30 Product Planning and Analysis

Kulbhushan Chandel

1. Learning Outcome:

After completing this module, the students will be able to:

Learn about the concept of product
Explain the product mix
Understand the process of product planning
Learn about product analysis
Learn about the product controlling

2. Introduction:

Varied new ways of marketing have emerged in the market with the globalisation and advancements in the technology. Marketing is the process of ascertaining customer needs, converting them into the products and finally selling them to the desired customers and users to satisfy the needs and wants. These are product, price, place, promotion. Product is the chief component which is exchanged between the two parties of the marketing.

3. Meaning of Product:

Product refers to tangible and intangible goods like physical objects, services, events, persons, places, organisations, ideas and combination of these. For example, washing machines, soaps, exhibitions, business schools, etc. Services are the form of activities that consists of activities, benefits that are offered for sale and are essentially intangible. It is very vital that whatever is produced, it must be according to the preferences and demands of the customers as customer is the king of the market. Product can be in the form of raw material, work in progress and finished product.

Definitions of Product:

According to W. Alderson, “A product is a bundle of utilities consisting of various features and accompanying services.”

According to Philip Kotler, “A product is anything that can be offered to a market for attention, acquisition and consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organisations and goals.”

4. Characteristics of Product:

For being called as a product, it must contain some features. To have clear cut understanding of the product concept, it is necessary to identify the basic characteristics of the product which are as follows:

A product must be tangible one; it means the product should have its own size, shape, colour, weight, length, etc.
Product should have a physical appearance. It can be seen or touched.
A product is accompanied with the various services also. Whether these services are provided before sale or after sale. Before sale of product, the services provided are like demonstrating the product to the customer, explaining its usage method, etc. And after sale services are guarantee, warranty, delivery of product, etc.
A product must contain a label. Labelling helps the seller to identify the product and moreover a label provides detailed information about the product to the customer.
A product should be properly packed in the package.
Packaging helps the customer to identify the brand name of the product.

5. Product Planning:

Product planning is the systematic determination of the manufacturer’s product-line. Product line refers to the variations in the products which are offered in the market for the sale. It comprises of two words, product and planning. Product refers to all goods and services that satisfy the consumers and planning refers to looking in the future. Thus, product planning includes all those activities which decides that which products of a company should be offered to the market for sale so that in spite of acute competition in the market which can be sold profitably. Product planning is a process of searching new ideas to produce and launch a product in order to earn the higher profits. It is further concerned with monitoring the ideas systematically, converting them into tangible products and introducing the new product in the market for the use. It also comprises of formation of policies and strategies. It includes improvement and expansion in the existing products. Product planning is a complex process and requires effective coordination between different departments of the organisation.

5.1 Significance of product planning :

Product planning is important function due to following reasons:

It involves decision making regarding the product and its attributes as all P’s of marketing mix depends upon the product.
It ensures profitability of the business firm. For this the business carries research work along with the product modifications from time to time so as to increase its sales and customer satisfaction.
Performing product planning symbolises managerial ability and it helps the company in facing challenges.
It can be used as a competitive weapon by making proper decisions regarding the product attributes, prices, customer service, techniques, etc.
It is an important means to fulfil social responsibilities of the firm.

5.2 Objectives of Product Planning:

Product planning is required for the following reasons:

To meet customer needs.
To ensure proper and optimum utilisation of resources.
To increase firm’s sales.
To employ surplus funds or borrowing capacity.
To diversify risks and face competition.

Product planning answers following questions:

6. Process of product planning

New product development is a growth strategy because of the heavy role which the marketing plays in finding, development and launching of new products successfully. New products can be product modifications and new brands which the company develops through its own R&D efforts. A key factor in effective new product development process is to establish workable organisational structures. The process is as follows:

6.1 Idea Generation: the new product development process starts with the search of new idea. The top management defines the markets and the products to be emphasised. It should state the new product objectives and should state how much effort should be devoted to development of original products, modifying existing products and imitating competitors’ products. New products ideas can be derived from many sources like customers, scientists, competitors, company’s sales people, dealers and top management. Idea generation includes techniques like forced relationships, problem analysis, brainstorming and synetics help in generating better ideas.

6.2 Idea Screening: the second stage is idea pruning or reducing by screening. In this stage, the company must avoid the drop error, i.e. permitting a poor idea to move into development and commercialisation or dropping a good idea. The purpose of screening is to spot and drop poor ideas as early as possible, and making rough guesses for market size, product price, development time and costs, manufacturing costs and rate of return.

