Product Decisions in Marketing – Levels | Classifications | Creating Customer Value

Product decisions in marketing involve determining the aspects of a product that will best meet customer needs and help achieve a company’s objectives. These decisions encompass product design, features, quality, branding, packaging, and positioning to create value and differentiate the product in the market. They also involve planning the product mix, product line, and product lifecycle to ensure sustained relevance and profitability. Marketers must align these product attributes with consumer preferences, market trends, and the competitive landscape to develop a compelling offering that drives customer satisfaction and loyalty.

Table of Contents

1. Introduction
2. Levels of Product
3. Designing Value
4. Product Classifications
5. Product-Mix Decisions

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1. Introduction

Product is a key element in the market offering and marketing planning begins with formulating an offering to meet target customers’ needs or wants. The customer judges the offering on the basis of three basic elements including product features and quality, services mix and quality, and price.

A product, in a narrow sense, is a set of tangible physical attributes assembled in an identifiable form. Each product is identified by a commonly understood generic name such as steel, insurance. According to this interpretation an Apple and Dell would be the same good, i.e., a personal computer. In a broader sense, in was recognized that customers are not really buying a set of attributes but, rather bundle of benefits that satisfy their needs or wants. A product that provides benefits can be something other than a tangible good, it includes services, places, persons and ideas. While buying a refrigerator customer ask about its performance, style, design, rather than physical attributes.

Product goes beyond a physical object. It can be defined in several ways. According to Philip Kotler¹, “a product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need”. Product includes physical goods such as cars, books, services such as banking, airline, persons such as candidate of a political party, places such as Kullu Manali, organizations such as blood donation camp, and ideas such as family planning or benefits of not smoking.

In the words of Etzel, Walker, Stanton and Pandit², “a product is a set of tangible and intangible attributes, which may include packaging, colour, price, quality, and brand, the seller’s services and reputation”. A product may be a good, service, place, person, or idea. In essence, these customers are buying much more than a set of attributes when they buy a product. They are buying want-satisfaction in the form of the benefits they expect to receive from the product.

Companies brings the product to a new level by creating value for their customers as products and services become more and more commoditized. To differentiate their offers, they are creating and managing customer experiences with their company. Café Coffee outlets are the best examples of creating experiences for their customers. Disney has long manufactured dreams and memories through its movies and theme parks.

2. Levels of Product

Marketer plans its market offering through several levels, where each level adds more customer value by adding several advanced features, design, attractive packaging, and meaningful communication into the basic product. According to Kotler³, a product offer can be conceived at three levels: the core customer value; the actual product; and the augmented product. At the most basic level, the company acts, “What is the customer really buying?” For example people who buy an Apple iPad are buying more than just a tablet computer. They are buying entertainment, still-expression, productivity and connectively – a mobile and personal window to the world.

The most basic level is core customer value, i.e., the fundamental benefit or service that the customer is really buying. For example, a woman buying lipsticks buys more than lip colour, and keeping this in mind Revlon claims “in the factory we make cosmetics; in the store, we sell hope.” Cameras make memories by recording a scene, person or object. A hotel guest is buying rest and sleep.

At the second level, product planners turn the core benefit into an actual product and develop product and service features, design, quality, brand name and packaging. For example, digital cameras are offered with a variety of picture qualities, screen sizes, pixels, zoom features, and relay facilities. A hotel room provides clean bed, fresh environment, a remote-controlled television set, fresh flowers, etc.

Finally, product planners build an augmented product around the core benefit and actual product by offering additional consumer services and benefits, such as workmanship, installation, warranty, after sales services. While buying a digital camera the company might give buyers a warranty on parts, instructions on how to use the device, quick repair services when needed. A hotel can augment its product by including a free wifi, candy, bowl of fresh fruit, welcome drink on arrival. Today most competition essentially takes place at the product-augmentation level. Marketers constantly try to elevate their products to higher levels over time through innovations which in turn brings success and profits for the company.

