The product planning process starts either with a recognised customer need or with a basic product idea established through market research or other sources.
Regardless of the pedigree of the product idea—it may originate from a salesman, a customer, the company’s advertising agents, the technical research and development department, the suggestions box or the chairman’s wife— market research should be used at some stage, to determine whether it meets a known or as yet unrealised need.
Learn about:-
1. Introduction to Product Planning Process 2. Meaning of Product Planning Process 3. Definitions 4. Objectives 5. Elements 6. Characteristics
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7. Importance 8. Components 9. Product Planning and Development Process 10. Factors for Successful Product Planning Process 11. Organising for Product Planning and Development.
Product Planning Process: Meaning, Definitions, Objectives, Elements, Characteristics, Importance, Components and Factors
Contents:
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- Introduction to Product Planning Process
- Meaning of Product Planning Process
- Definitions of Product Planning Process
- Objectives of Product Planning Process
- Elements of Product Planning Process
- Characteristics of Product Planning Process
- Importance of Product Planning Process
- Components of Product Planning Process
- Product Planning and Development Process
- Factors for Successful Product Planning Process
- Organising for Product Planning and Development
Product Planning Process – Introduction
One marketing research commentator has described a product as an input-output device which translates a customer proposition in terms of value into a manufacturer proposition in terms of profit, and vice versa. Adapting this concept, the product planning function can be visualised in the following way.
The skill in product planning lies in converting a manufacturer’s inherited or acquired skills and facilities into products and services yielding customer value and satisfaction at a profit. Customers do not buy ‘products’ as such but rather what it is that the products will do for them.
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Thus, consumers do not buy domestic oil-fired boilers—they buy the convenience and comfort of central heating. They do not buy washing machines— they buy the capability to do the wash more quickly and more easily. A manufacturer does not buy a fleet of forklift—he buys a transport and mechanical-handling facility.
In other words, every manufacturer is involved in creating and satisfying customers and not in merely producing goods. Every company has certain technical and selling skills and know-how. It is the job of product planning to convert these skills and facilities into customer satisfying values. Product planning is concerned with those values that make customers exchange purchasing power for product satisfaction.
The product planning process starts either with a recognised customer need or with a basic product idea established through market research or other sources. Regardless of the pedigree of the product idea—it may originate from a salesman, a customer, the company’s advertising agents, the technical research and development department, the suggestions box or the chairman’s wife— market research should be used at some stage, to determine whether it meets a known or as yet unrealised need.
Marketing research will help to establish (a) The existence or otherwise of a real or latent need, (b) The dimensions and trend of the market (the number of potentials customers, their desires and preferences, where they are located, their purchasing power and buying habits, whether the market is expanding, static or shrinking in size and so on), (c) The competitive state of the market, and (d) The standing, with the customer, of competitors’ and the company’s own products.
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If a new or improved product is indicated and if it fits into the company’s present product line as an addition to the line or as a replacement for an existing product, the next step is a preliminary evaluation of the idea or ideas on the basis of the marketing research findings (the problems of diversifying into new fields outside the company’s immediate experience and know-how are considered later). If one or more ideas emerge as promising, product specifications based on consumer or user requirements are drawn up.
When approved these are passed to the manufacturing or research and development division which make prototypes and carry out preliminary checks on the feasibility of producing them, taking into account existing capacity, techniques and know – how, new materials or facilities needed and so on.
If preliminary costing indicate an acceptable margin of profit then a small quantity will be produced for testing with potential users. At the same time, the production division will obtain some experience of manufacture and, it is hoped, any major snags exposed and corrected.
Simultaneously, the marketing division prepares tentative sales and advertising plans and budgets to see if the product looks like being a worthwhile marketing proposition to the company. The findings of the product tests will have indicated whether any modifications are necessary prior to the product being placed on the market.
With this background of testing and evaluation, the marketing division must then decide whether or not the product is viable and stands a reasonable and calculable chance of being a successful and profitable addition to the line.
Assuming a favourable outcome, product and marketing proposals are submitted for management approval, setting out in detail how, when, where and at what cost and profit the product is to be introduced. A series of sales-test towns may be recommended to find the answer to certain unresolved questions on pricing, packaging, advertising, etc.
Alternatively it may be proposed that the product be launched piecemeal in one region of the country at a time so that developments can be progressively watched and plans modified and improved before moving into each successive area. Or it may be decided that the product should be introduced on a national basis right away because of the threat of early retaliatory action by a competitor.
