UNIT 3 ( PRODUCT AND PRICING DECISIONS)

Concept of PLC:
The product life cycle (PLC) is a concept that describes the stages a product goes through from its
introduction to its eventual decline or withdrawal from the market. It's a useful framework for
understanding the dynamics of a product's market performance and helps businesses make informed
decisions about marketing, pricing, and product development. The PLC typically consists of four main
stages: introduction, growth, maturity, and decline.

1. Introduction:
- In this stage, the product is launched into the market. Sales are typically low as consumers become
aware of the product and its benefits.
- Marketing efforts focus on creating awareness and generating interest. Companies may invest heavily
in promotion and distribution to establish a market presence.
- Profits are usually low or negative due to high initial investment and low sales volume.

2. Growth:
- In the growth stage, sales begin to increase rapidly as consumer acceptance grows. This is often
driven by positive word-of-mouth, effective marketing campaigns, and improved distribution channels.
- Competitors may enter the market, leading to increased competition. Companies may focus on
product improvement and expanding market share.
- Profits start to rise as sales increase and economies of scale are achieved.

3. Maturity:
- The maturity stage is characterized by stable sales and intense competition. Most potential customers
are aware of the product, and the market becomes saturated.
- Companies may focus on defending market share through pricing strategies, product differentiation,
or marketing innovations.
- Profit margins may stabilize or decline due to pricing pressure and increased marketing expenses.

4. Decline:
- In the decline stage, sales start to decline due to changes in consumer preferences, technological
advancements, or the introduction of superior alternatives.
- Companies may choose to maintain the product with minimal investment, harvest it by reducing
marketing support and cutting costs, or exit the market altogether.
- Profits decline as sales decrease and costs may outweigh revenues. Eventually, the product may be
discontinued.

Throughout the product life cycle, companies need to continuously monitor market conditions, consumer
preferences, and competitive dynamics to adapt their strategies accordingly. Strategies may include
product innovation, diversification, cost reduction, or strategic alliances to extend the life cycle or
capitalize on new opportunities. Additionally, understanding where a product is in its life cycle helps
companies allocate resources effectively and maximize returns on investment.

Marketing Strategies of PLC:

Throughout the different stages of the product life cycle (PLC), companies often employ various
marketing strategies to maximize the product's success. Here's how marketing strategies typically align
with each stage:

1. Introduction Stage:
- **Market Development:** Companies focus on creating awareness and generating interest in the new
product. Marketing efforts aim to educate consumers about the product's features, benefits, and uses.
- **Heavy Promotion:** Extensive promotional activities, such as advertising, public relations, and sales
promotions, are employed to attract early adopters and build initial demand.
- **Selective Distribution:** Distribution channels may be limited initially to ensure the product's
availability in key markets and to control costs.

2. Growth Stage:
- **Market Penetration:** Companies aim to capture a larger share of the expanding market by
aggressively promoting the product and lowering prices to attract more customers.
- **Product Improvement:** Continuous product development and enhancements are essential to
maintain competitiveness and meet evolving customer needs.
- **Expanded Distribution:** Distribution channels are expanded to reach new geographic areas and
increase accessibility to customers.

3. Maturity Stage:
- **Market Saturation:** The market becomes saturated with competitors, and growth slows down.
Companies may focus on retaining loyal customers and increasing market share through brand loyalty
and customer service.
- **Product Differentiation:** Companies differentiate their product through quality improvements,
additional features, or packaging innovations to maintain a competitive edge.
- **Price Competition:** Pricing strategies may shift to emphasize cost leadership or value-based pricing
to maintain profitability in a competitive market.
- **Diversification:** Companies may explore new market segments or product variations to offset
declining sales in the mature market.

4. Decline Stage:
- **Harvesting:** Companies may choose to reduce marketing support and focus on maximizing profits
from existing sales. This involves cost-cutting measures and rationalizing product offerings.
- **Product Extension:** Extending the product's life cycle by introducing new variations or targeting
niche markets that may still have demand.
- **Market Segmentation:** Identifying and targeting remaining customer segments that still find value
in the product despite declining overall demand.
- **Discontinuation:** Eventually, if sales decline significantly and are no longer economically viable,
companies may decide to discontinue the product and reallocate resources to more profitable ventures.

