
appliances, electronic goods, wine, fruit
and vegetables. They are frequently
used as a bulk shipper, delivering many
similar products in the same box
• Boxboard or Paperboard
Cartons:This is the thin, lighter
weight carton commonly used to
carry a single item such as breakfast
cereal, shoes, crackers, a toy. It does
not have the wavy middle layer
(corrugating medium) to add box
strength
• Paper Bags and Sacks: The paper
bags used to carry groceries and/or
retail items
Packaging Decisions
Following points are considered while taking packaging decisions:

- Type of Material Used (quality and quantity both)

- Material cost
- Package size
- Package design
- Reusability
- Recyclability
- Product differentiation
NEW TRENDS IN PACKAGING
(top packaging trends for 2020)

• Digital Printing Revolution

• Personalized Packaging
• Transparency and Clean Labels
• Private Labels and Store Brands Dominating
• Playful Colors, Designs and Gradients
• Recycled Packaging Products in Use
• Vintage Packaging.
Pricing Decisions
 Pricing Strategies
• Price Anchoring
• Market Skimming
• Penetration Pricing
• Value Pricing
• Cost Plus Pricing
• Loss Leader
• Psychological Pricing
• Going Rate
• Price Leadership
• Tender Pricing
• Price Discrimination/ Tiered Pricing/ Differential Pricing
• Target Pricing
• Marginal Cost Pricing
• Destroyer Pricing/ Predatory Pricing
• Influence of Elasticity
Price Anchoring
As the saying goes, the best way to sell a $2,000 watch is to put it right
next to a $10,000 watch. But why?
• The culprit is a common cognitive bias called anchoring.
• Anchoring refers to the tendency to heavily rely on the first
piece of information offered when making decisions.
• Placing premium products and services near standard options may help
create a clearer sense of value for potential customers, who will view the
less expensive options as a bargain in comparison
• Ex- real estate selling (showing an averagely maintained flat at Rs 10,000 and then showing
well maintained flat at Rs 13,000)
• This is why companies often present their products with two prices – a
recommended retail price that has been crossed out, and a lower sale
price next to it. Customers feel like they have scored a bargain.
Skimming Vs Penetration Pricing
Value Pricing
Psychological Pricing
Which one performed better ??
• $60, now only $45!
• $60, now only $49!
The study compared women’s clothing priced at $35
versus $39 and found that the prices ending in nine
outperformed the lower prices by an average of 24%.

Example: Keeping discounted items at the end of a store,

while making customers go through the entire nre collection
at the retail outlet
Price Discrimination /Tiered Pricing/
Differential Pricing
Price discrimination is a selling strategy that charges customers
different prices for the same product or service based on what the
seller thinks they can get the customer to agree to.
In pure price discrimination, the seller charges each customer
the maximum price they will pay
Example
• Retail price discrimination
• Travel industry
• Coupons
• Segmentation by age group, student status, ethnicity and citizenship
• Discounts for members of certain occupations
• Incentives for industrial buyers
• Target Pricing: Target cost is then given to the engineers
and product designers, who use it as the maximum cost to be
incurred for the materials and other resources needed to design
and manufacture the product. It is their responsibility to create
the product at or below its target cost.
• Marginal-cost pricing: in economics, the practice of setting
the price of a product to equal the extra cost of producing an
extra unit of output. ... By this policy, a producer charges, for
each product unit sold, only the addition to total cost resulting
from materials and direct labour.