Module 3 – Product & Price

Contents
Concept of Product
• Consumer and Industrial Goods
• Product Line and Product Mix Decisions
• Product Life Cycle – Meaning and Stages
• Product Planning and Development - Concept and Steps
• Packaging- Role and Functions
• Branding: Concept and Elements
Concept of Price
• Importance of Pricing
• Factors Affecting Price
• Pricing Strategies: Price Discrimination, Price Skimming,
Penetration Pricing and Discounts.
• Pricing Methods: Cost Based, Competitor Based and Demand
Based Pricing.

Product
Product & its elements / features
A product is the item offered for sale. A product can be a service or an
item. It can be physical or in virtual form. Every product is made at a
cost and each is sold at a price.
Elements / Characteristics of product:
• Core product: The actual product itself. Its dimensions are
included
• Product features: The benefits of using the product. [Suzuki
Access – Good Mileage]
• Augmented features: Additional features apart from main
benefits [Suzuki Access – USB charger]
• Brand name: It is the manufacturers name which is
registered.
• Logo: The symbol representing the brand
• Package: The cover design, details and font, Material used
etc.
• Label: The printed information sticked to the product giving
information

Classifications of product
• Based on use:
 • Consumer goods: Those which are used directly for
consumption
• Industrial goods: Those which are used for production /
preparation of final goods
• Based on durability:
• Non-durable goods: Those need to be consumed quickly.
• Durable goods: Those can be stored and remain for longer
period of time
• Services: Those which are not tangible
Consumer goods
Those which are used directly for consumption
Features:
• Self-consumption: Consumer goods are products that an average
user purchases for self-consumption.
• Final goods: They are also known as final goods or consumer
products because, the last stage comes when they are consumed by
the end-user.
• Examples: Consumer goods include food, clothing, household
appliances, and entertainment items.
• To satisfy desire: They are purchased with the intention of fulfilling
an immediate need or desire.
Types of consumer goods
Industrial goods
Those which are used for production / preparation of final goods
Features:
• To produce other products: Capital goods are items used to produce
other products. These can include major equipment like machinery,
tools, and buildings.
• Includes raw materials too: Some industrial goods include raw
materials and work in progress
• May not be used for ultimate consumption: Since it is not the final
goods, the chances are less for consumers to directly consume them.
• Examples: Machinery, Chemicals, Supplies etc.
Types of industrial goods

Product line & Product mix decisions

Product line: A product line is a group of related products marketed

and sold under a specific brand, offered by a particular company.
Product mix: A product mix is the total number of product lines and
individual products or services offered by a company.
Product mix width: The width of a product mix refers to the total
number of product lines a business
Product mix depth: Depth speaks to the variety within a single product
line.
Product mix decision
What? Product decisions are decisions about a company's product or
service to meet customer demand and ensure business success.
• Attributes: Product quality, feature, and design are product
attribute decisions.
• Individual product: Product attributes, branding, packaging,
labeling, and support services are individual product decisions.
• Product line: A product line is a group of related products that
function similarly and are sold to the same customer segment.

Product life cycle (PLC)

A product life cycle is the length of time from a product first being
introduced to consumers until it is removed from the market.
Stages of PLC
Stage #1 - Introduction Stage
 When - The introduction stage is when a new product is launched
into the market
 No profits - the product may not be profitable
 Low sales - sales may be low due to limited awareness and
distribution.
 Focus - The focus during this stage is on creating brand awareness,
generating demand, and developing a strong distribution network.
Stage #2 - Growth Stage
 Acceptance - the product gains acceptance in the market
 Sales increase - sales start to increase.
 Focus - The focus during this stage is on expanding the distribution
network, increasing production capacity, and improving the
product's features and quality to meet customer needs.
Stage #3 - Maturity Stage
  Longest - The maturity stage is the longest stage in the product life
cycle.
 Sales growth peaks - Sales growth starts to slow down, and the
market becomes saturated.
 Focus - The focus during this stage is on maintaining market share,
reducing costs, and improving product differentiation to remain
competitive.
Stage #4 - Decline Stage
 Final stage - The decline stage is the final stage in the product life
cycle.
 Sales decline - Sales start to decline due to:
 Changes in customer needs
 Technological advancements
 Increased competition.
 Focus - The focus during this stage is on minimizing costs and
maximizing profits through strategies such as product diversification
or market segmentation.