Throughout the PLC, effective marketing strategies require continuous monitoring of market trends,
consumer preferences, and competitive dynamics. Flexibility and adaptability are crucial for companies
to adjust their strategies accordingly and sustain the product's success over time.
PRODUCT CLASSIFICATION:

Product classification refers to the systematic categorization of products based on specific criteria such
as their characteristics, intended use, or industry standards. This classification helps businesses,
marketers, and policymakers understand products better, streamline inventory management, and
develop targeted marketing strategies. Here's an elaboration on different ways products can be classified:
1. **Consumer Goods vs. Industrial Goods:**
- **Consumer Goods:** Products directly purchased by end consumers for personal use. They can be
further categorized into convenience goods (everyday items like toiletries), shopping goods (purchased
after comparison shopping, like clothing), specialty goods (unique or luxury items), and unsought goods
(products consumers do not actively seek out).
- **Industrial Goods:** Products used by businesses to produce other goods or provide services. They
include raw materials, components, and machinery. Industrial goods are often classified based on their
durability, tangibility, and how they enter the production process (e.g., raw materials vs. capital goods).

2. **Durability and Tangibility:**

- **Durable Goods:** Products that are long-lasting and used repeatedly over time. Examples include
appliances, electronics, and furniture.
- **Non-durable Goods:** Products consumed quickly or have a short lifespan. These include
perishable goods like food and beverages, as well as items like toiletries and office supplies.

3. **Tangibility:**
- **Tangible Goods:** Physical products that can be touched and seen, such as clothing, electronics,
and automobiles.
- **Intangible Goods:** Products that lack physical substance but provide value, such as services (e.g.,
education, healthcare) and digital goods (e.g., software, e-books).

4. **By Use or Application:**

- **Capital Goods:** Products used by businesses to produce other goods or services, such as
machinery, equipment, and infrastructure.
- **Consumer Goods:** Products purchased by individuals for personal use, including both durable and
non-durable goods.

5. **By Industry or Sector:**

- Products can be classified based on the industry or sector they belong to, such as healthcare products,
technology products, automotive products, etc.

6. **Based on Product Life Cycle:**

- **New Products:** Recently introduced products in the market.
- **Mature Products:** Products that have reached a stable stage in their life cycle with consistent
demand.
- **Declining Products:** Products experiencing a decrease in demand due to market saturation or
changing consumer preferences.

7. **By Price and Quality:**

- Products can be categorized based on their price point and quality level, such as economy, mid-range,
and premium products.

8. **By Origin or Source:**

- **Domestic Products:** Products manufactured or produced within the country.
- **Imported Products:** Products sourced from foreign countries.

By employing product classification systems, businesses can better understand consumer behavior, tailor
marketing strategies, optimize inventory management, and make informed decisions about product
development, pricing, and distribution.
PRODUCT LINE DECISIONS:

Product line decisions refer to strategic choices made by a company regarding the assortment of products
it offers within a particular product line. A product line consists of related products that share similar
characteristics, target similar customer segments, and fulfill similar needs. Product line decisions involve
determining which products to include, exclude, or modify within the product line to achieve specific
business objectives. Here's an explanation of the key aspects of product line decisions:

1. **Product Line Depth:**

- Product line depth refers to the number of product variations within a product line. Companies can
expand or reduce the depth of their product lines based on market demand, customer preferences, and
competitive dynamics.
- Increasing product line depth involves adding new variations, sizes, flavors, or models to existing
product categories. This strategy allows companies to cater to diverse customer needs and preferences.
- Conversely, reducing product line depth involves discontinuing underperforming variations or
consolidating similar products to streamline operations and reduce complexity.

2. **Product Line Width:**

- Product line width refers to the range of product categories or types offered within a product line.
Companies can expand or narrow the width of their product lines to enter new markets, capitalize on
emerging trends, or diversify their revenue streams.
- Expanding product line width involves introducing new product categories or entering related markets
to broaden the company's offerings and reach new customer segments.
- Narrowing product line width involves focusing on core product categories and divesting unrelated or
underperforming product lines to allocate resources more efficiently and improve focus.

