DU SOL B.Com 3rd Year Marketing Management Notes Chapter 4 Product (Concept, Classification and Decisions)

DU SOL B.Com 3rd Year Marketing Management Notes Chapter 4 Product (Concept, Classification and Decisions)

Question 1.
Define Product and explain its importance.
If the first commandment in the marketing is, “know the customer”,the second is “know the product”. Explain.
Meaning Of Product:
Wroe Alderson suggests that e.”product should be considered as a bundle of utilities consisting of various product features and accompanying services.” A product is both what a seller has to sell and what a customer has to buy. The word goods is also used frequently to mean product. By custom and usage these two words are used synonymously.

According to William J. Stanton, “A product is a complex of tangible attributes, including packing. colour, price, manufacturers prestige and retailers prestige and manufacturers and retailer’s services which the buyer may expect as offering satisfaction of wants or needs.” In the words of R.S. Davar, “A product therefore, may be regarded from the marketing view point a bundle of benefits which are being offered to the consumer.

On the basis of analytical study of above definitions, it may be concluded that all goods or services, tangible or intangible, of any size, colour, packing pr price which may be exchanged for money and accepted by consumers to satisfy their wants and needs are products.

There are two concepts of product – narrow concept and wide concept. In its narrow concept, a product is a bundle of physical or chemical properties which has some utility. A product is not a non-living object, it is not a mere assemblage of matter -physical and chemical. Utility alone is not the function of the product. A product means an object which satisfies the need of the customer. Thus fan,- table, pen, cooler, chair etc. are products.

In its wider concept, all the brands, all the colours all the packaging, or all the designs of a product is taken to be different products. For example, if a tooth paste is produced in three different sizes, these are three products because they satisfy needs of different customers. Thus, if there is a change in the size or colour or brand, or packaging, it produces a new product. The product is to us total package of benefits received by a customer.

Importance of Product.
It is said that nothing happens in our economy unless there is a sale or purchase of a product. Product is the soul of all our marketing activities. Without a product, marketing cannot be imagined. Product is a tool in the hands of the management through which it gives life to all marketing programmes. So, the main responsibility of the management should be to know its product well. Someone has said, “If the first commandment in marketing is know their customer, the second is know their product.” In short, the importance of the product can be judged from the following facts :

(i) Product is the Central Point for all Marketing Activities.
Product is the pivot, and all the marketing activities revolve around it.1 Marketing activities, selling, purchasing, advertisement distribution, sale promotion ate all useless unless there is a product. It is a basic tool by which profitability of the firm is bargained. Product is the soul of business and without it nothing may happen.

(ii) Product is the Starting Point of Planning.
No marketing programme will be prepared if there is no product because planning for all marketing activities as distribution, price sales promotion, advertising, etc. is done on the basis of the nature, quality and the demand of the product. Product policies decide the other policies.

(iii) Product is an End.
The main objective of all marketing activities is to satisfy the customers. It is the philosophy of the modern marketing concept. Various policy decisions are techniques to provide the customers benefits, utilities, and satisfaction through product. Thus product is an end (satisfaction of customers) and the produce), therefore, must insist on the quality size, etc. of the product so that it may satisfy the customers needs. Though there are low-quality products in the market but their life is very short because they fail in satisfying the customers needs for long.

Thus, it is clear that the product is a must for marketing activities. It is true that all marketing activities are done for the satisfaction of customer and the producers must know their customers and their needs. It is equally true that they should also know their product and its qualities. The product must contain the qualities which can satisfy the customers. It requires continuous and sincere efforts on the part of the producers or marketers to know their product thoughout marketing research and planning and to improve if it is somewhere lacking.

Question 2.
Explain consumer and industrial goods,-What are the differences in the marketing of the both types of goods ?
The three way sub-division of consumer products into convenience goods, shopping goods and speciality goods is based on consumer buying habits rather than a consumer products. Do you agree ? Explain.
Classification Of Goods:
The two major categories of goods are :

  1. consumer goods, and
  2. industrial goods.

This classification is traditional and is based on the purpose for which they are primarily used. Typewriters and electric motors are classified as industrial goods whereas soaps and sweets are regarded as consumer goods. This classification does not put them in water-tight compartments for example writing paper when used for business purposes becomes an industrial goods but when used for writing by a student becomes a consumer goods. The same article may under one set of circumstances be an industrial goods and under other a consumer goods.

Still the classification is necessary for a student of marketing since the buying motives differ from buyer to buyer. Marketing situation and problems vary depending upon the category of a product.

Consumer Goods.
The American Marketing Association has defined the consumer goods as “Goods destined for me by the ultimate consumers or household and in such form that they can be used without commercial processing” Thus consumer goods are products which are used by the end consumer e.g. soap, tooth paste, book, pen etc. The consumer goods are further divided into three classes. The credit for this classification goes to Meloin T. Copeland who divided consumer goods into convenience goods, shopping goods, and speciality goods,

(i) Convenience Goods.
The consumer goods which a customer usually purchases frequently and wants immediately and with minimum-of efforts are called convenience goods. This category includes a Wide range of household products of low unit value like cigarettes, newspapers, drugs, grocery .products etc. These goods are non-durable in nature, i. e., are consumed rather rapidly and are also called ‘one shot items’.

In buying covenience goods the habit dominates the consumer’s behaviour. The convenience in availability and that too with less shopping time is the basis of buying these goods. Because of this, producer must secure the widest . possible availability of his goods if he has to maximise his sales.

(ii) Shopping’Goods.
These goods are bought by the customer only after comparing quality, price suitability and style. Selection of these goods thus becomes a ingredient of the buying motive of a customer. Products of this group are more complex than convenience goods. They exhibit a high degree of differentiation. These goods are durable in nature. They are purchased less frequently and are of high unit value. Here the brand name is also Of much use. Wide distribution arrangements are not necessary since customers are not hasty in deciding what to buy, e.g., readymade garments and shoes, sarees, jewellery.

(iii) Speciality Goods.
American Marketing Association defined speciality goods as goods “having unique^ characteristics and/or brand indent ideation for which a significant group of butters are habitually willing to make a special purchasing effort.” These goods are durable and comparatively of higher unit value infrequently purchased. Brand loyalty , influences to a great extent the buying motive of customers., The customers make a special purchasing effort in the case of speciality goods. Such goods are T.V., Refrigerator, Scooter etc.

Insistence Goods.
These are goods which may or may not be generally available bin for which the consumer refuses to accept any substitute. For example, if a customer is in the market and wants buy an Ambassador Car and insists on buying only an Ambassador Car, then Ambassador Car for that transaction becomes an insistence item. This type of goods are sometimes included under speciality goods.

Industrial Goods.
These goods are meant for use in producing other goods or rendering services, as against the goods meant to be sold to ultimate – consumers. The American Marketing Association has defined the industrial goods as “Goods which are destined to be sold primarily for use in producing other goods or rendering services as contrasted with goods destined to be sold primarily, to the ultimate consumers.”

Further classification in this case is less difficult because industrial users exhibit more uniform patterns of buying behaviour than the ultimate consumers. The main characteristic features are : Geographical concentration of the market, limited number of buyers, large unit of individual purchase and technical considerations. These goods have a derived demand.

Some of the goods have common features of consumer as well as industrial goods depending upon the purpose for which it is being purchased. For example, tyres. Tyres when purchased by the manufacturers of vehicles are industrial goods but when purchased by a car or scooter owner, they become consumer goods. Similarly, sugar, gas, coal etc. may be classified as consumer goods as well as industrial goods depending upon the circumstances.

Industrial goods fail into four main categories.
(i) Raw Materials.
Most of the agricultural products are raw materials which require further processing. Only after processing do they become consumer goods of industrial goods, e.g, parts of the assembly goods are also to be included in Raw Materials for the product as TV part’s.
Agricultural products : Natural rubber, cotton.
Parts of Assembly goods : TV or refrigerator or bicycle parts.

(ii) Semi-finished Goods.
Semi-finished goods are goods which are neither raw nor finished. They are under process. They are supplied either from one department to another in the same enterprise or are supplied from one industrial unit to another industrial unit for further processing e.g., steel.
lead etc.

(iii) Fabricated Materials.
These industrial goods become a part of the finished goods. These products might have gone through .complete manufacturing processes but reach the ultimate user-only after they are assembled or combined with other products.-They do not change their forms, e.g., electric motors, batteries, automobile parts, tyres and tubes, etc.

(iv) Equipments.
Included in this category of industrial goods are three sub-categories. Installations, Minor or Accessory equipments and Plants and Buildings. These goods do not become part of the physical product but facilitates the production process.

Examples :
Installations : Boilers, Lathes, Saw Mills.
Accessory Equipments : Tools, welding equipments, time clocks, type-writers, calculators.
Generally these products are highly technical in nature and therefore, require considerable sales efforts. They are also generally characterised by short distribution channels, viz., direct from manufacturer to industrial users.

(v) Operating Supplies.
The products are essential to the business operations of industrial users. But they do not form a part of the finished product, e.g., fuel, coal, cleaning materials, etc.
The classification of goods may be shown in the following diagramme :
DU SOL B.Com 3rd Year Marketing Management Notes Chapter 4 Product (Concept, Classification and Decisions) 1
Fig. 13.1. Classification Of Product
Industrial goods and consumer goods are two broad divisions of manufactured goods. But they show latent differences which are evident from the following definitions given by the American Marketing Association.

“Consumer goods are destined for use by ultimate consumers or households and in such forms that they can be- used without-commercial processing Against this industrial goods arc defined as “those goods which are destined to be sold primarily for use in producing other goods or rendering services as contrasted with goods destined to be sold primarily to be ultimate consumer.

These definitions prima-facie bring out two differences. Firstly, industrial goods are not. meant for consumption, so their buyers are different from the buyers of consumer goods. Secondly, further processing is required in the case of industrial goods before they can be finally consumed.