Importance / Decisions of PLC

Product planning & development
What is it? Product planning is an essential process for companies that
create, manufacture and sell goods.
Product planning: Product planning is the process of developing
successful products to offer your customers. It includes all aspects of the
product development cycle, including market research, strategic planning,
product design and development, manufacturing and pricing.
It is for:
 Meeting customer needs
 Using resources effectively
 Improving inventory control
Stages of PPD

Packaging – Roles & Functions

Packaging is the act of enclosing or protecting the product using a
container to aid its distribution, identification, storage, promotion, and
usage.
Definition (Kotler): Packing constitutes all the activities of designing and
producing the container for a product.
• Identify and differentiate the product in the market
• Transport and distribute the product
• Store the product
• Promote the product
• Use the product properly
Roles of packaging
• Reduce Damage: Packaging minimizes product breakage or harm
during handling and shipping.
• Combination role: Functions as a container and marketing tool
simultaneously. Also it avoids spilling for liquid products / eatables.
• Identification: Helps in easily recognizing and distinguishing
products.
• Protection / ease of transport: Shields items during transit while
facilitating convenient carrying.
• Stacking and storage: Enables efficient organization and safe
storage of goods.
• Printed information: Provides essential details such as usage
instructions and ingredients.
Functions of packaging
• To protect from damage: Depending on the product it is carrying,
packaging is vital for protection during transit. Additional protection
might be needed for delicate items, which could require either a
more rigid container or foam padding to minimize movement.
• To provide key information: Packaging contains large amounts of
important information, from ingredients to usage instructions and
indicators of safety and quality standards
• To contain multiple items: Products that consist of multiple
pieces or components, electronic gadgets, will need to be both
secured and accessible in its packaging.
• To promote the product: The combination of visual branding,
such as colors and logos, and product display, can attract consumer
interest by highlighting the quality of the products
• To improve storage effectiveness: Packaging which has been
designed to be stackable, compact and to not add excessive weight
can allow for a larger inventory in a smaller space.
• To consider environment impact: Modern packaging must be
efficient, secure and attractive, while also avoiding unnecessary
waste.

Branding – Concepts and elements

Branding is the process of creating and disseminating the brand name, its
qualities and personality.
• Branding could be applied to the entire corporate identity as well as
to individual products and services or concepts.
Importance / Need of branding:

Elements of brand / branding

Dos during branding

• Simple and easy to pronounce
• Should be memorable
• Taglines shall mention benefits
• Name should be suitable to the product
• Distinctive from others
• Should not be outdated
• Should come immediately in the mind of customer

Pricing
Pricing
• Price: The amount of money given or set as consideration for the
sale of a specified thing.
 • Pricing: Pricing is a process of fixing the value that a
manufacturer will receive in the exchange of services and goods.
Objectives of pricing
• Revenue Generation: Pricing can be used to maximize total
revenue by finding the optimal balance between price and
quantity sold.
• Market Ruler: To increase its revenue and customer base, the
company will need to agree on an optimal price for its
product/service that the customers can afford.
• Survival: Without revenue and profits, a firm can not survive for a
longer period. Pricing generates revenue and revenue is used in
further production in order to produce goods.
• Profit Maximization: Pricing strategies are designed to ensure
that the revenue generated from sales exceeds the costs incurred
in producing and marketing the product or service.
• Attraction and Retention of Customers: Having a proper and
affordable pricing strategy helps the business in acquiring new
customers and retention of previous customers. A more customer
base means more revenue.
Importance of pricing
First Impression: Any consumer would compare the price of products
before purchasing items for most of the cases. Pricing acts as 1 st
impression.
Right-Level Pricing: Wrong level of pricing will lead to close down of the
company. A thorough market research is required before setting up the
final prices for the product.
Sales Promotion: Pricing strategies are important tool of sales
promotion. Discounts, offers and other aspects are important.
Flexible Element: Price is the most flexible element of marketing in
comparison to product, place, and promotion. Price can be changed
rapidly and is affected by many factors like customer perception of
value, inflation, economy, overall costs, etc.
Profit Generation: Pricing directly influences a company’s revenue and
profit margins. Setting the right price ensures that the revenue
generated from sales exceeds the costs
Competitive Edge: Pricing strategies can differentiate a business from
its competitors. Appropriate pricing helps create a competitive
advantage by appealing to customers through factors such as
affordability, perceived value, or quality.
Demand Management: Effective pricing can regulate demand for
products or services. Price adjustments, discounts, or promotions can
stimulate demand during slow periods or manage peak demand to
prevent stockouts.
Factors affecting pricing

