Module 2: Product Planning & Development

MEANING/DEFINITION OF PRODUCT

1. According to Philip Kotler,

“A product is anything that can be offered to a market for attention, use,
acquisition or consumption that might satisfy a want or need.”
2. According to Skinner,
“A product is any good, service or idea that satisfies a need or want and can be
offered in an exchange.”
In simple words, a product is not only a physical good but also includes
services, ideas, experiences, places and organizations that provide value to
customers.

TYPES OF PRODUCTS

A. Based on Tangibility
1. Tangible Products
Physical goods that can be seen and touched.
Example: Mobile, car, clothes.
2. Intangible Products (Services)
Cannot be touched but provide value.
Example: Banking, insurance, education.

B. Based on Functions
1. Durable Goods
Used for a long time.
Example: Refrigerator, car.
2. Non-Durable / Consumable Goods
Used once or quickly consumed.
Example: Food, soap.
C. Based on Price & Quality
1. Mass Products
Produced in bulk, low price, for general public.
Example: FMCG goods.
2. Premium Products
High quality and high price for niche customers.
Example: Luxury watches.
D. Based on Utility
1. Form Utility
Form utility is created when raw materials are converted into finished goods
that are more useful to consumers.
Example:
Cotton is converted into cloth.
Cloth is converted into ready-made garments.
2. Time Utility
Time utility is created by making a product available at the right time when
consumers need it.
Example:
Raincoats during monsoon.
Air conditioners during summer.
Umbrellas during rainy season.
3. Place Utility
Place utility is created by making goods available at a convenient location for
consumers.
4. Possession Utility
Possession utility is created when ownership of the product is transferred from
seller to buyer.
It is created through the process of selling, credit facilities and easy payment
options.
3. Consumer Goods
Goods purchased for personal use.
1. Convenience Goods – Frequently purchased. (Bread, milk)
2. Shopping Goods – Compared before buying. (Clothes, electronics)
3. Specialty Goods – Unique with brand loyalty. (Luxury cars)
4. Unsought Goods – Not normally planned to buy. (Insurance)

4. Business / Industrial Goods

These are goods purchased for business use or for producing other goods.
1. Raw Materials – Basic materials used in production (cotton, iron ore).
2. Spare Parts – Components used in machinery repair.
3. Installations – Heavy machinery and large equipment.
Equipment – Tools and machines used in operations.

4. Supplies – Short-term goods used in daily operations (stationery, cleaning

material).

PRODUCT LIFE CYCLE (PLC)

The Product Life Cycle (PLC) shows the different stages a product passes
through from its introduction into the market until
its decline.
The diagram is represented by a curve plotted
on two axes:
• X-axis (Horizontal axis) → Time
• Y-axis (Vertical axis) → Sales
The curve typically has four stages:
Introduction → Growth → Maturity →
Decline
 1. Introduction Stage
• Product is launched.
• Sales are low.
• Heavy promotional expenses.
2. Growth Stage
• Sales increase rapidly.
• Profits rise.
• Competitors enter the market.
3. Maturity Stage
• Sales reach peak.
• Market becomes saturated.
• Intense competition.
• Profits start stabilizing or declining.
4. Decline Stage
• Sales fall.
• Demand reduces due to new technology or changing tastes.

FACTORS AFFECTING PRODUCT LIFE CYCLE (PLC)

The length and shape of the Product Life Cycle depend on various internal
and external factors. These factors determine how long a product stays in
each stage.

1. Rate of Technological Changes

Rapid technological advancements can shorten the life cycle of a product.
Example:
Smartphones, laptops, and electronic gadgets have short life cycles because
new versions are launched frequently with advanced features.
2. Rate of Market Acceptance
 Market acceptance refers to how quickly consumers adopt a new product.
Example:
Online payment apps saw rapid market acceptance, leading to quick growth.
But electric vehicles initially faced slow acceptance due to high cost and
infrastructure issues.
3. Entry of Competitors
When a product becomes successful, competitors enter the market.
Increased competition:
• Reduces market share
• Increases price competition
• Leads to product differentiation
4. Economic and Managerial Forces
Economic conditions such as inflation, recession, purchasing power and
income levels influence product demand.
During recession:
• Demand decreases
• Sales decline faster
5. Risk Bearing Capacity
Risk bearing capacity refers to the ability of a company to handle financial
losses and uncertainty.
Companies with high financial strength can:
• Invest heavily in promotion
• Improve product features
6. Government Policy
Government policies directly impact product performance.
Factors include:
• Taxation policies
• Import/export regulations
 • Environmental laws
• Safety standards
• Subsidies

NEW PRODUCT
A new product is a product that is newly introduced into the market or
significantly improved to satisfy consumer needs better.
A new product does not always mean something completely original. It can also
be an improved or modified version of an existing product.