3. Designing Value

Marketers design and create value through product decisions by aligning product features, benefits, and positioning with customer needs and wants. They start by conducting thorough market research to understand consumer preferences and aspirations. This insight informs product development, ensuring that features and functionalities address specific customer problems or desires. Marketers then craft a unique value proposition that highlights how the product solves these issues or fulfils these wants better than competitors. They consider factors like quality, price, convenience, and emotional appeal to create a comprehensive value package. Branding represents the designed product value to the target audience, emphasizing the product’s unique benefits and how it fits into consumers’ lives. Further, the careful balancing of tangible product attributes with intangible brand associations, helps marketers to build value perceptions that exceeds the actual cost. Thus, the core idea of designing value through product decisions is to influence purchase decisions and build brand loyalty. A prime example is Apple’s iPhone. The company consistently makes design decisions that balance sleek aesthetics with cutting-edge technology, creating a product that not only functions well but also serve as a status symbol. Apple’s attention to details like materials, color options, and even the unboxing experience adds layers of perceived value, setting iPhones apart in the crowded smartphone market and justifying their premium pricing. This approach has helped Apple build a loyal customer base willing to pay more for products they perceive as superior in design and functionality. Amazon’s ‘Just Walk Out’ technology allows new value proposition that enhances brand experience for its customers (see Exhibit 1). Nike’s massive Fifth Avenue store in New York offers customers all the immersive branding, but also takes personalized brand experiences to the next level and unite online and offline stores to provide customers with a seamless retail experience (see Exhibit 2). Similarly, back in India Myntra is creating personalised shopping experience by employing technology (see Exhibit 3).

Exhibit 1

Amazon’s ‘Just Walk Out’ Technology

Today, as products and services become more commoditized, many companies are moving to a new level in creating value for their customers. Companies are leveraging innovation and technology to create new value propositions and enhance the customer experience. To differentiate their offers, beyond simply making products and delivering services, they are creating and managing customer experiences with their brands or companies.

Amazon’s celebrated ‘Just Walk Out’ technology, which allowed customers to bypass traditional checkouts at its stores, secretly relied on Indian human workers manually doing the job, according to a recent report in Business Insider. The company touted the technology, which allowed customers to bypass traditional checkouts, as an achievement powered entirely by computer vision. Just Walk Out technology first debuted in Amazon Go convenience stores. It enabled customers to enter by identifying themselves with their Amazon account, pick up items, return items to shelves, and walk out with their final selections without interacting with a cashier. Build an amazing brand experience, and then sales will just naturally happen.

Exhibit 2

Nike by You

Splashing cash on flagship brand experiences isn’t a new move for modern retailers. But Nike’s new, highly customized shopping experience is a good example of a trend that takes personalization to whole new levels. Nike’s massive Fifth Avenue store in New York offers customers all the immersive branding that one may expect. But this iconic Nike NYC, House of Innovation 000 location takes personalized brand experiences to the next level. For example, clients can customize their shoes using the help of dedicated on site personal shoppers. The sportswear brand has used technology to unite online and offline stores to provide customers with a seamless retail experience. It’s also offering an unprecedented level of customizable services in-store, including dyeing, printing, embroidery, and lasering. Smaller sportswear brands may not be able to venture into this kind of trend, as it means high investment in the brand experience and a huge commitment to evolving their brand positioning.

Exhibit 3

Myntra – Personalizing Fashion Retail

Myntra, a front-runner in India’s online fashion retail sector, distinguishes itself by employing cutting-edge technology to deliver a highly personalized shopping experience. Integrating AI and machine learning enables Myntra to cater to customers’ unique tastes, enhancing satisfaction and driving sales. Myntra faced the challenge of standing out from other eCommerceplatformsbyincreasinguserengagementandpersonalization.Myntra’s personalized strategies have greatly improved customer retention rates and raised average order values. Adopting AI and AR technologies enhances the consumer shopping experience and solidifies Myntra’s position as a technologically advanced player in the fashion industry.

4. Product Classifications

Marketers classify products on the basis of durability, tangibility and use⁴.

Durability and Tangibility: According to durability and tangibility, products fall into three groups:

• Non-durable goods are tangible goods that normally are consumed in one or few uses, such as toothpaste, shampoo, soap and these are purchased frequently and consumed The appropriate strategy is to make these available in many locations, charge only a small markup and advertise heavily to induce trial and build preference.
• Durable goods are tangible goods that normally survive many uses, such as refrigerators, clothing, and These goods normally require more personal selling and services, command a higher margin and require more seller guarantees.
• Services are intangible, inseparable, variable, and perishable products which require more quality control, supplier credibility, and For example, haircuts, repairs, banking, airline, etc.

Based on the types of consumers that use them, products are of classified into two broad classes, viz.,- consumer products and industrial products.