6.3 Concept Development: surviving ideas must be developed into product concepts. A product idea is an idea for a possible product that the company can see itself offering to the market. A product concept is an elaborated version of the idea expression in meaningful consumer terms. Like producing any powdered item for putting in milk to change its flavour is a concept development.

EXAMPLE: Horlicks jar occupies an important position in the kitchens. Since, 1930’s it is one of the best known brands in the health food industry. It owes a success to a strong brand heritage, commitment to quality, focused communication, and a deep understanding of the consumer needs. The Horlicks product concept was developed by James Horlicks and his brother William in Chicago, U.S.

6.4 Marketing Strategy: The new product manager needs to preliminarily test the new product in the market. It will help in refinement of the product in further stages. The marketing strategy consists of three stages. The first stage describes the size, structure and behaviour of target market. In the second stage the product planned price, distribution strategy and marketing budget for the first year. The third part describes the planned long run sales, profit goals and marketing mix strategy.

6.5 Business Analysis: the next stage is the evaluation of the business attractiveness of the proposal. The management must review the sales, costs and profit rejections to determine the objectives. If this is done then the product moves to product development stage. With any new information, the necessary required changes are made. The management needs to estimate about the sales and this is done by estimating the first time sales and replacement sales and also repeat sales. After preparation of the sales forecast, the management estimates the costs and profits and this is done by R&D, manufacturing, marketing and finance departments. It is an in depth study of the economic feasibility of product ideas. It is assessing the profitability of a new product idea that helps management in deciding whether to introduce the new product, continue the development and the evaluation further or to drop the idea. It is the evaluation of product idea in depth to determine its financial, competitive, manufacturing and marketing viability in an accepted business environment.

6.6 Product Development: if the product passes the business analysis, then it moves to the R&D and engineering departments to be further developed into a physical product. This stage provides the answers for the product idea which can be translated into the technically and commercially feasible product. The R&D department develops one or more physical versions of the product. It helps to find whether the consumers see the product as embodying the main attributes of the product.

6.7 Test Marketing: after the management is satisfied that the product’s functions are proper, the n the product is considered to be ready for the dress-up with a brand name, packing, and a preliminary marketing programme. The main purpose of the test marketing is to learn how the consumers and dealers react to handling, using and repurchasing the actual product and how large the market is. The cost of marketing test may be enormous and take time that may allow competitors to gain advantage. If management is confident about the new product then the company may do little or no test marketing. Test marketing is an ultimate test to experience and experiment with actual selling and purchasing of the product.

Test marketing is done due to following reasons:

It helps the company to get knowledge about the potential market of the product.
It helps to pre test the marketing plans of the company.
It helps the company to get knowledge about the reactions of the customers.
It helps the company to find faults in the product.

6.8 Commercialisation: test marketing apparently gives the management necessary needed information to make a final decision about the launch of the product. In launching new product, the company makes the new decisions, like when the product be introduced, where should it be introduced and in which target market should it be introduced and how the company should introduce it.

7. Product Analysis:

Product analysis facilitates us to understand the significant materials, processing and economic decisions which are needed for manufacturing of any product. It is quite imperative to examine the product after disseminating the product. SWOT analysis can be used for the analysis of the product in a simple manner. Product analysis is done for the following reasons:

It helps in decision making.
It helps in formulation of the business strategies.
It also helps in facing competition.
It is helpful in making proper use of the various opportunities available.
It is helpful in minimising the weakness and maximising the strengths.
It is helpful in replacing the product whenever it becomes obsolete in the market.
It is helpful for the customers in deciding whether the product is worth buying or not.
It is helpful for the improvement in the product design.

Product analysis can be carried out by an individual product being analysed or by alternatively a number of similar products can be compared with each other using the same criteria.

8. Product Controlling:

Planning and controlling are corresponding to each other. Thus, they must go alongside. The process of controlling is also performed after making plans about the product so as to find out the deviations and taking corrective actions to control such variances. This function is performed by the Product Controller. He takes into consideration about the quality of the product, price of the product, quantity of the product, branding, packaging and labelling etc. The product controller also ensures that whether everything is in accordance with the rules and instructions and also he ensures effective utilisation of the resources. For effective utilisation of resources effective coordination and budgeting is needed. Moreover, proper evaluation of product must be done from time to time.