Whatever course of marketing action is recommended it should be based firmly on a realistic assessment of the risks involved and the potential gains or losses that may follow from the particular course selected. The outcome will depend upon the company’s own strengths and weaknesses vis-a-vis those of its competitors, i.e., its differential advantages in terms of products, selling ability, advertising, marketing research and other communication skills, and its ability to act more quickly, more decisively or more flexibly than its competitors.
The final approved recommendations are embodied in a written marketing plan which forms the basis for integrated action by all the departments concerned. Operating instructions are issued to implement the various parts of the agreed plan. The progress made in implementing the plan should be constantly reviewed and evaluated to see how and where future improvements can be made.
Product Planning Process – Meaning
Product planning is a technique of planning all the aspects of a product in its relationship with the market. It answers several basic questions related to the product such as what type of product? How much, when, where, at how much, for whom etc. In answering all these questions, a marketer tries to match the products of the company with the market expectations.
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The aim of product planning is to avoid designing of unsuitable products and all the related expenses. The present day customer will not accept any product which does not suit his requirements in any way-price, style, designing, features, distribution etc. Product planning is always done keeping in mind the market or consumer expectations.
Product planning is the process of determining that line of products which can secure maximum net realization from the intended markets. It is an “act of marking out and supervising the search, screening, development, and commercialization of new products; the modification of existing lines; and the discontinuance of marginal or unprofitable items”.
The managerial decision making in this area centers around deciding the type of Products Company should develop and sell so that product serves as an instrument of achieving marketing objectives. It also involves surveillance of product abandoned, or repositioned.
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The aim of this managerial activity is to ensure that product line of the company is confined to logical, well designed, and individually justified product items so that company is placed in a strong competitive position. Product planning then would ensure that products do not work at cross purpose, are designed on the basis of research inputs provided by marketing research, and contribute to the fulfillment of consumer and business needs.
Product Planning Process – Definitions: Suggested by Carl H. Titgen, Dale Littler, Rick Suttle, Johnson and Karl H. Tietjing
“Product planning is the act of managing and supervising the search, screening, development and commercialization of new products; the modification of existing lines; and the discontinuance of marginal or unprofitable items. – Carl H. Titgen
“Product planning involves devising procedures to evaluate the performance of products and planning the modification where necessary, of existing products aimed at extending their lives, the deletion of those products which have reached the terminal stage of their lives and the development and marketing of new products”. – Dale Littler
“Product planning is the process of creating a product idea and following through on it until the product is introduced to the market. Additionally, a small company must have an exit strategy for its product in case the product does not sell. Product planning entails managing the product throughout its life using various marketing strategies, including product extensions or improvements, increased distribution, price changes and promotions”. – Rick Suttle
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“Product Planning is the ongoing process of identifying and articulating market requirements that define a product’s feature set. Product planning serves as the basis for decisions about price, distribution and promotion”. – Anonymous
“Product planning is the process of envisioning, conceptualizing, developing, producing, testing, commercializing, sustaining and disposing of organizational offerings to satisfy consumer’s needs and wants and achieve organizational objectives”. – Anonymous
Product planning embraces all activities which enable producers and middlemen to determine what should constitute a company’s line of products.
According to Johnson, “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. Tietjing, defines product planning, “As the act of making out and supervising the search screening, develop and commercialization of new products, the modification of existing lives and discontinuance of marginal or unprofitable items”.
Thus, product planning signifies three important considerations:
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a) Development and introduction of new products.
b) Modification of existing lines as may be needed in terms of changing customer needs and preferences.
c) Discontinuance or elimination of marginal or unprofitable products.
Product Planning Process – 8 Main Objectives
i. To meet the customer needs – Successful marketing lies in identifying and meeting customer needs. Product planning is a technique which enables identification and meeting of customer needs through working with the customers and securing their feedback. This makes possible delivering customer satisfaction.
ii. To increase the sales – Product planning enables a company to manufacture appropriate products which satisfy customer expectations and thereby increase sales.
iii. To optimally utilize resources – Every company has limited resources in terms of money, material and human resources. Product planning enables the company to make the best use of such limited resources by channelizing them towards the most appropriate products.