• Consumer products are intended to be purchased for household use. These goods are distributed normally through long Advertising, packaging, branding and middlemen play an important role for such goods.
• Industrial products are intended to be purchased for further production. These goods are used to either enable the organization to function smoothly or they form an integral part of the products, processes, and services supplied by the organization for resale. Such goods can be classified on the basis of how they enter the production process and their relative costliness.

Consumer Products Classification: Consumer goods could be classified on the basis of how and where consumers buy them. Consumer products include:

• Convenience products are those products that customers usually purchase frequently, immediately, and with a minimum of effort For example, bread, soaps, toothpaste. The per unit cost of such goods is not very high, because of the repetitive nature of purchase customer already has information about the product and buy them from nearest source. They mainly prefer branded products. Convenience products may further be subdivided into three categories. Products that are bought often, routinely and without much thought, like milk, soft drinks, toothpaste are Staple products and are, used almost everyday in every household. Impulse products are products that are bought quickly i.e., without any planning or search effort, like chocolates, magazines. These products are usually displayed widely so that customers become attracted to such products i.e., they decides to buy on sight. Emergency products are purchased when a need is urgent. Buyers’ intent is for buying a solution than buying the right quality or image-related product. The purchase of a bandage when someone has cut or injured, or buying umbrellas in the middle of summer when an unexpected downpour occurs, constitute emergency products. Manufacturers place such products in the outlets where customers are likely to experience an urge or need to purchase. Marketing strategies for convenience products mainly focuses on intensive distribution, through long channels, as the products are purchased frequently. If consumers don’t get the required product from the nearest source, they will buy the substitute products. Companies image through promotional technique is more important as customers prefer branded and packaged products. As margin of profit is less, responsibility of advertising falls on manufacturer. After sales services are usually not much required for such products.
• Shopping Products are those products for which the customer compares in terms of product characteristics such as suitability, quality, price and style during the process of selection and purchase. Examples include furniture, electrical appliances, jewellery and mobile Consumers give time and effort to plan these purchases as the level of risk is more substantial than that associated with convenience products. They will visit several stores and collect information about price, product and the experience of other customers. These products are usually less frequently purchased and the levels of loyalty of customers are quite low as they are happy to switch brands in order to get the level of functionality and overall value they need. Depending on what customers are comparing, shopping products could be divided into two categories.

1. 1. Homogeneous products are similar in quality but different enough in price to justify shopping comparison. Some customers find that certain variant of television sets, washing machines and even cars are similar in many respects and so they shop for the best price. Firms, though, try to emphasize and promote their product differences to avoid head-to-head price competition, but customers find the differences unreal in terms of value, and instead they decide to shop for price.
   2. Heterogeneous products are shopping products that customer sees as different and inspect for quality and suitability. Furniture, clothing, jewellery are good examples. The firms must carry a wide assortment to satisfy individual tastes and must have well-trained sales personnel to provide information and advice to customers. Marketing strategies for shopping products require more personal selling effort as these are less frequently purchased items. Customers are more interested in the hidden characteristics of the product, which could be effectively done through selective distribution strategies. Also, dealer’s image is more important as compare to packaging and branding. Such products carry high margin of profit therefore advertising responsibility falls on the dealer. Promotional tools like after-sales services play an important role in order to create confidence and overall sense of value in the purchase.

• Specialty Products are those having unique characteristics and brand identification and there is a significant group of buyers who is habitually willing to make a special purchasing Shopping for a specialty product doesn’t mean comparing the products; instead the customer wants the product and is willing to search for it. It’s the customer’s willingness to search, not the extent of searching that makes it a specialty product. Designer dresses, Mercedes or any other convenience or shopping product can become specialty product for a customer. Brands usually achieve that level of brand loyalty in the minds of the customers that they are not willing to accept its substitutes. Marketing strategies to support specialty products focus heavily on sustaining the quality as customers are loyal towards the product, even a slight displacement from the quality could lead to loss of customers. Limited distribution and advertising is required to establish the brand name and values. Product warranty and product support services play an active role.
• Unsought Products are those products that the customers do not know about or normally know about but do not think of buying. Air purifiers and insurance policies are unsought goods until the customers realize their importance through informative There could be a need for the product, but potential customers do not feel motivated to buy them, and in such cases personal selling is an important to bring desired persuasion for such products. Many non-profit organizations try to sell their unsought products. Red Cross regularly holds blood drives to remind prospective donors of how important it is to give blood.