Internal factors
Cost: Pricing decisions are influenced by the expenses incurred in
production, as higher costs may necessitate higher prices to maintain
profitability.
Quality: Higher quality often commands higher prices in the market, as
consumers are willing to pay more for products perceived as superior in
performance or durability.
Class of product: Whether a product is considered a luxury or basic
necessity guides pricing strategies to align with perceived value and
target market segments.
Elements of marketing mix: Pricing is influenced by various marketing
factors such as promotion, distribution, and product features, which
collectively shape the value of the offering.
Brand image: Strong brand image can support premium pricing
strategies, as consumers are often willing to pay more for products
associated with reputable or prestigious brands.
Market share: Pricing decisions may be influenced by the desire to gain
or maintain market share, with companies adjusting prices strategically
to compete for a larger portion of the market.
External factors
Demand: Pricing decisions are shaped by the level of demand for a
product or service, with prices often adjusted to reflect consumers'
willingness to pay at different levels of demand.
Competition: Pricing strategies are influenced by the actions of
competitors, as companies may adjust prices to remain competitive
within the market and attract customers.
Price of raw materials: Fluctuations in the cost of raw materials directly
impact pricing decisions, as changes in input costs affect the overall
cost structure and profitability of products.
Government rules: Pricing strategies can be influenced by government
regulations and policies, such as taxation or price controls, which may
impose constraints or provide incentives for certain pricing practices.
Economic condition: Pricing decisions are influenced by broader
economic factors such as inflation, recession, or economic growth,
which affect consumer purchasing power and overall market demand.
Buying behavior: Pricing strategies are informed by consumer behavior,
including sensitivity to price changes, preferences for certain pricing
models (e.g., subscription vs. one-time purchase),
Methods of pricing

• Cost-based pricing strategies uses production costs as its basis for

pricing and a profit level must be added in order to come up with the
product price.
• Also known as competitive pricing, consists in setting the price of a
product based on what the competition is charging.
• Demand-based pricing is a pricing strategy wherein consumers'
demand determines the price of a product or service.
Cost-based pricing

Pros
 Calculations to determine price are simple.
 Pricing ensures total profits for the business.
Cons
 Ignores how customer demand affects price.
 Ignores competition in setting price
 Price setting cannot be solely based on costs.

Competitor based pricing

Who should adopt? This pricing method is normally used by businesses
selling similar products, since services can vary from business to
business, while the attributes of a product remain similar.
Competition is the key: Consumers judge products with similar
features by the prices. Consequently, competitors may need to price their
products lower or risk losing potential sales.
Always opened eyes: Existing and emerging competition by using a
competitor website price monitoring software
Pros
 Competitive pricing strategy
 Setting the right price according to market state helps gain
competitiveness.
Cons
 Setting price need to be above break-even point
 Chances of loss
 It needs an effective price monitoring system.
Demand based pricing
Pricing based on the demand of the consumers is termed as demand-
based pricing. Here, three strategies are included:
• Price skimming: Initial price is set very high so that only the
customers with more purchasing power can buy the product. After
that the price is reduced gradually so that the price-sensitive
customers who were not able to buy the product at first can now
buy.
• Price penetration: In this method the initial price is kept really low
to attract more customers and increase the market share.
• Price discrimination: Customers are charged differently based on
different demand.
Strategies of Pricing
1. Price Discrimination
2. Price Skimming
3. Penetration Pricing
4. Freemium pricing
 5. Bundle Pricing
6. Premium Pricing
7. Economy Pricing
8. Discount pricing
9. Psychological pricing

1. Price Discrimination: Charging different prices to different

customer segments based on their willingness to pay, allowing a
company to capture more consumer surplus and increase overall
revenue.
2. Price Skimming: Setting a high initial price for a new product or
service and gradually lowering it over time as competition increases or
as market demand changes.
3. Penetration Pricing: Setting a low initial price for a new product or
service to quickly gain market share, with the intention of increasing
prices once a foothold has been established.
4. Freemium pricing: Offering a basic version of a product or service
for free while charging a premium for additional features or
functionality, enticing customers to upgrade to a paid version.
5. Bundle Pricing: Offering multiple products or services together as a
package at a discounted price compared to purchasing each item
individually, encouraging customers to buy more.
6. Premium Pricing: Setting a higher price for a product or service to
convey exclusivity, quality, or luxury, targeting customers who are
willing to pay more for perceived value.
7. Economy Pricing: Offering products or services at a low price to
appeal to price-sensitive customers and compete with low-cost
competitors, focusing on cost efficiency and affordability.
8. Discount pricing: Offering temporary price reductions or discounts on
products or services to stimulate sales, attract price-sensitive
customers, or clear out excess inventory.
9. Psychological / odd pricing: Setting prices based on psychological
factors such as perceived value, pricing thresholds, or the use of charm
prices (e.g., $9.99 instead of $10) to influence consumer perception
and behavior.
Previous questions from question papers of 2023
2 marks
 What is basic product
 Define PLC
5 marks
 Give the classification of consumer goods
 Explain the stages of PLC
10 marks
 Explain different pricing strategies

Previous questions from question paper of 2022

2 marks
 What is augmented product?
 Define cost-plus pricing
5 marks
 What are the requisites of a good package
 Explain different types of price discrimination
10 marks
 Define branding. What are the functions of branding

Previous questions from question paper of 2021

3 marks
  Define core product
 Non-durable goods
 Odd Pricing
 Price bundling
7 marks
 NIL
10 marks
 Write an account on different methods of pricing