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iv. To analyze the company’s strengths and weaknesses – Product planning analyzes the strengths and weaknesses of the company in the light of the market requirements. This enables the company to consolidate on its strengths and overcome its weaknesses.
v. Survival of the firm – Product planning enables a company to survive in a highly competitive market through its components such as product innovation, renovation and elimination.
vi. Commercial success – Product planning enables a company to achieve commercial success by coordinating the activities of all the specialists in the company who contribute to the product’s performance in the marketplace. This is done through product development teams, marketing executives, quality managers and sales representatives.
vii. Achieving the goals of marketing management – Product management and marketing management share similar objectives, which are to maximize revenue and profit by meeting customer needs. Product managers work closely with marketing managers, using research from the marketplace to plan and prioritize product development programs, and briefing marketing teams on the benefits of new products so that they can develop effective customer communications.
viii. To plan effectively – A key objective for product management is planning and developing the specifications for a range of products or a product portfolio that meets the long-term strategic plan. The strategic plan may require development of new products to meet the needs of new market sectors or improvements and extensions to the current product range to increase share in the existing sectors.
ix. To conform to time schedules – Product managers have to meet time and budget objectives. To meet the demands of the market and counter competitive pressures, they must be able to conclude product development programs on time and on budget. That enables your company to reduce the time to bring new or improved products to market and stay ahead of your competitors.
Product Planning Process – 8 Important Elements: Research before Production, Possibility of Production Method, Modification in Existing Lines and a Few Others
The various definitions of product planning & development bring out the following essential elements of product planning:
Element # 1. Research before Production:
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Before taking a decision to produce a new item, market research should be carried out extensively. The company must know beforehand what should be produced and for whom. It should decide the characteristics of the product that can meet the requirements of the people.
Element # 2. Possibility of Production Method:
What production method would be followed and is practicable to develop a product exactly the way the customer wants? This possibility should also be examined before taking a decision of producing a new product.
Element # 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.
Element # 4. Elimination of the Product:
Product planning involves the decision regarding the elimination of the unprofitable product lines so that the resources may be used to some other product profitably.
Element # 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.
Element # 6. Price Determination:
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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?
Element # 7. Commercialization of Product:
Product planning includes products commercialization 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.
Element # 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. It can be done by taking timely decisions for marketing conditions from time to time.
Product Planning Process – Characteristics: Product Investigation, Change in Commodity According to Demand, To Know the Practical Aspect of the Product and a Few Others
The following are the main characteristics of Product Planning:
Characteristic # 1. Product Investigation:
Before preparing the product for marketing, marketing research is carried out to know the desired need of the consumers so that product’s size, colour, design, features, package, price etc. are according to their requirements and only then the product satisfying all these choices is to be produced.
Characteristic # 2. Change in Commodity According to Demand:
If the existing product needs certain modifications according to the demand, then collection of necessary facts and making changes in the product accordingly are also part of product planning.
Characteristic # 3. To Know the Practical Aspect of the Product:
After knowing the product features desired by the consumers, it is important to know whether it is practicable to develop a product exactly what the consumers want.
Characteristic # 4. Discontinuance of Product:
Product Planning involves the decision regarding the elimination of the unprofitable product or product lines so that the resources may be used to some other product profitably.
Product Planning Process – Importance: Starting Point of the Marketing, Means of Fulfilling Social Liability, Indicators to Managerial Ability, Competitive Tool and Wide Scope
Product planning has become increasingly vital to gain and hold competitive edge in the market. Properly planned and well-developed products help place a firm in the strong competitive position.
Importance of product planning is as given below:
1. Starting Point of the Marketing:
Product planning involves decisions regarding the product at different stages of its life cycle from time to time. According to Stanton, ‘Product Planning is the starting point’. Any decision regarding the production, modification and elimination of a product may affect the marketing policies.
Thus product planning is the starting point of all marketing programmes. Marketing activities revolve around the product planning. All the 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. Means of Fulfilling Social Liability:
Product planning is also an important means of discharging social responsibilities of the business. Object of every business or industrial enterprise is to earn maximum possible profits. Every business or industrial enterprise bears a great responsibility of meeting and fulfilling social requirements and expectations.
The object of earning maximum profits can also be achieved only by fulfilling these social expectations. Fulfilment of social expectations is possible only through product planning because the process of product planning decides the nature and characteristics of products that may fulfil these expectations.
3. Indicators to Managerial Ability:
Product planning is considered as a symbol of managerial ability. If an enterprise does not undertake the process of product planning it is considered lack of product planning which means managerial bankruptcy in the organisation.