Make or Buy Decision

When developing a new product, a company must decide whether to:
Develop internally (Make)
OR
Acquire externally (Buy)
1. Make (Internal Development)
Advantages:
• Full control over product
• Better protection of trade secrets
• Stronger brand identity
• Higher long-term profits
Disadvantages:
• High cost
• Time consuming
• High risk of failure
Large companies with strong R&D departments prefer this option.
2. Buy (Acquisition or Licensing)
The company purchases the product idea, patent, technology or even acquires
another company.
Advantages:
• Saves time
• Reduces development cost
• Faster market entry
• Lower uncertainty
Disadvantages:
• Less control
• Dependency on external party
• Licensing fees or acquisition cost

STAGES OF NEW PRODUCT

DEVELOPMENT
New Product Development (NPD) is a systematic
process through which a company develops and
launches a new product in the market.
The major stages are as follows:

Stage 1: Idea Generation

This is the first and most creative stage of product
development.
Sources of ideas include:
• Customers (feedback, complaints, suggestions)
• Employees and R&D team
• Competitors’ products
• Market research
Stage 2: Screening
In this stage, weak, impractical or unprofitable ideas are eliminated.
The company evaluates ideas based on:
• Cost feasibility
• Technical feasibility
• Market potential
Stage 3: Concept Testing
Here, the selected idea is presented to a small group of potential customers in
the form of a product concept.
A product concept is a detailed description of the idea in terms of features,
benefits and target market.
Feedback is collected to understand acceptance.
Stage 4: Business Analysis
At this stage, the company evaluates the financial viability of the product.
The company estimates:
• Expected sales volume
• Cost of production
• Marketing expenses
Stage 5: Product Development
Now the idea is converted into a physical product.
The company develops:
• Prototype
• Product design
• Packaging
• Brand name
Stage 6: Test Marketing
In this stage, the product is launched in a limited geographic area or selected
market.
The company evaluates:
• Consumer reaction
• Sales performance
• Competitor response
Stage 7: Commercialization
This is the full-scale launch of the product in the market.
Major decisions taken at this stage include:
• Pricing strategy
• Distribution channels
• Promotional campaigns
• Production volume
Stage 8: Review (Post-Launch Evaluation)
After commercialization, the company continuously monitors product
performance.
They evaluate:
• Actual sales vs expected sales
• Customer feedback
• Market share
• Profit levels

FACTORS AFFECTING NEW PRODUCT

DEVELOPMENT
The success of a new product depends on various internal and external factors.
1. Cost
Cost is one of the most important factors in new product development.
Before developing a product, the company must evaluate:
• Research and development cost
 • Production cost
• Marketing and promotion expenses
• Distribution cost
2. Ergonomics
Ergonomics refers to designing products that are comfortable, safe and easy to
use.
A product may be technically advanced, but if it is difficult to handle or
uncomfortable, customers will reject it.
3. Materials
The availability, quality and cost of raw materials directly affect product
development.
Example:
Using premium leather increases product quality but also raises price.
4. Customer Requirements
A product must satisfy the needs, preferences and expectations of customers.
Understanding customer requirements involves:
• Market research
• Surveys
• Feedback analysis
• Studying buying behavior
If a product does not solve a real problem or meet a genuine need, it will fail.
5. Company Identity
Every company has a brand image and positioning in the market.
The new product must align with the company’s identity and values.
Example:
A luxury brand cannot suddenly launch low-quality budget products without
damaging its reputation.
6. Aesthetics
Aesthetics refers to the appearance, style and design of the product.
Attractive design increases emotional appeal and influences buying decisions.
In many markets, appearance matters as much as functionality.
7. Fashion
Fashion and trends play an important role in product development, especially in
industries like clothing, electronics and automobiles.
Consumer preferences change rapidly.
Companies must stay updated with current trends to remain competitive.
8. Culture
Cultural values, beliefs and traditions influence consumer behavior.
A product that works in one country may not succeed in another due to cultural
differences.
9. Functions
The primary purpose of any product is to perform its intended function
effectively.
No matter how attractive a product looks, if it does not function properly, it will
fail.
10. Environment
Environmental factors include:
• Government regulations
• Pollution control norms
• Sustainability concerns
• Eco-friendly production

CAUSES OF PRODUCT FAILURE

Even after following all stages of development, many products fail in the
market. The major causes are as follows:
1. Inadequate Market Research
Market research helps companies understand customer needs, preferences,
purchasing power and competition.
If research is incomplete or inaccurate:
• The product may not match customer expectations.
• The target market may be wrongly identified.
• Pricing may be inappropriate.
2. Product Defects
If a product has quality issues, technical problems or performance defects,
customers quickly lose trust.
Defects may include:
• Poor durability
• Safety issues
• Design flaws
• Malfunctioning features
3. High Cost
If the product is priced too high compared to competitors or customer
expectations, demand decreases.
High cost may be due to:
• Expensive raw materials
• High production cost
• Inefficient operations
4. Poor Timing
Timing plays a crucial role in product success.
5. Strong Competition
Entering a market with strong established competitors can be risky.
Competitors may have:
• Strong brand loyalty
 • Better pricing
• Wider distribution network
6. Insufficient Marketing Efforts
Even a good product needs proper promotion.
Failure may occur due to:
• Low advertising budget
• Weak promotional strategy
• Poor brand positioning
• Lack of awareness among customers
7. Low Sales Volume
If sales volume remains below expectations:
• Production cost per unit increases
• Profits decline
• Company may discontinue the product
8. Weak Distribution Network
Distribution ensures product availability at the right place and time.

Even high demand cannot generate sales if the product is not easily available.
Availability drives purchase.