The number or consumers in case of industrial goods is limited whereas in case of consumer goods, it is very large. But purchases of consumer goods are in small quantity whereas in case of industrial goods, they are made in large quantity.

In the industrial products the customer is well informed and known the relative merits of a particular product, alternative sources of supply and also the various competitive products available.

But this classification is not an air-tight compartment. An industrial product may serve the two markets simultaneously. For example, a typewriter may be used in industrial concern and it may also be used for personal purpose. In the later case it is pure consumer product.

Differences in the Marketing of Industrial and the Consumer Goods.
However the marketing remains the same, yet there are important differences in marketing the industrial products and marketing consumer products. The prime difference in the marketing of these two goods in nature of their demand.

The demand of consumer goods is original while that of industrial goods is derived. The industry is to supply the goods according to 5 the wants of actual consumers’ or users. It means that the demand of industrial . product is derived from the demand of consumer products in which the industrial products may play an important part inTnaking.

Again the knowledge and sophistication of customers varies according , to whether the goods are industrial goods or consumer goods. The industrial buyer is well Informed of the relative merits and demerits of the alternative sources of supply of various competitive products.

Moreover the number of customers of industrial product is small as compared to the number of consumers of consumer products. Therefore, in marketing industrial products, greater emphasis is placed on personal selling through salesmen whereas in the consumer products, emphasis is laid on mass-marketing and hence most of the selling has to be done through advertising.

Question 3.
What is meant by product mix? Explain the influencing factors in the change of product mix.
Product Mix:
One major management aspect involved in product policy is the decision concerning product mix. The product mix is one of the elements in the product policy. This is more important now-a-days since most of the manufacturers are diversifying their products. The product policy decisions are made of these different levels : Product mix; Product items; and Product line. These ‘three-in-one elements make the product planning effective.

Product mix is the list of all products offered for sale by a company. It is defined as ‘the composite of products offered for sale by a firm or a . – business unit’. For example, if a firm manufactures or deals with different ‘ varieties of soap, tooth brush, tooth paste etc; the group, of all these products is called product mix.

The product mix Is three dimensioned, it has breadth, depth and consistency. Breadth is measured by the number of variety of products manufactured by a single manufacturer. For example, Bajaj Electricals produce a variety of electrical appliances such as fans, presses, mixers, lamps, etc. Depth refers to the assortment of sizes, colours and models, offered within each product line. For example, Bajaj Electricals manufacture different varieties of models of fans and lamps.

Consistency refers the close relationship of various product lines either to their end use or to production requirements or to distribution channels or to other variables. Bajaj Electricals, for example, produce those goods which fall under the category ‘Electrical appliances’.’So there is consistency in their produces, In contrast to this D. C. M offers’ inconsistency m their product line, manufacturing process and in their channels of distribution. This is .the natural outcome of their product mix which offers a variety of products having no common relationship for example, cloth, sugar, and chemical, etc.

Product line is a group of different product items closely related to each other. All the brands of the same product is product line.

Product Item. Product item means a specific product of certain specifications and may be distinguished from other product, or brands. A particular brand of a product is a product item.

Thus, on the basis of above discussion, it is clear that a single product -item having same specifications (size, colour, utility etc.) is a product item”. All the product items in the same group are collectively known as product fine. For example. Fan (including different sizes of fans) is a product line. AH the product lines manufactured or sold by an enterprise are collectively known as product mix. For example, electrical goods which include bulbs, fans, coolers; mixie etc. having some common characteristics (all are operated from electric current) are known as product mix.

Factors Influencing Change In Product Mix:
It is very difficult for a concern to take a decision about the number of products it should produce at a specified time because the number of products or product mix-is affected by several factors such as demand, competition, cost of product and appropriate time etc-. In short, following factors influence the decision of product mix :

1. Change in Market Demand.
The change in the demand of a product (due to change in habits, fashion, purchasing power, income, attitudes and preferences of consumers) affects the decision of product mix. if the demand of a hew product is increasing in the market and the production of that hew product is beneficial to the company considering’ its cost of production, utilisation.of its plant and machinery and labour-force, and if it thinks that it can compete its competitors, it can start production of the new product. Likewise! if the demand of a product is declining fast, it can decide to drop its production.

2. Cost of Production.
If the company can develop a new product with the help of the same labour force, plant and machinery and techniques, it can decide to start tire production of that product at lower cost. For example, a by-product can be developed by as a product at low cost.

3. Quantity of Production.
If the production of the new product is considered to be at a large scale and the company can add one more item to, its product line just to get the economies of large scale production. Keeping in view its production capacity and other factors.

4. Advertising and Distribution Factors.
Advertising and distribution factors may be the one of the reasons for the changes in production mix. If the advertising and distribution organisation are the same, the company; may take the decision to add one more item to its psoduct line. For example, company can produce one more product if the same, raw materials are used in its production.

A company producing the suitcase , may add production to Holdall or Attache-case and the advertising and distribution cost will not increase at all or it may increase marginally in introducing the product in the market.

5. Use of Residuals.
If residuals can be used gainfully, the company can develope its by products into the main products. For example, a sugar mill can profitably develop the production of paper, card board or wine from the bagasse.

6. Change in Company Desire.
Keeping in mind the objectives Of the firm, i. e., maintaining or increasing the profitability of the concern, the firm may eliminate some of its unprofitable processes Or may start a new more profitable product. In this way, the firm tries to make its product mix an ideal one.

7. Competitors Actions and Reactions.
The decision of adding or eliminating the product may be the reaction of competitors’ actions. If company thinks that it can meet the competition well by making necessary changes in the size, colour, packing or price, it can make such changes.

8. Change in Purchasing Power or Behaviour of the Customers.
If the number of customers are increased with the increase in their purchasing power or with the change in their buying habits, fashion, etc. the company may think of adding one more product keeping mass-production or increase in profitability in the mind.

9. Full-utilisation of Marketing Capacity.
If the company is not getting desired results from the market, it can decide to stop the production of such a product and divert its resources to produce a new product or improve the existing product, according to the needs of the consumers.

10. Goodwill of the Company.
If the company is of repute, it can market any new product in the market without much difficulty. It may take decisions of adding new product without any hitch because it knows that customer will accept any product introduced by the firm. For example, if a new product is introduced by the Hindustan Lever Ltd. it will gain favour by the customers over competitors product and if is only because of the goodwill of the firm in the market of consumer products.

11. Financial Resources.
Finance is the life blood of a firm. Availability of finance may necessitate some changes in the product of the company. If the company is short of finances or if the product is continuously going into loss the company may decide to drop the production of such product. Similarly, if company has sufficient funds, it may improve its products.

Question 4.
What do you understand by width, depth and consistency of the product mix? Also explain the effect of company’s objective on product mix.
Meaning Of Width Depth And Consistency Of The Product Mix:
We know that the product mix is the collection of product offered for sale by a business unit. Product mix is the “composite of products offered for sale by a firm or a business unit.” While product line is a group of products that are closely related either because they satisfy a class of need, or used together, or sold to the same customer groups, or marketed through the same types of outlets or fell within given price ranges.
DU SOL B.Com 3rd Year Marketing Management Notes Chapter 4 Product (Concept, Classification and Decisions) 2
The nature of the product mix is at times described by expression like depth, width and consistency . Depth is used to the number of products items offered by the organisation for sale within a particular line.

The width refers to the extent Of different product lines in the product mix offered by an organisation.

The consistency describes the relatedness of the various product lines. Fig. 13.2. illustrates the width, and consistency of product mix of an electrical company:
In the above diagram width of the product mix is limited to five product lines.
In the depth of the product mix DU SOL B.Com 3rd Year Marketing Management Notes Chapter 4 Product (Concept, Classification and Decisions) 3

on an average there are four, products. There is also consistency of product mix because all products are connected with electrical goods.

The above three elements (depth, width, and consistency) of the product mix are very important from marketing point of view. All the three aspects of product mix may form a basis for the rationalisation the marketing process.

By enlarging the width, i.e., by increasing the product-lines, the company can satisfy the needs of different types of customers and may increase its goodwill.

By going deep, a company can satisfy the needs of the customers by . producing different qualities of product in the same product-line. A company producing fans, may produce fens of different sizes and qualities keeping in view the range of customers. In this way, company may specialise in that product-line and thus increases its goodwill and profitability by reducing the costs of production and distribution considerably.

Company can also carry out the research work to improve the quality of its products. It can also decide whether to add another product or improve the existing one for meeting out the needs of fee customers, if it is in demand or to scrap it altogether if it is lacking demand keeping in view the competitors’ products and activities. In present days, the consumer pays more attention on quality rather than the price of the product.

If product-line are consistent or if they relate to the same category of consumer goods, it will reduce the cost of production to a great extent. The cost of distribution will also be lowered down by using the same channels of distribution and advertisement. For example, an electric, company may produce fans, bulbs, radio, transformer, etc. at low cost of production and distribution.

Effects of objectives of the company on its product-mix.
Long-term objectives of a company affect product mix to a great extent. There may be a number of long-term objectives of the firm, but for the convenience of study, these objectives, may be divided into three main parts :

  1. Profit objective,
  2. Sales stability objective, and
  3. Sales promotion or sales growth objective.
    The effects of these objectives on the product mix of the company can be explained as under :

1. Profit Objective.
Maximisation of Profit is the main objective of every firm, in order to achieve this objective, the film may add the most profitable product in the product mix, less profitable product may be improved and the production of unprofitable product may be stopped so that the product mix may be an ideal product mix and toe enterprise may maximise its profits.

2. Sales Stability Objective.
Every business or industrial unit wants stability in its sales volume so that its production capacity may be utilised fully. If there is wide fluctuation in its sales volume, it may cause great difficulty to the enterprise. For example, if the sales of an enterprise go very high at a time, it will require an addition to its production capacity involving huge capital expenditure.