Thus product planning is not an activity. It is a process which embraces all the efforts of an enterprise.
4. Competitive Tool:
Product planning acts as a competitive weapon by making proper decisions regarding product attributes, price, consumer services, promotion. 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 competitor’s products.
5. Wide Scope:
The scope of Product Planning is very wide.
Product Planning Process – Top 5 Components: Production Innovation, Product Diversification, Product Standardization, Product Customization and Product Elimination
Product planning deals with the following aspects of product:
1. Product innovation
2. Product diversification
3. Product standardization
4. Product customization
5. Product elimination
Component # 1. Production Innovation:
In a general way innovation is to find out something new, try new methods of doing the same thing or being creative. In marketing also innovation means the same, but in marketing the meaning of innovation is slightly extended. In Latin the word innovate or innovation means to change.
In marketing innovation means developing various techniques that will satisfy the needs of the customers in a much better and effective way. It creates new needs and enlarges the market for the product. This task is done by the following-effective products, processes, services, technologies, or ideas that are made available to markets and society. Innovation differs from invention. Innovation refers to the use of a better and, as a result, novel idea or method, whereas invention refers more directly to the creation of the idea or method itself.
Innovation also differs from improvement. Innovation refers to the notion of doing something different rather than doing the same thing better. Innovation is also the process by which an idea or invention is translated into a good or service for which people will pay, or something that results from this process.
“Product innovation means the development and market introduction of a new, redesigned or substantially improved good or service. Examples of product innovation by a business might include a new product’s invention; technical specification and quality improvements made to a product; or the inclusion of new components, materials or desirable functions into an existing product”. – Business Dictionary
In marketing, an innovation has to be an idea that can be replicable at a viable cost and must satisfy a specific need. Innovation involves application of information, imagination, and initiative in deriving greater or different value from resources, and involves all processes by which new ideas are generated and converted into useful products.
In business, innovation often results from the application of a scientific or technical idea in decreasing the gap between the needs or expectations of the customers and the performance of a company’s products.
Market and consumers’ preferences keep changing very rapidly, thereby reducing the life of product cycles. Therefore, a company has to be innovative to suit the requirements of an ever changing market or consumer preference. Many companies having excellent products have been closed down because these companies did not innovate.
Component # 2. Product Diversification:
Diversification also means expansion of the business by adding new products to the existing product mix. Therefore, only an existing company can diversify.
“Diversification is a policy or management philosophy of operating a company so that its business and profits come from a number of sources usually from diverse products that differ in market or production characteristics”. – Bailey L.G
There are different types of diversification:
(i) Horizontal Diversification:
This means adding new products to the existing product mix of a company and the new products are unrelated to the existing products. The intention of such a diversification is to take the benefit of selling the new products also to the existing customers with whom the company has a good relationship.
Example – A Company successfully selling ready-to-wear garments may start manufacturing and selling designer jewellery to the same customers. The company intends to sell the jewellery easily as it already has a good relationship with its existing customers.
(ii) Vertical Diversification:
This means a company adding a new line of business which is either an upstream activity or a downstream activity to its existing business in the production cycle. It may take the form of backward diversification. Example – A textile mill starting a unit to spin yarn is backward diversification. This is because, previously the mill would buy yarn from an outside unit and use it for weaving cloth. After the diversification the mill can use the yarn which is spun by its own spinning unit. It may also take the form of forward diversification.
Example – A milk processing dairy starting an ice-cream making unit is forward diversification. This is because; previously the milk dairy would sell its milk to ice-cream making units. After the diversification it can use the milk to make ice-cream in its own unit.
(iii) Concentric Diversification:
This means a company adding new products with the aim of fully utilizing the potential of the existing technologies and marketing system. Example – A bakery starts producing pastries or dough products.
(iv) Conglomerate Diversification:
This means a company diversifies into new products or services that have no technological or commercial synergies with current products but that may appeal to new groups of customers. The conglomerate diversification has very little relationship with the company’s current business.
Therefore, the main reasons of adopting such a strategy are firstly to improve the profitability and the flexibility of the company, and secondly to get a better reception in capital markets as the company gets bigger. Even if this strategy is very risky, it could also, if successful, provide increased growth and profitability. This is also called heterogeneous, lateral or corporate diversification. Example – A company manufacturing automobiles diversifying into retailing.