Industrial Products Classification: Industrial products could be classified in terms of their relative cost and how they enter into the production process:

• Raw Materials and Parts are products that enter the manufacturer’s product completely. Raw materials either a farm product or a natural product.

1. 1. Farm products are grown by farmers, such as fruits, vegetables, wheat, and livestock. These products are provided to marketing intermediaries for assembling, grading, warehousing, transportation and selling purposes. Such products do not require much advertising but sometimes commodity groups launch campaigns to promote their For example: National Egg Coordination Committee periodically undertakes promotion campaign like “Sunday ho ya Monday roz khao ande”, for increasing egg consumption by educating customers about the nutritional value of eggs.
   2. Natural products are such as coal, timber, fish, crude petroleum are given by the nature and are limited in supply. Usually producers often market them directly to industrial users, where price, delivery, and reliability influence the selection of supplies in their case: Components such as wire, plastic, or textiles are finished (or nearly finished) items that are ready for assembly into final product. Quality is an important consideration in the case of components because they become part of the firm’s own product and these are also often produced in large quantity to meet standard specifications. Branding and advertising are, therefore, less important as a strategic decisions.

• Capital Goods are long lasting goods that facilitate developing or managing the finished product. They include installations and equipment:

1. 1. Installations, such as buildings, land rights are usually bought directly from the producer through sales force after long Suppliers sometimes provide installation of the equipment as special services with no extra cost. In the case of dentists, for example, the firm that sells (or leases) equipment to dentists, may install it and help dentist learn to use it.
   2. Equipment includes hand tools, lift trucks, personal computers, desk don’t become part of a finished product. Equipments are usually sold through intermediaries as markets are geographically dispersed, buyers are numerous and orders are small. Sales force is more important than advertising and features, price, and service are major considerations.

• Supplies and Services are the goods and services that are required on continuous basis to facilitate developing or managing the finished product. Supplies include maintenance, repair items and operating supplies. Supplies are equivalent to convenience products as they are usually purchased with minimum effort. Such products are marketed through intermediaries because of low unit value and large number of geographically dispersed customers. Price and service are important considerations because supplies are standardized and brand preference is not Maintenance and repair services such as window cleaning, copier repair, legal advice are usually supplied under contract by small producers or from the manufacturers of the original equipment. Supplier’s reputation and personnel are important considerations.

5. Product Mix Decisions

The set of all products and items that a particular seller offers for sale to buyers is referred as product mix, also called a product assortment. For example, Hindustan Unilever’s product mix comprises of bath soaps, fabric wash, beverages, beauty products, deodorants, food items, etc.

A company’s product mix has four important dimensions: width, length, depth and consistency. Product mix width is the number of different product lines offered by the company such as HUL product mix width ranges from personal care, home care to food items. Product mix length means the total number of items in the product mix, such as HUL offers personal wash, skincare and cosmetics, hair care, deodorants, oral care, within personal care. Product mix depth refers to the number of versions offered of each product in the line, such as Lux soap comes in several variants like strawberry and cream, peach and cream, purple lotus and cream, Lux International, and in different sizes. They also offer Lux soap bar and liquid wash. Finally, the product mix consistency is how closely related the various product lines are in terms of their end use, production requirements, distribution channels or some other way. HUL offer consistent product lines as far as FMCG products are concerned as they go through the same distribution channels, although these product lines are less consistent in the functions they perform for buyers.

5.1 Product Line Decisions

A group of products that constitute the product line are closely related in terms of their functional performance, their customer groups, their channels of marketing, or their price range. Any change in product line changes the product mix and vice versa. For example, in fast moving consumer goods range, ITC’s product line varies from food, cigarettes, lifestyle and retailing, education and stationery, personal care, safety matches to agarbatti. Product-line managers need to know the sales and profit of each item in their product line so as to determine which items in the line are to build, maintain, harvest or divest⁵. They also need to understand each product’s market profits.

5.2 Product Item

Product item means a specific version of a product that has a separate designation in the seller’s list. It refers to a specific model, brand or size of a product that a company sells, such as Dove soap is a product item of HUL within the product line of bathing soaps.

Marketers constantly need to appraise their product lines for successful implementation of the marketing strategy. They critically assess the performance of the products against the targets set for them. They also need to keep the products in the line growing i.e., to fight saturation of sales from a given product line or product item. Marketers add new items to the line by adding new brands, brand extensions, variants through new colors or pack sizes, new product forms. They may also trim the product lines by withdrawing certain items as and when found necessary.

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