If, later on, the sales of toe company product decline to a considerable extent, its production capacity will remain idle and the company will have to pay heavy amount of interest on such investment causing loss to the company. Therefore, the company must make efforts to stabilize its sales volume. For this purpose, toe company should make necessary, changes in its product mix.

3. Sales Growth Objective.
The success of an enterprise is not only in stabilising its sales volume but it should also make comprehensive efforts, to increase its sales. To achieve the object of sales growth, the company should change Its product mix keeping in view the product life cycle of its existing products. It may scrap its products which have reached the saturation stage. It may improve its products or add some new products. The company may enter new segments of the market by improving the products. These efforts will increase the sales potentials of the company s product mix.

Question 5.
What do you mean by Product Life Cycle ? What are the gradual stages in the product fife cycle of a particular product ?
Examine the concept of Product Life Cycle and discuss how it is related to the different stages of market development.
Explain the nature of promotional job in relating to the life cycle of a consumer product.
Write a short essay on the concept and uses of product life cycle.
Product Life Cycle:
Like a human being, all products have certain legnth of life during which they pass through certain identifiable stages. Through the conception of the product, during its development and up to the market introduction, product remains in pre-natal stage. Its life begins with its market introduction, then goes through a period during which its market grows rapidly, eventually, it reaches at maturity and then stands saturated. Afterwards its market declines and finally its life comes to an end.

The important stages from the view point of marketing can be grouped into six :

  1. Innovation or introduction,
  2. Growth,
  3. Maturity,
  4. Saturation,
  5. Decline, and
  6. Obsolescence.
    This is termed gs a product life ‘cycle.

When a product is first introduced at the pioneering stage, the sales will take some time before they pick up. Once the product gains consumer acceptance the sales will go up in growth stage. Henceforth as more competitors enter the market the rate of growth decreases but the total sale- volume goes up. Afterwards, a stage comes when the sales come to standstill inspite of the best efforts of the marketer.

This is the saturation stage. In the end sales are likely to go down or it reaches to decline and the product dies at the end. Every product has these stages. The time span differs between ‘innovation’, and declines among different products. Some products lose the market even before the plants are ready. Some goods remain in market due to conumer demand. Many factors govern the length of product life cycle.

A slight change in the ingrediends may lead to obsolescence. When the product is new in the market, it needs advertisement expenses to a great deal. In the second stage sales are grown and it reaches growth stage. Now the 4 competitors reach the field with price appeals and product improvement. Now it has come to maturity stage. Sales begin to come down and the complete decline comes if not researchers give some new substitute in time.

William J. Stanton has explained the concept of life cycle of a product ‘ as “From its brith to death, a product exists in different stages and in different competitive environments. Its adjustment to these environments determines to.a great degree just successful its lift will be.”

Different Stages Of Product Life Cycle:
“Different stages of a product life cycle are as follows :
(i) Introduction.
It is the first stage of the product life cycle. The product is first introduced’ in the market. Heavy expenditure on advertisement is made to inform the potential customers about its qualities a id characteristics and it is made popular among its users through promotional efforts. As because the potential – consumers are quite unaware of the products characteristics, the sales do not pick up much. Moreover, the product is put to the market at very competitive price.

Consequently the quantum of profits is low or rather negligible in this stage but the risk factor is much higher. Competitors are not in the market because the product is new for the potential consumers. Most of the product fail in this Stage due to lack of proper innovation efforts. Thus, at this stage, it is necessary to prepare and implement the effective advertising and sales promotion programme.

(ii) Growth.
After the product is introduced in the market, the product enters the second stage, z. e., growth stage. Under this stage, the product gains popularity among and recongnition from the customers. The demand and sales go up tremendously due to promotional efforts. Consequently profits of the firm start going up and up because of two primary reasons:
(a) Production and sales go up hence firm gets many internal and external economies of large scale production and sales, and
(b) Advertising and distribution costs, though go up but per unit cost is reduced. High profits attract the competitors to enter the field.

In order to lengthen the growth stage, the marketer must concentrate up on advertising and sales promotion programmes. New and alternative uses of the product should be widely communicated to the consumers and would be consumers. New market segments should be opened and system of physical distribution should be made sound. The reactions of customers should be noted and analysed.

(iii) Maturity.
The next is maturity stage. In this stage, competition increases. Though sales of the product go up but with a lower speed. The advertisement and distribution costs increase in order to make the product survive. The profit rate begins to decline. The producer makes search for new markets. Market and marketing research expenditure goes up. The prices came down due to stiff competition.

This stage is challening. The marketer must change its marketing strategies, policies and programmes keeping in view the changing circumstances of the market. He must have a close eye on competitors.

(iv) Saturation.
Next comes the sturation point. At this stage the sale volume comes to standstill despite best promotional efforts but it is at all time high. The competition is-also at its peak in this period.Competition brings the cost of distribution and promotional efforts at new high; prices begin to fall and therefore profits come down, Fresh efforts are made in this stage to improve the product. New markets are tried.

(v) Decline.
This stage is brought out by product gradual displacement , by some hew innovation or change in consumer behaviour. New and new products are introduced in the market by competitors. Sales of existing product go down inspite of all best efforts of picking it up. Cost control becomes necessary to reduce the price in order to compete; At this stage, the marketer should explore the possibilities of selling the product. It he finds bleak possibility, he should divert his resources to other products.

(vi) Obsolescence.
As new and new product are developed and introduced by the competitors, the company’s product dies out. Its demand and sales are likely to taper off. Profits are reduced, to a negligible point. At this stage, it is advisable to stop the production of the product and switch off to other products.

The above discussion concentrates on the life cycle of a product beginning with its introduction up to the market and ending with its death, (i.e., only post-marketing stages of a life Cycle are given) but a series of processes are to be undertaken by the management even prior to its introduction. The various expenses’ are made even before its introduction in the market on research, engineering and technical improvements, post-production and pre -marketing (test-marketing, advertising) etc.
This cycle of a production be depicted in the following diagramme :
DU SOL B.Com 3rd Year Marketing Management Notes Chapter 4 Product (Concept, Classification and Decisions) 4
The above discussion concentrates only on the life cycle of product, beginning with introduction stage (Le.. post marketing). But a series of processes are undertaken by the management much before the introduction of the product into the market. The diagramme given above may be given below in an enlarged form to incorporate the pre – incorporation stage also.
(For detailed discussion of these stages, See Q. 11.)
DU SOL B.Com 3rd Year Marketing Management Notes Chapter 4 Product (Concept, Classification and Decisions) 5
Utility Of Product Life Cycle Concept:
There is a great difference of opinions of scholars about the utility of the concept of product life cycle. Some scholars are of the view that the study of life cycle of concept is a wastage of time, money and energy. They argue that different products have different life cycle and life cycle changes from time to time depending upon different factors.

They are also of the view that it is not easy to determine the particular stage of the life cycle of a product at a particular time. Moreover length of a particular stage cannot be ascertained. On the other hand, some scholars are of the view that the study- of product life cycle is .very useful in marketing and also for preparing and Implementing-marketing strategies and programmes. Its utility can be explained as under:

1. Life of a Product is Limited.
According to the concept, the life of a product is always limited. The product will die out over a period of time irrespective of the fact, that the product had made a tremendous progress during the past. Knowing this fact, management always try to improve its existing product or to develop a new product.

2. Estimation of Profits.
The quantum and rate of profits increases or decreases with the quantum of turnover. At introductory stage, profits are negligible, then they go up and after some time they begin to fall and gradually they move to nil. Thus, the management can well predict the firm’s profits in different stages of the life cycle of the product.

3. Marketing Programme.
Different policies, procedures, and strategies are followed in the different stages of the life cycle Of a product. So, management can prepare the marketing programmes accordingly and may get

Question 6.
Explain the marketing strategies which may be adopted during the life cycle of a product. Or
Suggest .some of the strategies toward off obsolescence stage.
Strategies During The Life Cycle Of a Product:
All products have certain length of life during which they pass through certain identifiable stages. (For detailed study of these stages, see answer to the previous question.) Once the product gains consumer acceptance, the sales generally go up in the growth stage but soon more and more competitors enter the market.

It will adversely affect the sales of the product considerably and will likely to stop going up. The sales position is optimum in the maturity stage. Henceforth sales begin to go down and comes to an end after certain period when its demand dies out.

Every product has to pass through these stages. The period of its stay in the market may differ from product to product: Several factors govern the length of product life cycle. A slight change in the ingredients leads to obsolescence. So, the management tries to make the product survive in the market for a long period and hence, it takes up various strategies at the different stages of life cycle of a product.

At introductory stage,the marketing strategy would involve heavy advertising, extensive selling and introductory inducement. Thus heavy expenditure on advertisement informing about the product and the producer and on personal selling etc. is to be made.

The effect of advertising and extensive selling in the introductory stage may be seen in the growth stage where sales pick up smoothly and start attracting the competitors in the field. In this stage, marketing strategy may shift to price appeals-and product improvement.

Again by reaching the declining stage, the organisation may merely attempt to recover costs. In the meantime, steps should be taken to reduce the cost and for this the research department should have been active enough to have come foreward with a new product in time. At this stage, the following steps may be taken :
(a) The utility of the product may be increased,
(b) Nev uses may be suggested.
(c) New attractions to the purchaser may be added such as draw of “lucky coupons or gifts etc.
(d) New markets may be searched out.

The above steps may be called ‘injecting new blood’ technique to ward off the obsolescence stage. However this type of injection in practice cannot be done permanently. Therefore, the company must come out from time to time, especially in competitive environment, with new products so that its sales line will rise steadily. This may be termed ‘injecting new products’.