Component # 3. Product Standardization:
This means establishment of certain standards based on a few inherent attitudes of the goods such as nutritional content, size, shape, colour, composition, quality, taste, performance etc. A standard itself is a measure of the above attributes. The products are compared and conformed to the standards.
“A standard is a measure that is generally accepted as having a fixed value. The measure is in units of intrinsic qualities or characteristics of a product or service”. — Duddy and Revzan
Standardization is a framework of agreements to which all relevant parties in an industry or organization must adhere to ensure that all processes associated with the creation of a good or performance of a service are performed within set guidelines. This is done to ensure the end product has consistent quality, and that any conclusions made are comparable with all other equivalent items in the same class. – Anonymous
A standard conveys the idea of a certain level of physical attributes of goods.
Standardization also means product rationalization. This means trying to reduce the number of varieties or variants of the products, so that instead of carrying a large number or varieties, a fewer varieties will be offered to the customers. Standardization is actually done by merging certain varieties wherein the differences among them are either very minimal or do not matter. Standardization is the design rationalization of a range of homogenous and partially interchangeable products designed to meet various needs.
Product standardization is an efficient method of cost reduction and quality enhancement. By minimizing the differences among products, production is increased, distribution is streamlined, raw material cost is reduced and branding becomes easier.
Component # 4. Product Customization:
Customization means manufacturing products in accordance with the individual tastes and preferences of different customers and at the same time maintain large scale production. This technique involves maintaining the basic design of the product uniformly but, simultaneously infusing certain changes which enable the products to become suitable to different people.
“Customization is producing goods and services to meet individual customer’s needs with near mass production efficiency”. – Tseng & Jiao
Mass customization is the new frontier in business competition for both manufacturing and service industries. At its core is a tremendous increase in variety and customization without a corresponding increase in costs. At its limit, it is the mass production of individually customized goods and services. At its best, it provides strategic advantage and economic value.
Mass customization, is the use of flexible computer-aided manufacturing systems to produce custom output. These systems combine the low unit costs of mass production processes with the flexibility of individual customization.
The concept of mass customization is attributed to Stan Davis.
Mass customization is the method of “effectively postponing the task of differentiating a product for a specific customer until the latest possible point in the supply network.” -Chase, Jacobs & Aquilano.
“Mass customization is a strategy that creates value by some form of company-customer interaction at the fabrication and assembly stage of the operations level to create customized products with production cost and monetary price similar to those of mass-produced products”. – Kaplan & Haenlein
Kamis. Koufaris and Stern conducted experiments to test the impact of mass customization when postponed to the stage of retail, online shopping. They found that users perceive greater usefulness and enjoyment with a mass customization interface vs. a more typical shopping interface, particularly in a task of moderate complexity.
Component # 5. Product Elimination:
Any product no matter how well it is received by the market, how successful it is commercially, will face a downturn in the long run and become obsolete. A company generally improvises such a product, repositions it an offers it to the market. Beyond a certain point of time, even such strategies do not work and people will stop buying such a product.
Product elimination means foreseeing such a situation and withdrawing a weak product from the market. A firm has to get rid of some products to maintain an effective product mix. A weak product costs the firm financially. In addition, too much of a marketer’s time and resources are spent trying to revive it. This, in turn, reduces the time and resources available for modifying other products or developing new ones.
When a weak product generates unfavorable images among customers, the negative ideas may rub off onto some of the firm’s other products. Most organizations find it difficult to delete a product because of an emotional reason any marketer will find it difficult to abruptly discontinue a profitable product which has been around for quite some time. Market realities however indicate otherwise.
“Product elimination is the decision to drop a product (for example, in the decline stage of its life cycle) in order to use the costs associated with it to enhance profits or to release resources that could be more effectively used in other ways”. – MONASH Marketing Dictionary
When a product reaches the stage where continued support can no longer be justified because its performance falls short of expectations, it is desirable to pull the product out.
Reasons for poor performance of a product are various such as the following:
i. Declining profitability
ii. Declining sales volume or market share which would be impossible to build up
iii. Emergence of new and superior technology
iv. The product entering the decline stage of its life cycle.
v. Mismatch with the company’s present strength or declared mission.