3. **Product Line Consistency:**

- Product line consistency refers to the degree of similarity and coherence among the products within
a product line. Consistent product lines have products that complement each other, share a common
brand identity, and adhere to a unified design or quality standard.
- Maintaining consistency ensures a cohesive brand image, enhances customer loyalty, and facilitates
cross-selling and upselling opportunities.
- However, companies may also intentionally introduce product line extensions or variations that deviate
from the core product offerings to capture new market segments or address evolving consumer
preferences.

4. **Product Line Rationalization:**

- Product line rationalization involves evaluating the performance of individual products within a product
line and making decisions to optimize the product portfolio.
- This may include discontinuing underperforming products, reducing redundancy or overlap, and
focusing resources on high-potential products with strong market demand and profitability.
- Product line rationalization helps companies streamline operations, reduce costs, and allocate
resources more effectively to support strategic growth initiatives.

Overall, product line decisions are crucial for shaping the company's product portfolio, enhancing
competitiveness, and maximizing long-term profitability. By carefully managing product line depth, width,
consistency, and rationalization, companies can adapt to changing market conditions, meet customer
needs, and sustain growth in the dynamic business environment.
PRODUCT MIX DECISIONS:

Product mix decisions refer to the strategic choices made by a company regarding the assortment of
products it offers across all its product lines. The product mix, also known as the product assortment or
product portfolio, represents the entire range of products and services available from a company. These
decisions involve determining which product lines to offer, how to allocate resources among them, and
how to balance factors such as product differentiation, market demand, and profitability. Here's an
explanation of the key aspects of product mix decisions:

1. **Product Mix Width:**

- Product mix width refers to the number of different product lines offered by a company. A wide product
mix encompasses multiple product categories or types, catering to diverse customer needs and
preferences.
- Companies with a broad product mix can capture a larger share of the market, reach different
customer segments, and mitigate risks associated with dependence on a single product line.
- Conversely, a narrow product mix focuses on a limited range of product categories, allowing
companies to specialize, streamline operations, and maintain a clear brand identity.

2. **Product Mix Depth:**

- Product mix depth refers to the variety of products within each product line. It involves offering different
variations, models, sizes, or flavors to meet specific customer preferences and market demands.
- Increasing product mix depth involves expanding the range of options within existing product lines,
providing customers with more choices and customization opportunities.
- Decreasing product mix depth may involve consolidating product variations, discontinuing
underperforming SKUs, or simplifying product offerings to improve efficiency and profitability.

3. **Product Mix Consistency:**

- Product mix consistency refers to the coherence and alignment among the different product lines
within the product mix. Consistent product mixes maintain a unified brand identity, target similar customer
segments, and adhere to a common set of values or design principles.
- Consistency enhances brand recognition, fosters customer loyalty, and facilitates cross-selling and
upselling opportunities across product lines.
- However, companies may also introduce complementary or supplementary products that expand the
product mix while maintaining overall coherence and relevance to the target market.

4. **Product Mix Balancing:**

- Product mix decisions involve balancing various factors such as market demand, competitive
positioning, resource allocation, and profitability across different product lines.
- Companies need to allocate resources effectively to support product development, marketing,
distribution, and customer service initiatives across the product mix.
- Balancing the product mix requires ongoing monitoring of market trends, consumer preferences, and
competitive dynamics to make timely adjustments and optimize the allocation of resources.

By making informed product mix decisions, companies can create a well-rounded portfolio that meets the
needs of diverse customer segments, enhances competitiveness, and drives long-term growth and
profitability. A carefully curated product mix enables companies to adapt to changing market conditions,
capitalize on emerging opportunities, and differentiate themselves in the marketplace.
BRANDING DECISIONS:

Branding decisions involve the strategic choices made by a company to create, develop, manage, and
position its brand(s) in the marketplace. A brand is more than just a logo or a name; it encompasses the
perceptions, emotions, and associations that consumers have with a company, product, or service.
Effective branding decisions can significantly impact customer loyalty, brand equity, and long-term
business success. Here's an explanation of the key aspects of branding decisions:

1. **Brand Identity:**
- Brand identity defines how a company wants to be perceived by its target audience. It includes
elements such as brand name, logo, tagline, colors, typography, and brand voice.
- Brand identity communicates the company's values, personality, and unique selling proposition (USP),
helping differentiate it from competitors and create a memorable impression in the minds of consumers.