Question 7.
“The length of a product life cycle is governed by the rate of technical change. The rate of market acceptance ‘and the ease of competetive entry.” Discuss.
Explain the factors affecting the life cycle of a product.
Factors Affecting The Life Cycle Of a Product:
There are many factors that affect the life cycle of a product. Statement of Joe Dean is very important in this regard. Be said, “The length of a product life cycle is governed by the rate of technical change, the rate of market acceptance, and the ease of competitive entry.” Some of the important factors affecting the life cycle of a product are as follows :

1. Rate of Technical Change.
Life cycle of a product is affected by the rate of technical change in the country, If the rate of technical change in the country is very high; the life of the products is limited because new and ‘ improved products take place of old and existing products. On the other hand, if the rate of technical change is not so high, the life of the product in that country may be longer. For example, the life cycle of products in India (where rate of technical change is not high) is longer as compared to-the life cycle of products in developed countries’ (where technical change is a higher rate).

2. Rate of Man at Acceptance.
The rate of customer acceptance also affects the life cycle of products. If the rate of market acceptance is high, the life cycle of products in that country is limited. It is because the customers who have accepted the new products today can accept another product tomorrow and the existing products will soon stand out of the market. Similarly, if the customers accept the product at a slow rate, the life cycle of the products may be quite long. For example, in India, the market acceptance is very slow, and therefore, here life of the products is very long.

3. Case of Competitive Entry.
The situation of competition in the market also affects the life cycle of the products. If the entry of competitors are easy and unchecked, the life of the products will be shorter as the new and hew products will enter the market. As a result the existing products will be flushed out of the market. Contrary, if the entry of competitors is hot so easy the life cycle of products will be longer.

4. Risk Bearing Capacity.
The risk bearing capacity of the enterprise ‘ also decides the life cycle of its products. If the enterprises have risk bearing capacity, they can keep their product alive in the market far a long period as they can face the challenges of the market very effectively. For example, they can spend more amount on advertising and sales promotion to meet the competition in the market. But where the enterprises have no risk bearing capacity may fail to face the challenges of the market. They will soon withdraw their products from the market, if they smell heavy risk. In such cases, the life cycle of their products will be shorter.

5. Economic and Managerial Forces.
Enterprises having Strong economic and managerial forces, can keep their products standing in the market and the life cycle of their product will be longer that of the life, cycle of the products of those enterprises having Weak economic and managerial base.

6. Protection of Patents.
The life cycle of the products is fairly long if their patents have got registered. On the other hand, if the products are not patented, their life is cut short.

7. Goodwill of the Enterprise.
If the goodwill of the enterprise is good in the market as the producer of good quality products, its product will last long in the market as compared to, the products of those enterprises whose goodwill is not good or which are not known to the public much.

Question 8.
“Product Planning is the starting point of the entire marketing programme of a firm.” Explain.
Product Planning:
Planning is deciding in the present what to do in the future. Thus, product planning means deciding about the product what it should be in future in terms of product items, product lines, modification of present items, addition or deletion of products etc, According to W.J. Stanton, “Product planning embraces all activities which enable producers and middlemen to determine what should constitute a Company’s line-of products.”

Again Johnson defines product planning, as “Product planning determines the characteristics of product best meeting the consumer s numerous desires, characteristics that add stability, to products and incorporates these characteristics into the finished product.”

Karl H. Tietji defines product planning “as the act of making out and supervising the search, screening, development and commercialisation of new products; the modification of existing lines, and discontinuance of marginal or unprofitable items.”

Thus product planning signifies three important considerations :

  1. Development and introduction of new products.
  2. Modification of existing lines as may be needed in terms of changing consumer needs and preferences.
  3. Discontinuance or elimination of marginal or unprofitable products.

The idea for new or modified produces is secured from external sources like competitors, distribution channels, and ultimate consumers. Product ideas require preliminary screening and evaluation. Market research helps in such fields.

Elements of Product Planning.
The various definitions of product planning given above bring out the following essential elements of product planning:

1. Research before Production –
Before taking a decision to produce ‘ a new item, market research should be carried out extensively with a view to know the needs, wants, tastes, habits, preferences, attitudes etc. of the consumers. The company must know before hand what should be produced and for whom ? It should decide the characteristics of the product e.g., size, colour, quality, design, brand, packing, price etc. that can meet the requirements . of the people. Such type of research provides the base for product planning.

2. Possibility of Production –
What production method would be followed and is it practicable to develop a product exactly what the consumer wants ? This possibility Should also be examined before, taking a decision of producing a new product.

3. Modification in Existing Lines –
The existing production lines should also be diagnosed whether they can be improved to meet the new requirements of the consumer or a new product is to be developed. If it is possible to modify the existing line, then, to what extent ?

4. Elimination of the Product –
Product planning involves the decision regarding the elimination of the unprofitable product (which has reached final stage of its life cycle) or product lines so that the resources may be used to some other product profitably.

5. Improvement in the Product –
Product planning includes decision regarding the improvement of the existing product in terms of quality, packing etc. taking in view the Competitors’ strategies in the market.

6. Price’Determination –
Determining the price of the product is the main element of the planning. Would the prices be fixed on the basis of the prices fixed by the competitors for their products or on the basis of its cost of production or on the basis of the forces of its demand and supply in the market ? This is an important decision by the management concerning product planning.

7. Commercialisation of Product –
Product planning includes products commercialisation and sale of the product which can earn a good profit to the  company on the one hand and may satisfy the needs of the consumers on the other hand. It also involves attractive introduction of the product in the market.

8. Coordination –
Product planning also attempts to coordinate the various products and their efforts so that the company can maintain or rather improve its competitive position, “t can be done by taking timely decisions for marketing conditions from time to time.

Thus it is clear from the study of various elements of product planning that every decision from the start of an idea of producing a product to its elimination from the product line of the company forms the part of the product planning.

Importance of Product Planning.
Why product planning is a very pertinant question because there are firms having no concern with the product planning are successful in marketing their products while some others fail in their marketing activities ihspite of planning. But it is not because the
planning is made or not. It may be because of the defective planning. Product
planning is necessary due to the following facts :

1. Product Planning is the Starting Point of the Entire Marketing Programme –
Product planning involves decisions regarding the product at different stages of its life cycle from time to time. Why to produce a particular product; What to be produced when and why to produce; Why not a particular product be improved or abolished from the product line ? are certain questions which require adequate attention of the management.

Any decision regarding the production, modification and elimination of a product may affect the marketing policies, programmes, procedures and strategies. If decision is taken without proper consideration or planning, it may ruin the firm because other programmes, policies etc. are the outcome of the product plans. So product planning is the starting point of all marketing programmes.

Lack of product planning implies managerial bankruptcy in the organisation and amounts to leaving the enterprise to trust its own luck Marketing activities revolve around the product planning. All elements of marketing programme of a business unit,- i.e., price policies, distribution channels, advertising policies and programmes, sales promotion and personal selling etc. are affected by the decisions concerning product planning.

2. Customers’ interest is supreme and it must be protected by all means is the main philosophy of the modern marketing management. What the customer needs; should be the main consideration in product planning and it should decide how the product must contain those qualities which can satisfy those needs. Production is made accordingly.

It is not the company to decide what to sell. Company can sell which is required by the customers otherwise life-cycle, of the product would be very short and company may lose its existence even. Thus product planning determines how to satisfy the consumers’ needs.

3. Product Planning ensures Profitability of the Product –
Profit is the main concern of the business. No businessman would be ready to do anything without profit motive. Customers’ needs must be satisfied on the one hand and reasonable and sufficient profits must be earned by the firm on the other hand. Product planning is one of the ways to coordinate the customers’ satisfaction and the profitability.

For this purpose, the firm should carry out different types of surveys to know the changing habits, needs, latest fashion, and the status of the customers and should modify its product accordingly. It will ensure profitability and consumer satisfaction both at the same time.

The firm knows the life cycle concept of a product. It can very well predict its profits during various stages of life cycle but only through product planning. It can decide what new product should be developed or eliminated to maintain the profits of the firm even in declining or obsolescence stage.

4. Helpful in Facing the Competition.
Product planning is necessary to face the competition in the marketing. The success of marketing efforts depends very much upon the extent to which product of the enterprise is able to face the competition. Decisions regarding modification or improvement in the product are taken with a view to keep the competitive forces out of the market or to have an edge over competitors’ products.

Thus product planning-is an important tools in the hands of marketing management to make the product and the marketing programmes successful. If product planning is lacking, it will certainly affect the marketing activities and will ruin the business completely, it is a foundation on which the. whole structure of marketing programme stands.

Question 9.
(a) What do you understand by product development ? Discuss its chief elements, principles and advantages.
(b) Discuss the scope of product planning and development.
(A) Product Development:
Product Development is the next step to product planning. Product development is a limited term but include the technical activities of product research, engineering and design. Product development is the process of finding out the possibility of producing a product keeping in view the. customers’ needs, and wants. It includes the decision as to whether it would be feasible or not to produce the product and whether it would be profitable or not for the enterprise to do so. The term product development has been defined as under :

William J. Stanton, “Product development encompasses the technical activities of product research, engineering and design.”

Eimpson and Darling, “Product development involves the adding, dropping, and modification of item specifications in the product line for a given period of time, usually one year.”

Thus, product development means making changes in the size, design, colour, shape, characteristics, packing etc. cf the product. It may include ‘ addition of a new product line, addition of new product item in a particular product line, elimination of an existing product or a product line and changes in the size, colour, design, packing, characteristics, prices of the product, and discontinuation of unprofitable item or product-line.

Main Elements of Product Development.
Main elements of product development are:

  • To discover the feasibility of production of the product,
  • To develop qualities and characteristics of the product,
  • To develop different designs and models of the product,
  • To select the best design or model,
  • To decide the size, colour, packing, form etc.
  • Expansion and contraction of product mix,
  • Discontinuation of unprofitable product,
  • Improvement in product.

Principles of Product Development – There are three main principles of product development –
1. Principle of Standardisation –
This principle stresses that the product should be standardised. The standards should be determined in advance. These standards may relate to the size, colour, form, packing, ‘ physical and chemical attributes etc.