Product Planning Process: Market Penetration, Market Development, Product Development, Test Marketing and a Few Others
The entrepreneur now enters into the market. As a marketer he has four alternative ways of bringing about an increase in sales and profits –
1. Market penetration
2. Market development,
3. Product development
4. Test marketing
5. Commercialization, and
6. Diversification.
1. Market Penetration:
It involves the expansion of sales of the existing products in the existing markets by selling more to present customers or gaining new customers in the existing markets. The firm can sell more of its products in the existing market by adopting a more aggressive marketing strategy. Customers from rivals or potential buyers can also be attracted. Again, the marketer may respond to a temporary price cut to raise the volume of sales and penetrate the market in a big way.
2. Market Development:
In market development, a present product is introduced to a new market. Market development is the creation of new markets by discovering new uses for existing goods. The firm can offer its existing products to new markets.
3. Product Development:
Product development takes place when a firm introduces new products into a market in which it is well established. In other words, product development is the introduction of new products in the present market. The firm by offering new or improved products to present markets can satisfy the present customers better.
4. Test Marketing:
The entire product marketing programme is tried out for the first in a small number of test markets. Test marketing is necessary to find out the viability of a full marketing programme for national distribution. Customer reactions can be tested under normal market conditions. It helps the firm to learn through trial and error and to get additional valuable clues for product improvement.
5. Commercialization:
Once the test marketing gives the green signal for the product the company can proceed ahead and can launch a full-fledged advertising campaign for mass distribution. The product is now born and will start its life cycle in due course.
6. Diversification:
Diversification occurs when a firm tries to enter a new market with a new product. Such a firm has neither market expertise, nor product knowledge. The firm adopts an aggressive strategy by creating new products for entirely new markets. The strategy is risky but the innovator can have spectacular results. In 1960 TV was in this category in many countries.
Product Planning Process – 8 Major Factors for Successful Product Planning: Product Line, Product Mix, Packaging, Labeling, Branding, Service after Sale and a Few Others
A product plan or strategy is a company’s plan for marketing its products.
The success of product plan depends on the following factors:
1. Product line
2. Product mix
3. Packaging
4. Labeling
5. Branding
6. Service after sale
7. Organising for product planning and development, and
8. Product research and improvements.
Factor # 1. Product Line:
Philip Kotler has defined a product line as, “a group of products within a product class that are closely related, either because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets or fall within a given price range”. For example- a range of detergents, toilet soaps, cosmetics, washing machines, television, cars, etc.
Factor # 2. Product Mix:
It is the entire range of products offered by the company for sale. This may be either related products or totally different products. Anchor Company produces thread, paste, tube lights and bulbs. This is an example of a company producing totally different products. Similarly, Times of India, the leading national newspaper group, has launched its banking division, Times Bank. An example for totally related products can be explained with Maruti Udyog Ltd. It has a range of cars, Maruti 800, Gypsy, Maruti Esteem, Maruti van etc.
The product mix of a company can be described as having a certain width, depth and consistency. The width of the product mix refers to how many different product lines are found within the company. For example- BPL Ltd. produces computers, televisions, refrigerators, telephone answering machines, washing machines, etc. Other examples are Tata, Bajaj, Godrej, etc.
The depth of the product mix refers to the average number of items offered by the company within each product line. For example- Samsung has different types of televisions, Godrej has eleven varieties of toilet soaps, eight types of toiletries, two types of shaving soaps and liquid detergents.
The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or in some other way. For example- India Today has a number of magazines, namely India Today, Business Today, Computers Today, etc. All these products are closely related, because these products have similar production requirements, distributions channels, marketing techniques, etc.
Factor # 3. Packaging:
A package is a wrapper or container in which a product is enclosed, encased or sealed. Packaging can be defined as “an act of designing and producing the package for a product”. Now packaging is done according to consumer convenience. For example- in a super market, goods are packed in different sizes and packages that are easy to open and carry. Another example is Karnataka Soaps Ltd., which markets six toilet soaps in an attractive plastic box which is further encased in a gift box. Similarly Cadbury’s chocolates are also available in gift packs.
Factor # 4. Labeling:
Labeling is the right of consumers in the free market economy, to be informed with accurate and up-to-date information about the content and necessary guidance regarding the use of the product. A significant move in this direction was made by the Union Health Ministry, by amending the Prevention of Food Adulteration (PFA) rules, making it mandatory for all packed food products to carry the special logo, indicating whether it contains any non – vegetarian ingredient.