2. **Brand Positioning:**
- Brand positioning involves defining the unique place or space that a brand occupies in the minds of
consumers relative to competitors. It articulates the brand's value proposition and the benefits it offers to
its target audience.
- Effective brand positioning highlights the brand's strengths, addresses customer needs or pain points,
and resonates with the target market's preferences and aspirations.

3. **Brand Image:**
- Brand image represents how consumers perceive and evaluate a brand based on their experiences,
interactions, and associations with it. It encompasses attributes such as quality, reliability,
trustworthiness, and emotional appeal.
- Brand image is shaped by various factors, including product performance, customer service,
marketing communications, and endorsements. Consistent delivery of positive brand experiences helps
reinforce a favorable brand image.

4. **Brand Extension:**
- Brand extension involves leveraging the strength and equity of an existing brand to introduce new
products or enter new markets. It allows companies to capitalize on the recognition, credibility, and loyalty
associated with the parent brand.
- Successful brand extensions maintain relevance to the core brand promise, offer complementary
products or services, and address unmet consumer needs in related categories.

5. **Brand Communication:**
- Brand communication encompasses the strategies and channels used to convey the brand's
message, values, and offerings to the target audience. It includes advertising, public relations, social
media, content marketing, and experiential marketing.
- Consistent and coherent brand communication builds brand awareness, fosters brand engagement,
and reinforces brand loyalty over time.

6. **Brand Management:**
- Brand management involves overseeing and nurturing the brand's health and equity through strategic
planning, monitoring, and adaptation. It includes activities such as brand tracking, brand audits, brand
partnerships, and crisis management.
- Effective brand management ensures alignment between the brand's identity, positioning, and image,
and facilitates continuous improvement and innovation to stay relevant in a dynamic marketplace.
By making informed branding decisions, companies can create strong, distinctive, and enduring brands
that resonate with consumers, drive preference and loyalty, and ultimately contribute to sustainable
business growth and profitability. Branding decisions are integral to building and maintaining a
competitive advantage in today's crowded marketplace.

PACKAGING AND LABELLING:

Packaging and labeling are critical elements of product marketing and play a significant role in influencing
consumer perceptions, enhancing brand visibility, and ensuring product safety and compliance with
regulations. Let's delve into each concept and highlight their features and importance:

**Packaging:**

Packaging refers to the process of designing and producing the container or wrapper for a product. It
serves several key functions:

1. **Protection:** Packaging protects the product from damage, contamination, tampering, and spoilage
during transportation, handling, and storage. It helps preserve product quality and integrity.

2. **Containment:** Packaging holds the product together and prevents spillage or leakage. It ensures
that the product remains intact and usable until it reaches the consumer.

3. **Convenience:** Packaging facilitates handling, storage, and usage of the product. It may include
features such as handles, resealable closures, and portion control to enhance convenience for
consumers.

4. **Information:** Packaging communicates essential information about the product, including its name,
brand, ingredients, usage instructions, nutritional content, and safety warnings. Clear and informative
packaging helps consumers make informed purchasing decisions.

5. **Differentiation:** Packaging serves as a vehicle for brand differentiation and communication. Unique
and visually appealing packaging design can capture consumer attention, evoke emotions, and
distinguish the product from competitors on the shelf.

**Labeling:**

Labeling refers to the process of attaching or imprinting labels onto product packaging. Labels provide
additional information, instructions, warnings, and branding elements. Key features of labeling include:

1. **Product Identification:** Labels contain essential information such as the product name, brand logo,
and variant (e.g., flavor, size) to help consumers identify and differentiate the product.

2. **Regulatory Compliance:** Labels include mandatory information required by regulatory agencies,

such as ingredients lists, nutritional facts, allergen warnings, expiration dates, and safety instructions.
Compliance with labeling regulations is essential to ensure consumer safety and avoid legal penalties.
3. **Promotion and Branding:** Labels serve as a platform for promotional messages, marketing claims,
and branding elements such as slogans, taglines, and imagery. They reinforce brand identity,
communicate brand values, and influence purchasing decisions.