2. Principle of Simplification –
This principle stresses that the production process must be as simple as possible. The types, sizes, colours designs and forms of the product must be minimum in number. It makes the process of preparation and implementation of marketing programme easy. It reduces the cost of production storage and distribution easy.

3. Principle of Specialisation –
This principle stresses that the enterprise must try to achieve leadership and to be expert in a particular field. Unnecessary product differentiation should, as for as possible, be avoided. It will bring down cost, increase efficiency and provide maximum satisfaction to customers.

Advantages of Product Development.
Product development provides a number of advantages to the enterprise. Some important advantages are

  • Product development helps in producing the goods and services of best quality.
  • Product is developed in view of the customers’ demand, therefore it a provides the maximum possible satisfaction to customers.
  • It helps in expanding the market of the products of the enterprise.
  • It helps in achieving stability in product demand of the enterprise.
  • It minimises the risk of obsolescence because producers may introduce a new product -an improvement in the existing product -in the market in place of the existing one.
  • It helps in facing the competition successfully and effectively.
  • It increases the potentiality and goodwill of the firm.
  • It increases the profit earning capacity.

(B) Scope Of Product Planning And Development:
The scope of product planning and development is very wide and includes the following activities –
1. Product Decision –
In product planning and development, the first activity to be included is the decision of starting the production of the product. In taking decision, the producer has to think over whether it would be profitable or not to produce the product under Consideration.

2. Size and Design of the Product –
The next decision, included in product planning and development is regarding size and design of the product. The size of the product may be large, medium and small or may be of different measurement. Design of the product includes determination of form, structure, colour etc. of the product.

3. Name of the Product –
Next activity in product planing and development is to decide the name of the product. The name of the product , must be short, easy to remember. It must have some resemblance with the characteristics or utility of the product.

4. Price of the Product –
Price determination is included in product planning and development. It is perhaps the most sensitive decision to be taken by the enterprise. The object of profit maximisation depends price determination of the product. The price of the product must be fixed by the enterprise keeping in, view the cost and characteristics of the product price of the competitors’ products and the purchasing power of die consumers.

5. Brand, Packing and Label of Product –
The enterprise has to decide about the brand, label and packing of the product so that it may easily recognised in the market. The product may make an effective and attractive place in the market to gain loyalty of the consumer.

6. New uses of Product –
Development of new uses of the product is also included in product planning and development. It helps in developing the demand of the product.

7. Guarantee and After-Sale Service –
It has became a usual practice these days to guarantee for the. repair and maintenance of the product for a specified period free of charge. During this period, the enterprise attends complaint free of charge at their residence. It is also included in product planning and development.

Question 10.
What do you mean by product line policies and strategies ? Explain the various product line strategies.
Write an essay on ‘Product line policies and strategies
What do you mean by Product Line Management ? Briefly comment on its strategies.
Product Line Policies And Strategies:
Product line refers to a group of products that are closely related because they satisfy a class of needs or are used together or are sold to the same customer group or are marketed through the same types of outlets or fall within given price ranges.

The alteration and modification in the product line is called product line policies and strategies or product line management. In order 😮 achieve the long-term objectives, the firm is to alter or modify its existing product line. It becomes necessary following the changes in the firm’s own long-term objectives or change in the government policies regarding the product or the business and the changes in the political and social environment of the country to alter or modify its product line policies and strategies otherwise the firm will fail in keeping pace with the changing environment. Therefore, in order to survive, it becomes imminent to alter or modify the product line.

Various Product Line Policies And Strategies:
The following product line policies and strategies are generally employed by the producer or the wholesaler of the product:
1. Product Line Contraction or Contraction of Product Mix –
This is otherwise known as contraction of product mix. It is a method by which either the number of product lines or the depth of a product line is thinned out. It is also termed as ‘simplification’. The decision to reduce the product items might be due to the purposeful act of management to suspend the production of unprofitable products or product line. Marketing problems also sometimes compel the manufacturers to withdraw certain items. Needless to say on such occasions the product mix will be altered.

Product line contraction is a major decision from the point of view of the management. “Marty sick or marginal products never die; they are allowed to continue in the company’s product mix until they, fade away.” These products in course of time, eat away the profit, earned by the other products. The decision to give away a product often results from changes in the market conditions. Products may also be abandoned even through it is still profitable if the management feels that the same resources could yield a higher profit from other products.

Thus the process of avoiding, or stopping altogether the production of a particular product is called ‘Simplification’. It is also termed as ‘Product Line Contraction’. It is just opposite to diversification. R.S. Alexander states, “But putting products to death – or letting them to die – is a drab business and often engenders much of the sadness of a final parting with old and true friend.”’ The reasons for this are partly logical and partly sentimental.

Thus, contraction of product lines or product mix may take place in the following two ways:

  1. decrease in the number of product lines.
  2. decrease in the number of product items in the existing product line.

2. Product Line Expansion or Expansion of Product Mix or Diversification –
It is just the opposite of the product line contraction and is referred to diversification. To utilise fully the marketing opportunities a firm may expand :n both breadth and depth. The expansion of the product line is undetaken by increasing the lines or items of products. New line may be related or unrelated to the presents products. For example, manufacturers of radio sets may start producing television sets and tape-recorders as televista has done. The objectives and uses of product diversification are as follows:

  • To eliminate seasonal slumps;
  • To eliminate cyclical slumps;
  • To reduce the danger of declining demand;
  • To acquire social approval;
  • To make use of discoveries accidental in the company laboratories;
  • To use excess production capacity;
  • To utilise profitably the by-products of the production process;
  • To use cash and undistributed earnings during high profit periods.

3. Trading up and Trading Down –
Trading up and trading down are the two forms of the strategy of product change -New market. This gives increased profitftaulity through additional sales volume got by changing certain features of the product and selling it to a new market. Very few products, fully satisfy the needs of more than one market segments. So concerns must change often few product features to match them better with the individualized needs of new target market segments.

Trading up –
Concern trades up when it adds higher priced better item to gain sales of a present lower priced article. This may bring involvement of new markets, the stress is on increasing sales to an old market segment. It may take up old and new segments also. Companies trading up make up the difference of a low priced with the high priced article at the same time, it adds to the goodwill of the firm. For example, a number of manufacturers have started selling higher quality products designed as ‘Expert Models’. Household items like fans, sewing machnies, refrigerators etc. offer such examples.

Trading down –
The company adds a low priced article for the better marketing of present high priced one so that more people can buy it easily. In trading down new market is looked for where the old product has not reached. This leads to success and the difference in profit is adjusted through the high priced one. Both the Strategies are Riskful.

4. Changing Models or Styles of the Existing Products –
Continuous changes in fashion creates a problem for the producer compelling him +o assess in advance such changes. Furthermore, the desires and needs of the consumers are also subjected to continuous changes. All these combel the management to review this problem with farsightedness.

5. Quality Variations –
In contrast to the above, under certain circumstances a manufacturer is forced to produce differing qualities of a particular product. Even if the quality of the product is good, a single quality may not be enough to retain the market. For example, manufacturers of fountain pens invariably market pens of different varieties with varying quality at different prices.

In the matter of quality the manufacturer of consumer goods such a speciality goods and convenience goods often face the problem of changing the quality to suit the market. This is done by cither trading up or by trading down already explained.

6. Product Identification –
The ultimate aim of producing a commodity is selling. But the position of products in the market is determined by contrasting their image with competing products as well as other products marketed by the same company. This in turn is partly created by brand image.

One’s product should be capable of easy identification by the buyers in the market place. But the brand image is not a permanent one and cannot retain a permanent market. Brand is only a name and the acceptance of a product finally rests on the real worth of the product. Every manufacturer must find out beforehand whether his product will have a potenital market or not. It can be known by market information and product testing.

7. Test Marketing –
Before finding a new product to the market, test marketing is necessary. The product should be first introduced and, tried in a small segment of the market and the reaction of the customers studied carefully. The test can reveal the shortcomings of the product which can be removed and improved before the product is actually sent to the market. Testmarketing reduces risks. Test marketing is a trial and error method to know what is likely to happen when a new product is introduced commercially. By this future difficulties and problems are removed.

Question 11.
List the steps in the development of a new product.
Comment on the factors which you would into account in developing successfully a new product and its commercialisation.
“The new product development process starts with a search for goods ideas.” Explain.
Steps In The Developing Of New Product:
Planning the New Product.
Each concern.have different details for their product planning. They come under three phases :
(i) First new product ideas a e created. The planners evaluate the extent and importance of identified market needs through marketing research and buyer behaviour and appraise the extent to which present products fulfil. Company’s capabilities are valued as such based on scientific and technical knowledge of the concern for new products.

(ii) In the second phase, competitive market situation is investigated with company resources. Market research is critically carried on so that size and type of marketing organization may be known. Analyst Of company resources show the adequacy of plant capacity, product service facilities, marketing channels engineering abilities and other human resources. Relative profitability, target market segment and opportunity to attain product leadership are known.

(iii) In the third-phase, the product is actually developed. Management gets the prograime and the project is executed. This inci udes overal i plan, for the products eventual marketing.

Development of A New Product:
Basic requirements of a new product –
There are certain basic requirements of a new product:

  • Customer or consumer acceptance;
  • Satisfactary performance;
  • Economical production;
  • Adequate distribution in depth and breadth;
  • Effective packaging and branding;
  • Adequate servicing where required after the product is sold;
  • Ultimate replacement.

Ultimate replacement is a vital point. The concern can stay in business only if it comes regularly with new products that will replace the old ones becoming obsolete.

Technical Advances –
Due to research and development new products have come to help the customer. Many uses which were considered impossible have now become common it is through research and development. New uses of existing ones are known and obsolescence is saved due to substitutes competitive products.