Process of Product Controlling:

The product controlling involves four basic steps. These are as follows-

Setting standards: The first and foremost step in controlling is establishing the standards. These are the measure against which the results are measured. These are the objectives to be achieved by the organisation. Product is made according to the standards so set. Standards are in terms of quantity, quality, price, size, features of the product.
Measuring Performance: After setting the standards. The actual performance is measured. It is checked whether everything occurs in conformity with the rules made and guidelines issued or not. Quality check is done at this stage. Furthermore, the features, requirements are measured. The actual performance is measured which must be similar to the units set.
Comparing Actual Performance with establishes set standards: The third stage is the stage of comparison. Here, the actual performance is measured with the established predetermined standards. By comparing the performance, deviations are found out. The deviations are the result of low performance than the stated performance. If the performance is up to the level of budgeted performance then the situation is regarded as favourable and everything is under control.
Corrective Actions: After finding the deviations, the last step is to take the corrective actions in order to solve the problems. The decisions are taken by the top level management. Corrective actions must be in the favour of the product and should not affect the product, its quality, prices and so on. It must be well balanced and over controlling should be ignored in order to accomplish the task and to achieve the respective objectives of the organisation.

9. Product Development:

Product development is the next step to product planning. It is the process of finding out the possibilities for producing a product. It is necessary to find out the technical and financial feasibility, sales potential and profitability of the product. Thus, it can be said that the product development is concerned with the development and commercialisation of new products.

According to William J. Stanton, “Product development encompasses the technical activities of product research, engineering and designing.”

Product development is concerned with the adding off new products, designing current products i.e. their shape, size, quality, and packaging should be improved. Product development is preparation of the product for the satisfaction of real needs of the market.

It provides various advantages to the enterprises. Some of them are as follows:

It helps in production of best quality goods and services.
It increases the life cycle period of the product.
It helps in facing the competition effectively.
It increases the profit earning capacity of the firm.
It helps in achieving stability in the demand of the products.

Product development is related with providing of right product at right time at right place, at right price and in right quantity.

Following are the three main elements of the product development:

Product Innovation: It is not merely confined to the change in physical shape of the product. Thus, product innovation is concerned with generating ideas of new products and developing various models through research and development.
Product Improvement: It is concerned with the changes in the quality, variety, shape and size of the product. The prime objective of product improvement is to increase the variety of product, to earn maximum profits through the increase in sale with the help of technical improvements in the product.
Packaging Improvement: It is considered as the main element of product development. It includes decisions regarding changes in physical design of the package i.e. its shape, size, material colour combination, etc.

10. Summary:

Product is one of the important components in the marketing mix. It a physical thing or intangible service provided by the seller to the buyer according to his demand and need. Product so made must be of good quality and affordable price. Products should be saleable in order to get the higher profits. Moreover, in the today’s world, consumers are more aware of their duties and rights, so now days whatever are produced it is according to the customers need and preference. In order to launch a product in the market, a planning process is followed which involves various steps from idea generation to the commercialisation. Product planning is the systematic determination of the manufacturer’s product-line. Product line refers to the variations in the products which are offered in the market for the sale. It comprises of two words, product and planning. Product refers to all goods and services that satisfy the consumers and planning refers to looking in the future. Thus, product planning includes all those activities which decides that which products of a company should be offered to the market for sale so that in spite of acute competition in the market which can be sold profitably. Product planning is a process of searching new ideas to produce and launch a product in order to earn the higher profits. It is further concerned with monitoring the ideas systematically, converting them into tangible products and introducing the new product in the market for the use. Planning and controlling are corresponding to each other. Thus, they must go alongside. The process of controlling is also performed after making plans about the product so as to find out the deviations and taking corrective actions to control such variances. This function is performed by the Product Controller. He takes into consideration about the quality of the product, price of the product, quantity of the product, branding, packaging and labelling etc. The product controller also ensures that whether everything is in accordance with the rules and instructions and also he ensures effective utilisation of the resources. For effective utilisation of resources effective coordination and budgeting is needed. Moreover, proper evaluation of product must be done from time to time. Product development is concerned with the adding off new products, designing current products i.e. their shape, size, quality, and packaging should be improved. Product development is preparation of the product for the satisfaction of real needs of the market.

Suggested Readings (Books and Websites)

Ghosh PK, Sales Management- Text and Cases, Himalaya Publishing House, 2010.
Jobber David and Lancester Geoff, Selling and Sales Management, Pearson Education, Sixth Edition.
McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.
Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann.
Kotler, Philip (2012). Marketing Management. Pearson Education. Kotler, P. and Keller, K. (2006), Marketing and Management, Pearson Prentice Hall, Upper Saddle River, NJ, USA
McCarthy, Jerome E. (1975)”Basic Marketing: A Managerial Approach,” fifth edition, Richard D. Irwin