4. **Traceability:** Labels may include barcodes, QR codes, or serial numbers that enable product
traceability throughout the supply chain. Traceable labels facilitate inventory management, logistics
tracking, and product recalls if necessary.

**Importance of Packaging and Labeling:**

1. **Brand Visibility and Recognition:** Packaging and labeling are essential for building brand awareness
and recognition. Visually appealing packaging and distinctive labeling help products stand out on the
shelf and attract consumer attention.

2. **Consumer Communication:** Packaging and labeling convey important information about the
product, its features, benefits, and usage instructions. Clear and informative packaging enhances
consumer understanding and satisfaction.

3. **Product Protection:** Packaging protects products from physical damage, contamination, and
tampering, ensuring product safety and quality. Proper packaging is especially crucial for perishable or
fragile goods.

4. **Legal Compliance:** Packaging and labeling must comply with regulatory requirements and industry
standards. Accurate and transparent labeling helps companies adhere to legal obligations and maintain
consumer trust.

5. **Differentiation and Competitive Advantage:** Well-designed packaging and labeling can differentiate
products from competitors, create a strong brand identity, and influence consumer perceptions and
preferences.

In summary, packaging and labelling are integral components of product marketing and play a vital role
in product protection, communication, branding, and regulatory compliance. Companies should carefully
design and execute packaging and labelling strategies to enhance the consumer experience, drive sales,
and build brand loyalty.

PRICE SKIMMING AND PENETRATION:

Price penetration and price skimming are two pricing strategies used by businesses to introduce and
establish a product in the market. Let's delve into each concept:

**Price Penetration:**

Price penetration, also known as penetration pricing, involves setting a relatively low initial price for a new
product to penetrate the market quickly and gain a large customer base. Key features of price penetration
include:

1. **Low Initial Price:** The product is launched with a price significantly lower than competitors' prices
or the perceived value of the product. This low price attracts price-sensitive consumers and encourages
them to try the product.
2. **Market Penetration:** The goal of price penetration is to capture a significant market share quickly
by attracting a large number of customers. The low price encourages trial purchases and facilitates rapid
adoption of the product.

3. **Long-term Profitability:** While the initial price may be low, the aim of price penetration is to achieve
economies of scale, increase market share, and generate revenue through high sales volume. Over time,
as the product gains traction and becomes established in the market, prices may be adjusted upward to
improve profitability.

4. **Competitive Response:** Price penetration may trigger competitive responses from rivals, including
price reductions or intensified marketing efforts. Companies implementing this strategy should be
prepared to withstand potential price wars and maintain their competitive advantage.

**Price Skimming:**

Price skimming, also known as skimming pricing, involves setting a high initial price for a new product to
maximize profit from the most price-sensitive segments of the market before gradually lowering the price
to attract broader customer segments. Key features of price skimming include:

1. **High Initial Price:** The product is introduced with a premium price that reflects its uniqueness,
innovation, or perceived value. This high price targets early adopters, enthusiasts, or consumers willing
to pay a premium for the latest technology or features.

2. **Profit Maximization:** Price skimming aims to maximize profits by capitalizing on the willingness of
early adopters to pay a premium price. This strategy allows companies to recoup initial investment costs
quickly and generate high profit margins before competitors enter the market.

3. **Segmentation:** Price skimming targets different market segments based on their willingness to pay.
Early adopters and premium customers are willing to pay a higher price for exclusive or cutting-edge
products, while prices are gradually lowered to attract more price-sensitive consumers as the product
matures.

4. **Market Expansion:** As competition increases or market demand evolves, prices may be gradually
reduced to attract broader customer segments and maintain competitiveness. Lower prices may help
penetrate new market segments and extend the product's lifecycle.

In summary, price penetration and price skimming are two pricing strategies used by businesses to
introduce and establish new products in the market. Price penetration focuses on capturing market share
quickly through low initial prices, while price skimming aims to maximize profits by targeting early
adopters with premium prices. Both strategies have their advantages and considerations, and the choice
between them depends on factors such as product characteristics, market dynamics, competitive
landscape, and business objectives.

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( REMAINING PRICING RELATED QUESTIONS HAVE ALREADY BEEN GIVEN IN THE CLASS. SO
PLEASE CEHCK THE NOTES ACCORDINGLY)