Process of New Product Development Dr Steps-in Developing A New Product. The process of new product development is as follows :
I. Exploration of New-Ideas –
The development of new product starts with, the exploration, of pew .ideas. There may be a number of sources of exploring,these new ideas. Some of main sources of idea generation are :

  • Consumers’ opinions and suggestions offered by the consumers or invited or collected by the company.
  • Salesmen or distributors or retailers’ opinions and suggestions,
  • Competitors’ products may give an idea to innovate the firm’s product.
  • Own research and Development department of the company may bring new ideas after market research.
  • Universities and Government Research Laboratories.
  • Employees of the enterprise.
  • Management of the company.

All the ideas may not have immediate market potential. At the same time a firm must Always keep a collection of ideas ready in stocks because creation of new product is a condition for survival in the market. The specific activities performed at this stage are ;

  1. Determining the product fields of interest of the company.
  2. Establishing a programme for planned idea generation, and
  3. Collection of ideas through an organised work.

II. Screening of Ideas –
At this stage, ideas collected are scrutinised. AH the ideas collected may not be acceptable. Ideas which are quite inconsistent with the product policies and objectives of the firm may be dropped out rightly. There may be some other ideas which are good and consistent with company’s product policies and objectives but these cannot be developed due to certain limitations e.g., non-availability of raw materials or technology required, or short of financial resources or limited plant capacity or managerial ability. Thus, due to these constraints, such ideas are also dropped.

Remaining ideas which have been found suitable and feasible should be listed in order of their importance: At this stage, the following activities are involved :

  • Expanding each idea into full product concept.
  • Collecting facts and opinion to decide Whether the product idea can be converted into a business proposition.
  • Assessing each idea for its potential value to the company.
    The main object of this step is to scrap unsuitable ideas as quickly as possible and look out for the idea which can be developed.

III. Business Analysis –
This is in continuation of the above stage. When an idea is finally selected, a further analysis is necessary. A rough programme for its development is fixed. Under this stage, selected idea or ideas are studied in detailed manner, determining its desirable market feasibility and features of the product and developing specifications and establishing a definite programme for the product. Thus, for this purpose the following three types of estimates are necessary :

  • Estimating future sales of the product under consideration.
  • Estimating future costs of the product, if developed as a product. For this purpose, different elements of costs are to be analysed.
  • Estimating future profits.

IV. Product Development –
If one idea crosses the above three steps, the steps are taken for the implementation of the decision. At this stage, the management goes ahead to produce the goods in its physical form. The idea, thus, is converted into a product that is worth-producing. Under this stage, all decisions to bring the idea to final physical form are taken.

The final decision whether a product should be accepted for production on commercial scale is taken. Under this stage, the following decisions should be taken :

  • Developing Models –
    The idea is given to research and development department to prepare different models of the product and the management has to select only one model out of these models.
  • Consumer Preference Testing –
    In selecting a particular model, the management may invite some selected consumers to suggest the model.
  • Brands –
    After selecting the model, efforts are made to name the product and register its brand name copyright and trade mark.
  • Packaging –
    Packaging of the new product is also ail important decision to attract the potential customers.

V.Testing the Product –
After designing, the next step is testing the product in the market. The product, under this stage, is introduced in the whole market or in a segment of the market for a trial for a specified period. If it is an industrial product, cost of testing will be much less because the users of such product are less and can be approached easily. In case, it is a consumer product, it will take more time for testing the product and the cost of testing will be much higher.

The result of testing is then analysed and if the product proves successful, the decision to produce it on commercial basis is taken. If unfortunately, it proves unsatisfactory, it may be withdrawn or it may be modified in the light of the opinions and suggestions of the consumers or dealers. Testing the product in a segment of the market reduces the risk of the producer to a great extent.

The objectives of test marketing are:

  • to evaluate a complete market plan including advertising, distribution sales, pricing etc
  • to determine media mix, channels etc.
  • to forecast sales volume. Testing the product, reduces the risk of the producer to a great extent.

VI. Commercialisation of Product-
If the product is proved successfully in testing, a decision to produce it on commercial basis may be taken.
Thus the last stage in product development is the introduction or launching or marketing the product. This is also expensive. From top to bottom everyone is busy in calculating for the vast investments as the product may not prove profitable for three or four years in future. Top management must approve, finally the introduction of the new product.

Question 12.
What is product innovation ? What are the reasons which compel a marketing manager for product innovation ?
Why do companies manufacture new products ? What are the causes of failure of new products in the market ?
Meaning Of Product Innovation:
Frequent changes in the environmental conditions of the market take place in case of all products. Habits, taste, attitude, preferences etc. of the consumer keep on changing technological changes take place. Consumers needs, wants and their expectations changed from time to time. All these changes make it compulsory for every businessman and industrialist to make necessary changes in the product so that the product may be accepted by consumers. If the enterprise does not make the necessary changes, it cannot face the changes in market conditions effectively and successfully and the product will soon be out of demand.

When some improvements arc made in the product, then it is called product modification. But when a new product is introduced in the market in place of the existing product or when a product is modified in such a maimer that it gives an impression of a new product;, it is called product innovation.

The rate of innovation is not uniform in all the countries and at all the times. It is higher in developed countries because of speedier technological development and per capita income of the countrymen. It is comparatively low in underdeveloped or undeveloped countries because of their

  • low per capita income,
  • lower industrial and technological development,
  • illiterate population,
  • lower standard of living of the people,
  • higher demand of the product. Therefore, no need is felt by the enterprises to innovate their product.

Reasons For Product Innovation:
The following reasons compel the marketing manager for product innovation:
1. Competition –
Competition is perhaps the most compelling reason for product innovation. Every industrial enterprise wants to capture a major share of the market to defeat their competitors in the market, it is, therefore, necessary for the enterprise to represent its product in the market in the new and improved style to attract the consumers so that the demand of its product may be increased .over other products.

2. Business Growth –
Product innovation is a tonic for the growth of the business and industrial enterprise. If business grows, new and new products are introduced in the market to attract the customers. Firms which adopt product innovation, succeed in achieving its marketing objectives.

3. Market Changes –
Conditions arid environment of the market keeps on changing from time to time. Habits, tastes, attitudes, preferences etc. of the consumers change at a very fast rate because of the change in economic, social and political environment. These changes prompt the producer to innovate their products so at to meet the needs and wants of the consumers.

4. To Minimise Risk –
Every product has its own life cycle. When a product reaches at saturation or decline stage, it becomes necessary for the enterprise to innovate its product otherwise the existing product would soon die down. Thus, product innovation is necessary to meet the risk of dying down of the existing product.

5. Technological Changes –
Due to scientific and technological changes world wide, it has become necessary for every industrial enterprise to use newer and latest technology. If new technology is used, new product will be produced or there is product innovation. If the producers ignore these technical changes, their product will be out of the market very soon,

6. Maximum Utilisation of Resources –
Sometimes product innovation becomes necessary to make the maximum possible use of its physical and human resources. For example, to make use of the wastes and scrap of the product, or to make maximum possible use of marketing distribution channels, or plant and machinery or to avoid lay off of the employees or to use surplus capital or to get benefit of its goodwill are other reasons which give birth to new products.

7. Other Reasons –
Apart from the above, there are some other reasons which prompt the manufacturer for product innovation. These reasons are :

  • Market strategy,
  • To raise the standard of living of the people,
  • To impress the consumers,
  • To complete the product line,
  • Desire of the producer to maximise his profits or development,
  • alertness of the consumers,
  • making market programme more effective.

Causes of Failure of New Products.
Many new products enter the market. Every producer hopes to succeed in the market, but the success is not the fate of every product. It is seen that many products are thrown out of the market even before they reach the stage of growth or saturation of the product life cycle. There may be a numbering reasons for the failure of new products. Such reasons are:
(i) Inadequate Market Analysis –
Where the product is introduced in the market without proper market analysis or with biased and incomplete data, the product fails in achieving its objectives. It is because the enterprise fails in

  • Understanding the consumers needs and wants properly,
  • making correct estimates of sales, and
  • meeting the standards of utility etc.

(ii) Product Defect –
This arises out of technical flaws in the process of production. This is a fundamental reason for product failure. Low quality of products, pc~r design or packing may lead to product failure. This can be done away through the proper product testing.

(iii) Higher Costs –
Higher final costs than anticipated at the time of product planning is another reason for product failure. It might be partly due to wrong pricing policies adopted by the firm. The cost estimates also often go wrong when the products are finally introduced into the market.

(iv) Poor Timing –
The fundamental principle to be followed in product planning is to find out the exact time at which the product is to be introduced in the market. Usually when and how are the two questions a manufacturer is often, finding difficult to answer. A close analysis of the market, conditions and consumer behaviour and attitudes is essential to find an answer to the two problems.

(v) Competition –
Severe competition leads products to struggle hard in the market. There are various methods to overcome severe competitions including price cuts (mark down prices) and various kinds of discounts etc. Consumer products are most affected by severe competition. However, it should be noted that it is not the low prices alone that will h p a product to compete and succeed in the market.

Basically offering high quality products excelling the existing ones is the basic determinant in deciding the success of a product m t e market. That is a wide spread recognition that it is ultimately the quality of a product which will enable the product to withstand competition.

(vi) Insufficient Marketing Effort
It is wrong to assume that a manufacturer just ends his efforts the moment a product is ready for sale. Advertising and proper promotional activities also form a part of his job to make the product known to consumers. Proper selection of the channels of distribution and the methods of physical distribution also help in proper and efficient marketing of products.

(vii) Inadequate Sales Force –
Selling is done by personal or impersonal methods. Impersonal methods include advertisement and similar promotional activities. Personal methods, on the other hand, are more intimate and more efficient promotional activities should be backed by adequate sales forces to introduce the product properly in the market. If salesmen are not trained or do not possess salesmen qualities, the product will not succeed.

(viii) Weakness in Distribution –
The distribution of the product is one of the major marketing problems. It is this mainting function, which enables the product to reach the proper market* at proper time and at a proper price. Distribution management is considered to be one of the important ones where management decisions requires farsightedness and vision.

