This part includes product classification, product mix, product line , product life cycle and pricing policy,

2. PRODUCT POLICY
Product policy is concerned with defining the type, volume and timing of
products a company offers for sale. The product policies are general rules set
up by the management itself in making product decisions. Good product
policies are the basis on which the right products are produced and marketed
successfully.
A product policy generally covers :
 Product Planning and Development
 Product Line
 Product Mix
 Product Branding
 Product Positioning
 Product Packaging

5. 1. Convenience Goods
Products that users buy as a routine matter for their
daily life usage are convenience products. These are
bought by the customer just habitually without having
a thought for an alternative option. In fact, these are
mostly low-cost items; hence there is hardly any
difference between different brands. Resultantly
customers keep on buying the same brand over and
over without considering any other brand.
Items of daily usage such as Soap, Coffee, Candy,
toothpaste, etc. may be categorized under this type.
Since these products are of low-cost category, most

6. 2. Shopping Goods
Just opposite to Convenience Goods, Shopping
Goods are the products that carry relatively high
costs, such as house, car and clothing, etc.
Customers spend a little time on research and
analysis while buying such products. Not only the
price matters here, but at the same time brands and
manufacturers also have to be compared before
reaching a final decision.
As such the companies and manufacturers pay a lot
of attention to the quality and durability of their
products that can justify the price paid by the buyer.
Here the producer has to keep a balance in quality
and pricing. A product with almost the same quality

7. 3. Specialty Goods
 This is a unique group of products. Price and
quality don’t matters here; the only thing that
matters is the uniqueness of the product and
loyalty of the customers. The iPhone users will
always buy an iPhone and a Ferrari rider will go
for it all the time without considering anything
else.
 What matters here is only the specialty of the
product. Since price does not have any impact,
the producer has to focus only on the ever-
increasing trust and loyalty of the customer, for
which a consistent improvement in the product
is required. Above all, a sense of status
consciousness is also associated with this

8. 4. Unsought Goods
 Products which are so innovative and out
of the box that customer never thinks
about fall under this category. Similarly,
products which do not fetch any attention
of the customers unless they are
compelled to buy one, also fall in this
category.
 You will never think of buying an insurance
policy unless a fear arises in your mind
about your life expectancy. Similarly, most
people don’t bother to buy a fire
extinguisher unless they are compelled to

9. Product Mix
 The product mix of a firm is crucial to understand as it exerts a
profound impact on a firm’s brand image. Maintaining high
product width and depth diversifies a firm’s product risk and
reduces dependence on one product or product line. With that
being said, unnecessary or non-value adding product width
diversification can hurt a brand’s image. For example, if Apple
were to expand its product line to include refrigerators, it would
likely have a negative impact on their brand image with
consumers. In regard to a firm expanding its product mix:
 Expanding the width can provide a company with the ability to
satisfy the needs or demands of different consumers and diversify
risk.
 Expanding the depth can provide the ability to readdress and
better fulfill current consumers.

11. Product Line
 A product line is a group of connected products
marketed under a single brand name by the same
company.
 Companies sell multiple product lines under their
various brand names, often differentiating by price,
quality, country, or targeted demographic.
 Companies often expand their offerings by adding to
existing product lines because consumers are more

13. Product Life Cycle
 The life cycle of a product is associated with
marketing and management decisions within
businesses, and all products go through five primary
stages: development, introduction, growth, maturity,
and decline. Each stage has its costs, opportunities,
and risks, and individual products differ in how long
they remain at any of the life cycle stages.

15. 1. DevelopmentThe product development stage is often referred to
as “the valley of death.” At this stage, costs are
accumulating with no corresponding revenue. Some
products require years and large capital investment
to develop and then test their effectiveness. Since
risk is high, outside funding sources are limited.
While existing companies often fund research and
development from revenue generated by current
products, in startup businesses, this stage is typically
funded by the entrepreneur from their own personal

16. 2. Introduction
 The introduction stage is about developing a market
for the product and building product awareness.
Marketing costs are high at this stage, as it is
necessary to reach out to potential customers. This
is also the stage where intellectual property rights
protection is obtained. Product pricing may be high
to recover costs associated with the development
stage of the product life cycle, and funding for this
stage is typically through investors or lenders.

17. 3. Growth
 In the growth stage, the product has been accepted
by customers, and companies are striving to
increase market share. For innovative products there
is limited competition at this stage, so pricing can
remain at a higher level. Both product demand and
profits are increasing, and marketing is aimed at a
broad audience. Funding for this stage is generally
still through lenders, or through increasing sales
revenue.

18. 4. Maturity
 At the mature stage, sales will level off. Competition
increases, so product features may need to be
enhanced to maintain market share. While unit sales
are at their highest at this stage, prices tend to
decline to stay competitive. Production costs also
tend to decline at this stage because of more
efficiency in the manufacturing process. Companies
usually do not need additional funding at this stage.

19. 5. Decline
 The decline stage of the product life cycle is
associated with decreasing revenue due to market
saturation, high competition, and changing customer
needs. Companies at this stage have several
options: They can choose to discontinue the product,
sell the manufacturing rights to another business that
can better compete or maintain the product by
adding new features, finding new uses for the
product, or tap into new markets through exporting.
This is the stage where packaging will often

20. Factors determining
Pricing Policy

21. Internal Factors
 (i) Organisational Factors:
In the organization pricing decision happens at two levels. At the higher level
management, decisions like price range and the pricing policies are decided.
 (ii) Marketing Mix:
 Pricing is only one element of marketing mix. All other elements hold equal
importance to the success of marketing strategies of the firm.
 (iii) Product Differentiation:
 Price of the product very much depends upon the nature and characteristics of the
product. A differentiated product with value added features like quality, size, color,
attractive packaging, different uses of the product, utility etc. always forces the
customers to pay more price as compared to any other product.
 (iv) Cost of the Product:
 Cost and price of a product are closely related and are independent. The firm must
decide a realistic price based on current demand, competition, buying capability, etc.
 (v) Objectives of Firm:
 Pricing contributes its share in attainment of the objectives of the firm. The firm may
have a variety of objectives including – sales revenue maximisation, profit
maximisation, market share maximisation, maximisation of customer value,
maintaining image and position, maintaining stable prices etc.

22. External Factors
External factors are those factors which affect all the
firms of a given industry almost uniformly and are usually
beyond the control of the firm.
They include:
(i) Demand:
Market demand of a product obviously has a major
impact over its pricing policy. If the demand is inelastic
then higher price may be fixed but if the demand is
elastic then prices must be competitive.
Demand is affected by factors like, number and size of
competitors, buying capability and willingness of
prospective buyers, their preferences etc.
(ii) Competition:
In a market with many competitors, prices have to be
competitive without compromising on the quality. But in a

23. External Factors (Contin…)
(iii) Supplies:
If prices of raw material goes up then the price of
finished goods are bound to go up. Also suppliers pricing
policy has a direct impact on the prices. Scarcity or
abundance of raw material will also determine its prices’
thereby affecting the overall price.
(iv) Economic Conditions:
Overall economic conditions have a very important role
to play in the pricing decision. During recession prices
have to be reduced considerably to sustain. On the other
hand, during boom time, prices can be increased to reap
the benefits of improved economy.
(v) Buyers:
The nature and behaviour of buyers will also have an
influence on the pricing decisions. Their buying
capability and willingness to pay a certain price cannot
be ignored by the marketer.