India is the first country to go for the “non – vegetarian” labeling, though most countries require that, there be a label with the ingredients and in some countries with the nutritive value of each food item. The logo is in the form of a red coloured circle, with a single chord running diagonally through the centre of the circle. Health Ministry officials took this decision, because in a predominantly vegetarian country, such labeling would help the people be informed about what they are offered.
Factor # 5. Branding:
Branding is the practice of giving a specified name to a product or group of products from one seller. The brand names of Mercedes Benz, Opel, Maruti, etc., are examples of branding, which help distinguish their product in the market and create individuality. A well promoted brand name has an earned reputation in the market. Examples are Pepsi, Coke, KFC, Mac Donald’s, etc.
Factor # 6. Service after Sale:
Marketing focuses on the idea of satisfying the needs of the customer, as the customer is considered king in marketing terminology. Marketing approach is a customer oriented approach and in this context, service after sales is very important. The entry of multinationals in the Indian market, has made companies start giving importance to after sales service. For example- Daewoo Motors has a 24 – hour help line. Kenstar mixer grinder is providing 12 years of free servicing, Aqua Guard is giving yearly service, etc.
Factor # 7. Organising for Product and Development:
Product planning involves decisions regarding the products or services which the firm is to produce and sell. It involves estimating and analysing potential markets, estimating the sales volume, searching and screening new products, budgeting costs, modification of existing products, and scraping of marginal and unprofitable products.
Accordingly, changes are to be made in existing products in order to match the requirements of customers. The package brand and label should be used for each product. Services, warranties and amenities must be provided as after sales service.
Factor # 8. Product Research and Improvement:
The success of product planning and development depends on product research and improvement. In other words, product analysis and research is the study of consumer preference, habits and dealer preferences, habits relating to a given product, the market potentiality for a new product, etc. This analysis will help the firm re – design, improve or modify the product mix, as per the expectations and requirements of customers.
Product Planning Process – Organising for Product Planning and Development
Product planning and development is an integral part of marketing. Good sales and advertising policies will not compensate for weaknesses in earlier product planning procedures, i.e., product screening and evaluation, product testing, market research and test marketing. Potential friction between manufacturing and marketing, between technical research and development and product planning, can stultify the best efforts of both and result in unsatisfactory compromise.
Product planning involves the co-ordination of a number of linked activities—technical research and development, marketing research, sales and distribution and promotion. Maximum effectiveness more often depends upon the sum of the parts rather than on the separate optimisation of the individual components.
The separation of marketing responsibilities into tight specialist departments invites the danger that each department will regard its own activity as being the most important and having first call on available resources.
This rigid compartmentalisation has led in the past to the familiar situation where sales department has been handed a product by the technical research people, probably produced in great secrecy on the basis of specifications which satisfied the engineers and developed for the convenience of the manufacturer rather than of the customer.
In these circumstances, marketing people and, probably, the customer for whom the product is intended only get into the act at the tail end of manufacturing. From the marketing perspective this is the reverse of what should be done. Any new product idea must first be checked with the potential customer to determine whether there is a real need or latent want for the product, how it might be used, and within what sort of price range it might sell.
If the idea is favourably received than it must be translated into a customer ‘proposition’. The job of product planning, initially, is to prepare a customer specification for the product for the guidance of the engineering department, and thence to see that the prototype is tested, modified as necessary and brought to the marketable stage.
Logical as all this may sound it has to be admitted that still relatively few companies use product planning in this way and even fewer place product planning directly under marketing management. The reason is not hard to find. The British Institute of Management was recently forced to admit in one of its surveys that a trend towards the adoption of the marketing perspective in British business was barely perceptible and that relatively few companies were organised to implement the marketing concept.
Unfamiliarity with the concept among British business men was reflected in the pitifully low response to the questionnaire sent out on this particular survey which, in fact, offered a totally insufficient statistical basis for valid generalisations of any kind whatsoever.
It seems clear, therefore, that product planning, as described, is not carried out by the great majority of companies in this country. Yet it clearly makes sense to place product planning decisions in the hands of those executives responsible for the total company marketing effort.
For it is they who must decide when it is more important to spend money on changing the product instead of putting more behind its distribution and advertising or lowering its price. It is the marketing executive who must decide when the time is right to bring in new products at the expense of, or in addition to, existing products.