(ix) Price of the Product –
Wrong pricing policy sometimes is responsible for the failure of the new product. Sometimes, the price of the product is fixed so high that it fails to respond. Sometimes, the margin of middlemen is so inadequate that they do not take any interest in selling the company’s product.

All these problems could be solved by the timely action of the management. Blain Cooke opines that today three-fourths or more of new products fail. According to him, “’he new products which fail are not in literal marketing sense products at all – they are merely interesting but worthless artifacts of the production process.

The above reasons for failure of product may be controlled by the marketer, if paying due case and attention to the product; market and market conditions before introducing the product in the market. The marketer can solve the problem by faking following actions :

  • The marketer should ensure that there is sufficient demand of the product in the market. He should, therefore, identify the potential market for his products.
  • He should make the product keeping in View the customers’ tastes and preferences or the product that is acceptable to the society.
  • He should select a product that would fit into the existing market structure of a company.
  • He should use a continuous and efficient demand creation methods,
  • The product should reflect the company’s image already created especially with regard to price and quality.

Question 13.
What do you mean by Test Marketing ? Describe its procedure.
What is Test Marketing ? Discuss the various activities involved in developing a Test Marketing plan for a branded consumer product
Write a short note on ‘Test Marketing’
Test Marketing:
Meaning of Test Marketing. Testing means to try and imporve of required. Test marketing means to put the product in the market for trait before it is introduced in the market commercially. For this purpose, the product is put to test in a selectedmarket segment. It will provide the market an opportunity to know his product and also the results which may be expected when the product is put in market commercially. In test marketing, the consumers are closely observed So that the nature and response of the market towards the newly introduced product may be known.

It any defects in the product comes to the knowledge of the marketer, they should be removed before throwing the product into the market commercially. In this test, the marketer may also identify the effective marketing techniques e.g. suitable distribution channel, suitable price, most effective methods of advertising v and sales promotion for marketing the product at large scale.

Philip Kotler has defined the term test marketing as, “Test marketing is the stage where the entire product and marketing programme is tried out for the first time in a small number of well chosen and authentic sales environments.”’ Mason and Rath defined the term as, “Test marketing means marketing goods experimentally to consumers in several carefully selected areas before . releasing them on wide scale.”

Thus, the test marketing is a technique of selling the product on trial basis in a well chosen market to observe the response of the customers and to decide whether the product can be sold on large scale successfully.

The main objectives of test marketing are :

  • to evaluate a complete marketing plan, including advertising, distribution, sales, pricing etc.;
  • to deter media mix, channels etc.;
  • to forecast sales volume.

Reasons for Marketings –
There are two reasons for marketing :
1. To Know the Reactions of the Consumers –
The main reason of test marketing of the product is to know the reactions of the consumers and to forecast the sales when the product is introduced commercially on large scale. If the product is not duly responded in the test market, the idea for starting production at large scale should be abandoned and the decision should be taken to divert the resources to some other products. If response is encouraging the decision may be taken to start production, on the large scale.

2. To Know Alternatives –
Test marketing provides an opportunity to
the marketer to know the reasons why the product was not accepted by the consumers. It also provides an opportunity to understand what improvements should be made in the product to make it popular and acceptable to customers. If feasible, the product may be improved in the light of the observations. If it is not feasible to improve the product according to the needs and wants of the consumers and it is felt that it cannot be marketed at large scale the idea to produce the product may be dropped. Efforts may be made to develop an alternative product which may satisfy the needs of the customers.

Procedure of Test Marketing.
The following procedure for test marketing may be applied :
1. To Determine the Number of Cities –
The first step in test marketing is to determine the number of cities or markets where the test is to be done. Two main factors are worth consideration in this respect :
(i) representativeness, and
(ii) cost of testing. Markets should represent all „ types of customers and their behaviour and the cost of testing should also be within limits. So, number of market .should be an ideal one, representing all types of customers bearing the minimum cosfof testing. The number depends upon several factors like nature and demand of the product, probable area of sales, regional disparities, competitors’ efforts and cost of testing etc.

2. Selection of Cities –
Having decided the number of cities for test ‘ marketing, the second step is to select the particular cities where test shall be earned out. In selecting these cities one point should be kept in mind that . cities must represent the whole country so that appropriate results may be extracted from the test. Cities to be selected should possess the following characteristics :

  • Existence of various types of industries,
  • Average ‘ competition,
  • Presence of chain and departmental stores,
  • Critical nature of the population etc. For the purpose, metropolitan cities like Delhi, Bombay, Calcutta, Madras, etc. are more often selected.

3. Duration of the Test –
This is also an important decision. It may be a month or a year. The duration of the test may depend upon various considerations but three main factors which affect the duration, are worth noting. They are :
(i) Average Repurchase Period –
Where repurchase period is long, test duration shall be long. If repurchase period is short, test duration will also be short.

(ii) Situation of Competition –
Competition will also define the duration of test In competitive situation, the test duration should not be too short to draw the required results or it should not be too long to give time to the competitors to improve their products and introduce their improved products in the market.

(iii) Cost-
Cost factor is also one of the deciding factors for test duration. Cost and duration have positive correlation. The longer is the period the higher is the cost.

4. To Collect the Necessary Information –
The next step in test marketing is to collect the necessary information as to the nature of product, nature of customers, channels of distribution, buyers’ behaviour, etc. during test period so that the enterprise can draw unbiased results from such information. Generally, the following information is collected during this period :

  • Quantity of purchases made during test period.
  • Whether purchasers has made repurchases of the product during test period.
  • Buyers suggestions and opinions regarding product through survey of buyers so that necessary improvements may be made.

5. Launching the New Product or Action after Test –
After test marketing, the marketer is to take a decision whether to make the production i at large scale or not. There may be many alternatives. If the sales are excellent, decision may be taken for commercial introduction. If sales are fair, the marketer may take any of the three decisions :

  • commercialisation of the product,
  • a new test marketing in a new area, and
  • modifying the product on the basis of opinions and suggestions of the test buyers.

If the sales shown by test is‘poor’ the marketer may drop the idea or have a retest of the market with modifications in the product or we should redesign the area for test after improving the product.

Thus, When decided to launch the product proper marketing strategy is to be done based on the information of market test With respect to pricing policy, promotional strategy and organisation of physical disMButipn system test results are very useful

Question 14.
Describe simplification a part of product policy. Describe
the factors with encourage product simplification
Explain the detail simplification as a product strategy.
Prompt Simplification
product planning is a complex act. It is the act of making out and supervising the search, screening, development and commercialisation of new products Sometimes it becomes imperative for the management to reduce the product line, ProductJine contraction is also known as the contraction of product mix.

If is,a method by which a fat and long product line is thinned out. It is also termed as ‘simplification’. The decision to reduce the product items might be due to the purposeful act of management to suspend, the production of the unprofitable products. Marketing problems also compel the manufacturers to withdraw, certain items. Needless to say on such occasions the product mix will be altered.

product line contraction is a major decision from the point of view of management. “Many sick or marginal products never die, they are allowed to continue in the company’s product mix until, they fade away.” “These products will, in course of time eat away” the profits earned by the other products.

The decision to give away a product often results from changes in the market. Market salination makes a product unprofitable. Product may also be abandoned even though still profitable, if the managements feels that the same resources could yield a higher profit from other products.

Thus, the process of avoiding or stopping the production of a particular product is called ‘simplification’. It is also termed as product line contraction. From this view point it is opposite to diversification. In spite of the advantages most managements do ndt like “product pressing programmes”. In spite of hesitation most managements are always on the lookout for finding the weak products and adopting a gradual elimination of some products.

Advantages of Simplification Or Factors Motivating to Product. Simplification. Following are the advantages of simplification ;
1. Reducing in Cost –
Cost of production is reduced considerably by the process of simplification because production of unprofitable products is stopped and the resources are made available to other products hence production of some items is made on large scale and therefore large scale economies are gotten. Moreover supervision expenses are reduced.

2. Use of Specialised Plants and Techniques –
In order to specialise in the production of one or two items, specialised plants and techniques and standardised methods are used. It helps specialisation and standardization.

3. Use of Specialised Personnel –
The firm can make use of the skill of specialised personnel hence better quality of products are produced.

4. Increase in Efficiency –
As because number of products are limited, the production is made on the principles of specialisation and division of work. It increases the efficiency of labour and of the firms.

5. Increase in Profits –
By increased efficiency and reduced wastage, cost of distribution, selling expenses and cost of production, the profits of the firm increases to a great extent, because of increased demand through better customer services.

6. Market Control –
Marketing control becomes convenient by simplification because marketing activities such as market analysis, consumer analysis and competition analysis can be made extensively. Moreover marketing and production problems are less in product simplification. The company may use the best possible channels of distribution and best available media of advertisement and method of sales promotion to increase its volume of sales.

Question 15.
Explain the meaning and benefits of product diversification. Distinguish between diversification or related and unrelated products. What are the factors motivating it
What do you mean by product diversification ? Explain the factors motivating it. ;

Product Diversification:
Product line just opposite of simplification is referred to diversification. To utilise the marketing opportunities, a firm may extend in both breadth and depth. Depth refers to the number of product items offered by the organisation within a particular product line. Width refers to the extent of different product lines in the product mix offered by an organisation. Consistency describes the relatedness of the various product lines.

For product diversification, increasing depth of the product mix helps the organisation attract customers with deficient needs and preferences. This helps the concern to capitalize on its established reputation and marketing skills. Increasing consistency of the product mix helps the concern to capitalize on its existing facilities like production and distribution and establishes a high reputation itself.

Diversification by definition means that something new will be added. It may be new products, new markets, new technologies or even a new company. Generally it means adding a new product (not various qualities of the same product) to the existing product line or mix. For example, if a fan manufacturing company starts producing sewing machines, it is case of diversification.

