UNIT-III: Product and Pricing Decisions
Product Decisions
Product decisions involve determining the specific attributes and features of a product. This includes the following elements:
- Quality: Determining the level of quality that matches the target market's expectations.
- Design and Features: Selecting the design, style, and features that provide functional benefits and differentiate the product from competitors.
- Branding: Choosing a brand name, logo, and overall brand identity that resonates with consumers.
- Packaging: Designing the packaging to protect the product, make it convenient to use, and enhance its appeal.
- Labelling: Providing essential information about the product, its uses, and instructions on the label.
Product Line Decisions
Product line decisions involve managing a group of related products. Key aspects include:
Product Line Length:
Determining the number of items in a product line. Companies may extend their product line by adding more items or contract it by eliminating items.
Product Line Depth:
Refers to the number of versions of each product in the line. For example, different sizes, colors, or variants of the same product.
Product Line Consistency:
Ensuring the products in a line are closely related in terms of their end-use, production requirements, distribution channels, or target market.
Product Line Stretching:
Extending the product line beyond its current range, either by:
- Downward Stretching: Adding lower-end products to the line.
- Upward Stretching: Adding higher-end products to the line.
- Two-Way Stretching: Adding products at both the higher and lower ends.
Branding Decisions
Branding decisions are crucial as they help in creating and maintaining the identity of the product in the market. Components include:
Brand Name Selection:
The process of choosing a name that is memorable, easy to pronounce, legally protectable, and reflects the product's qualities.
Brand Positioning:
Establishing the brand in the target consumer's mind based on its attributes, benefits, beliefs, and values.
Brand Sponsorship:
Deciding whether the product will be a national (manufacturer) brand, private (store) brand, licensed brand, or co-brand.
Brand Development:
Strategies include:
- Line Extensions: Adding new features or Flavors to existing product lines.
- Brand Extensions: Using an existing brand name to launch products in a new category.
- Multibrands: Introducing additional brands in the same category.
- New Brands: Creating a new brand name when entering a new product category.
Packaging and Labelling Decisions
Packaging and labelling are integral to a product's market presence and consumer appeal.
Packaging Decisions
- Protection: Ensuring the product is protected from damage during transportation and storage.
- Convenience: Designing the package for ease of use, handling, and storage by consumers.
- Promotion: Using attractive designs and colors to catch the consumer's eye and convey brand identity.
- Sustainability: Incorporating eco-friendly materials and designs to reduce environmental impact.
Labelling Decisions
- Information: Providing important details about the product, such as ingredients, usage instructions, and safety warnings.
- Compliance: Ensuring the label meets all legal requirements and regulations.
- Promotional: Using the label as a marketing tool to highlight features, benefits, or special offers.
Product Life Cycle Concept
The product life cycle (PLC) is a framework that outlines the stages a product goes through from introduction to decline:
- Introduction: High costs and low sales; focus on awareness and trial generation.
- Growth: Increasing sales and profits; emphasis on market penetration and distribution expansion.
- Maturity: Peak sales and intense competition; focus on differentiation and maintaining market share.
- Decline: Declining sales; options include discontinuation or repositioning.
New Product Development
New product development (NPD) is the process of bringing a new product to market. Key stages include:
- Idea Generation: Brainstorming and identifying potential product concepts.
- Idea Screening: Evaluating ideas based on feasibility and alignment with company objectives.
- Concept Development and Testing: Refining the idea and testing it with target consumers.
- Business Analysis: Assessing financial and market viability.
- Product Development: Creating prototypes and testing functionality.
- Market Testing: Introducing the product on a limited scale to gauge consumer response.
- Commercialization: Full-scale product launch and distribution.
Pricing Decisions
Pricing decisions are critical as they directly impact revenue and profitability. Key considerations include:
- Cost-based pricing: Setting prices based on production and operational costs plus a margin.
- Value-based pricing: Pricing based on perceived customer value rather than cost.
- Competition-based pricing: Aligning prices with competitors' offerings.
- Psychological pricing: Leveraging consumer psychology, such as pricing at $9.99 instead of $10.
- Dynamic pricing: Adjusting prices in real-time based on demand and supply conditions.
- Penetration Pricing: Setting low initial prices to quickly gain market share.
- Skimming Pricing: Introducing products at high prices and lowering them over time.
- Freemium Pricing: Offering basic services for free while charging for premium features.
- Geographic Pricing: Adjusting prices based on location or region.
Multiple-Choice Questions (MCQs)
1. Which of the following is a key component of product decisions?
A) Supply Chain
B) Quality
C) Distribution Channels
D) Price
Hint: It's related to matching the target market's expectations.
Answer: B) Quality
2. What does product line depth refer to?
A) The number of items in a product line
B) Variants of a product within a line
C) Consistency between products
D) Stretching product lines upward or downward
Hint: Think about variations like size, colour, or Flavors.
Answer: B) Variants of a product within a line
[... Additional MCQs follow the same format ...]
Important Questions
1. What factors are considered in product quality decisions?
Hint: Think about customer expectations.
2. Explain the difference between product line length and depth.
Hint: Length is about numbers; depth is about variations.
[... Additional important questions follow the same format ...]