The product planning function can be organised in a number of different ways according to company size, needs and policies. Four examples are given of its organisation in companies of widely differing character. They have one common feature, however, in that the responsibility for product planning is placed directly under marketing management.
The Product Manager is responsible to the Marketing Manager for the entire product planning operation on existing and new products. He has one assistant to handle assignments on proprietary products selling through chemists only. The latter is a recent appointment due to the firm’s expansion into the proprietary field. The company’s previous experience is almost entirely in the marketing of ethical preparations to doctors and hospitals. All marketing research is placed with outside organisations.
The Product Manager also acts as Advertising Manager and is responsible for the placement of the company’s advertising through an advertising agency. The Sales Manager has a small specialised and highly qualified team of medical representatives calling on doctors and hospital staff. He is also responsible for a small but growing chemist sales force to meet the planned expansion of sales in this type of outlet.
In this company, the Marketing Manager is directly responsible to a Director of Sales and Marketing. The Marketing Manager has under him two Product Group Managers, a New Product Development Manager and a Market Research Manager.
Each Product Group Manager is responsible for the day-to-day product and marketing planning on an existing group of brands and products (there are a number of related products sold under the same brand names). In this case, although all the company’s brands and products are distributed through the same retail trade channels, there are two distinct types of product involved requiring different distribution, sales and promotion treatment.
The New Product Development Manager, as his title implies, is concerned only with research and development on new products not previously sold by the company up to the national marketing stage. At this point, the ‘going’ product is handed over to the Product Group Manager who is responsible for all further marketing, research and development on it thereafter. Product reformulations, pricing and packaging changes of an existing ‘going’ brand do not come under the New Product Development Manager.
The company does not employ an Advertising Manager as such, all advertising for individual products being the responsibility of the Product Group Manager in conjunction with the firm’s advertising agencies. In fact, the company employs separate advertising agencies for each of its four major brands and new product advertising is assigned to one or other or those according to circumstances, e.g., an agency may already be handling the advertising for an established product that competes directly with a new product.
In this company a certain number, but not all, of the elements of product planning are carried out by a committee which meets at least monthly, or as the need arises, under the chairmanship of one of the two joint assistant managing directors. Permanent members appointed to the committee are the Marketing Director, General Sales Manager, a Senior Production Planning Executive and the Chief Technical Research Executive.
Others who may be called in on an ad hoc basis include the Financial Controller, a Sales Analyst, the Service Manager, and the head of the Design Department. The committee is not concerned with day-to-day product or marketing planning and administration, which is carried out by Design and Marketing Department personnel.
Its main function is to review the company’s products with the object of (1) Eliminating unprofitable lines, sizes and designs, (2) Initiating research and development projects on possible new products or alterations to existing products, (3) Giving approval to selected new or existing product development plans and programmes, and (4) Authorising expenditures on agreed projects and plans.
The Commercial Director of this company is for all practical purposes in sole charge of the total marketing effort. He has reporting to him a Market Development Manager, a Product Development Manager and a General Sales Manager. The Market Development Department consists of four marketing development officers, each of whom is responsible for a major group of products which contribute about the same proportion of total company turnover.
These are the Transport Group, the Consumer Durable Group, the Building Group and the General Group which includes the electrical and general engineering industries principally. Each marketing officer is responsible for the study of market uses and potentials applications of the company’s products and their exploitation in terms of product sales publicity and advertising.
The Product Development Department which is staffed by qualified engineers is structured to correspond to the same industry breakdown. Each product development executive is responsible for advising on and progressing the technical research needed on any product assigned to him, for liaison between Market Development Department and the Engineering Division and for advising both on existing or new applications. The General Sales Manager controls as industrial sales force covering all the markets in which the company is currently engaged.
While final responsibility for the total product planning and development function must rest with company management, certain specific product planning and development activities can be delegated to outside specialists. The main external sources of such practical help and advice are advertising agencies, market research organisations, product and package design consultants and independent marketing consultants.
Apart from considerations of cost and the availability of internal personnel and facilities the chief argument made for the use of the outside specialist organisations is the breadth of experience, objectivity and the application of a high degree of professional skill which they can often bring to the problem.
They are better able to afford the employment of highly paid and qualified experts than is the average manufacturer who may not be in a position to make full and continuous use of such services. Companies which have their own full-time product planning staff may experience bottlenecks or especially difficult, out-of-the-usual-run problems with sufficient frequency which make it advantageous to call on the help and guidance of outside experts.