It does not mean that the new product should be complementary or an allied product to the existing one. It may be a product which may be entirely distinct and different from existing products. The term is applicable not only to production but also to selling. For instance, if a wholesaler dealing in engineering goods starts selling simultaneously woollen textiles, it is also a case of diversification.

Diversification is profitable only in the case of large companies which have multi-market and multi-products. Such companies should be financial viable supported by a well organised management. Diversification of products to a very large extent is capable of preventing recessionary trends entering the industry. The usual way in which dive sification is brought into effect is by means of mergers like one company acquiring another.

Hindustan Machine Tools offers a good example in this regard. It started as a company manufacturing various machine tools (lathes, drilling machines, etc.) it moved into the field of watch making. Their diversification process continues and their latest entry is in the field of manufacturing printing presses and electric bulbs.

Why Diversification or Objectives of Diversification – The main objects of the policy of diversification are :

  • To make use of the new technology;
  • To utilise the spare capacity of the factory;
  • To hold the market;
  • To use more effectively the existing selling and distributive facilities;
  • To meet the customers demand or request especially in industrial, products;
  • To take the advantage of its existing reputation as a producer of quality products;
  • To increase the sale of existing products where diversification is suggested in related products;
  • To exploit the distribution channels fully.

The ultimate goal of differentiation or diversification is to increase the profits by offering different types of products.

Various Forms of Diversification.
There are three popular forms of product diversification:

  1. Diversification into related product line.
  2. Diversification into unrelated product line.
  3. Product replacement.

1. Diversification into Related Product Line –
When diversification is planned in such product which are related to the existing product-lines it is called diversification into related product line. Generally the suggested
product may be grouped with the existing product on one or the other basis. For example, Hindustan Lever Limited produces several food articles or detergents etc. The purposes of such types of diversification are :
(a) to reduce the average selling cost,
(b) to reorganise its sales organisation,
(c) to combat competition, and
(d) to increase the profits.

2. Diversification into Unrelated Product Line –
The company may diversify in such product lines which are quite unrelated to each other. They cannot be grouped together. For example, Hindustan Machine Tools manufactures Machine tools, Watches, Tractors, and Bulbs etc. These products are not related to each other. The decision to diversify in this form is taken to get the following advantages:
(a) to capture the market,
(b) to take advantage of its goodwill in the market,
(c) to have stability in the trade, etc. This type of policy requires extensive market analysis before taking a decision to diversify.

3. Product Replacement –
Under this form of diversification, a new product is added to the product line to replace the other product of the same product line. If-company thinks that a product is to die, it adds the other product of similar nature to the market so that the company can maintain its sale-volume and profits also. It is a defensive policy against the risk of dieing out of one of the products of the company.

Factors Motivating Product Diversifications or Advantages of Product Diversification –
Following are given various factors which affect the decision of product diversification :
1. Utilisation of Unused Capacity –
If sources (capital, labour, managerial skill, research and marketing facilities, etc.) remain unutilised or under-utilised, the company can take the decision to diversify its products to make the best use of such unutilised or under utilised capacity. Change in product mix will reduce the cost of production because now the company is not to bear the cost of unutilised resources unnessarily.

2. Scientific and Technical Development –
The decision of diversification may be the result of scientific and technical developments in production methods. Such developments make the existing products obsolete and the demand of the new product increases. So, the company can replace the old product with the new one using the modern technological methods. It may take advantage of its goodwill if it pioneers in the field.

3. Efficient Management –
If the management of the organisation is efficient and takes interest in the development of the concern, it may come out with the decision to produce new and new items whether related or unrelated to the existing product line.

4. Industrial and Economic Policies of the Government –
Government industrial and economic policies also affect the decision of diversification. If these policies motivate the producers to produce new items and does not restrict the monopolistic tendencies on sound basis or amalgamation and absorption, diversification may take place.

5. Social Changes –
Social changes such as changes in nature and behaviour of the consumers, demand, fashion and style motivate the producer to diversify his product accordingly to meet the demand of the new product.

6. Desire of the Producer –
Sometimes, desire of the producer is very strong to produce different products hitherto take the advantage of his goodwill or to control the market or to dominate the will of the buyers. So he goes on to diversify. Tata’s, Birla’s, Modi’s etc. produce a number of items related or unrelated to their existing product line only to dominate the market.

7. Consumer Satisfaction –
In some cases, the faith of consumer is favourable to one company and he likes that the company should produce other products also. In such bases, If the company is confident enough to consumer’s faith, it takes decision to diversify in such areas also. In India, die consumer has faith in the products of Tata or Hindustan Lever and any new product from them will be easily reliable in the market only because it is produced by Tata of Hindustan Lever.

8. By-product –
In manufacturing certain products, there are some; wastages and scraps. The industry. may develop a by-product from such wastages and scraps. For example, a sugar industry may process molasses.

9. Competition –
Sometimes the producer diversify his product to meet the challenge of competition successfully.

10. Other Factors –
There are some other motivating factors foi diversification such as :

  • To arrest the trend of declining profit;
  • To complete the product line,
  • Desire of the produce to achieve monopoly in the market,
  • To increase total sale volume and profits.

Question 16.
What is meant by product elimination ? What can be the reasons of product elimination ?
Highlight some of the problems involved in the product elimination decisions.
Product Elimination
R.S. Alexander categorically states, “Putting products to death or letting them to die is a drab business and often engenders much of the sadness of a final parting with old and trusted friend.” Inspite of this hesitation most managements are always on the look-out for finding wea products and adopting a gradual elimination of such products.

There are some products which cannot be improved or modified to super market. Here the profitable alternative would be to withdraw the product. The process of withdrawal is technically known as ‘Product Elimination’. Products are removed from the product line at times.

Though management introduces a new product and reviews existing products from time to time and a times cancels the production. Continuation of sick product will lead company to lack of profitability . Again, these products require a disproportionate amount of management’s time and may even spoil the company’s reputation it they are unsuitable to die customers.

According to Lawrence suggestion accurate costing and experimentation as aids to making right decisions,regarding whether a product should be dropped or retained.

Process of Elimination –
A systematic approach is therefore, required for considering the question of elimination of marginal or unprofitable products. The process may be like the following :

  • The first step in the process would be to select the products which are to be considered for elimination.
  • Thereafter, necessary information would be collected and analysed. Factors which require analysis are deficiency in product, substitutes, product life cycle, price, profitability, inability of the product to satisfy the needs of the consumers etc.

If, after due analysis, it is found that the product can be modified to suit the needs of the consumers and it can be done profitably the product should be improved or modified. On the other hand, if the analysis finds that the product cannot be modified to the aspiration of the customers, a decision to it, should be taken.

Reasons for Indicators Suggesting Product Elimination.
There are certain reasons or indicators which suggest a careful analysis to determine whether or not .to eliminate a particular product. These include the following :
1. Continuous Decrease in the Sale of the Product –
It may be due to the last stage of the product life cycle or incoming of better quality products of the competitors in the market. If the company feels that the sales of the product cannot be increased inspite of company’s best efforts, decision may be taken to eliminate it.

2. Reduction in Product Effectiveness –
Over a period of time,certain products lose their effectiveness for providing the benefits for which they were produced originally. This particularly’ happens in case of pharmaceutical products and certain drugs may have to be eliminated or substituted by other drugs.

3. Emergence of a Superior Improved Products –
If an improved substitute of the existing product emerges in the market, the management must consider this seriously even at the time When substitute is in its introductory, stage otherwise company will lose the battle.

4. More Administrative Time –
If management devotes disproportionately excessive time on one product in comparison to the other products of the product mix only due to the product being sick, it is better to decide elimination of the product. However, this must be distinguished from the growing pains of a new product.

5. Downward Trend in Prices –
If prices of the product are continuously decreasing inspite of the best efforts of the executives and the management thinks that obsolescence stage cannot be warded off further, the firm must take a decision to eliminate the product.

6. Product Life Cycle –
If the product is in its last stage, ie.., in obsolescence stage, it would be wise step to eliminate the product timely to restrict die fall in profits otherwise the product will die itself within a short time.

These are the indicators of the sickness of the product. The management should analyse the reasons very carefully and should take various measures to improve the situation by various tactics but still the management justifies ,, the elimination on various grounds, then it should be allowed to be scrapped. The elimination should be made at an appropriate time so that the manpower and capital released through the deletion of the product may be employed in some other and more profitable activities.

Problems Involved in Product Elimination Decision or Why “ Management not Interested in Product Elimination. A decision for elimination of the product is not so easy. There are certain problems or barring factors before the management which force the management to avoid the elimination. Some of such factors or problems are as under :

  • Management always avoid the problem of product elimination and is interested in continuing the present product mix. Executives are sensitives to the elimination:
  • It is thought that market will turn favourable to the product and its sales will go up very soon if the decline in sales is due to some external factors beyond the control of the management.
  • Sometimes, it is realised that the defect does not lie in product, it is somewhere in marketing policies, programmes and strategies and these can be improved in due course.
  • Very often a poor sick product is allowed to continue because it facilitates the sale of other products of the concern.
  • Where management is of the view that the sale of the product shall have been increased after its proper modification by developing its quality, style, brand, and packaging,
  • In order to meet the liability of its fixed overhead charges and to utilise its fixed resources, the management has a hitch in eliminating ‘ the product. Until and unless those resources are utilised profitably, the management cannot take a decision of losing its capital.
  • Vested interests, sentiments of management and consumers and the sense of irresponsiveness of the firm are some other factors which help continuing the sick product.
  • In the interest of the employes engaged in the production of poor product. The decision of product elimination is dropped.

The above factors favour the continuance of the sick product in the market for a fairly long time, but the management should JC cautions enough in taking the decision to eliminate the product. Taking in view the present circumstances, if management thinks it desirable to eliminate the product, it should take the decision immediately to avoid the firm from losses.

DU SOL B.Com Programme 3rd Year Marketing Management Notes


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