Need of Line Extensions

Need of Line Extensions:
Line extensions strategy has enjoyed considerable  support of the managers. In most of the product categories including fast moving consumer goods, consumer durables and services, line extension lias been the name of the game. It is an expansionist move.The firms seem to seek growth more vigorously. What lies behind the aggressive pursuit of line extensions? The following nine prominent reasons could be identified as to why firns seem to favour line extensions are as follows:

1. Customer Segmentation:
The key difference between the marketing of the past and today is that customer aggregation is becoming more and more difficult to hold and operate upon. Marketers are forced to climb down from mass marketing orientation to individual customer orientation.

That is,aggregate markets are now getting manifest into finer segments. It is relatively easier now to find segments on a more sophisticated basis. The marketing research allows so, and advances in marketing techniquwa allow easy operations of the same. In such a scenario, marketers by line extensions. Line extension is a low cost and low risk strategy to more effectively meet the needs of customer segments.

2. Customer Need for Variety:
The emergent market conditions are at work to promote consumer promiscuity (consumer buying behavior marked by an absence of brand loyalty). product standardisation, and consistency in quality, is encouraging customers to try new products or brands. It is the result of a desire to get stimulations and break away from boredom.

3. pricing Breadth:
Some time ago, Videocon launched 'Bazoomba' and BPL launched its 'QPF' series. What does this indicate? This show marketers desire to move up the customers to a higher price point. Such a move allows the firm to generate more sales and profit per customer. The conditions propelling (forcing) these extensions are the slowing down of volume growth in the color television market.

4. Capacity Utilisation:
Sometimes, firms are driven by the economic logic of building plant capacities which are efficient or world class, The investment in plant increases the fixed cost of operations. Accordingly, pressures emerge to maximize plant utilisation in order to quickly recover the fixed costs and achieve efficient cost of operations. Sometimes marketers may seek refuge in extensions as a means of utilising excess capacity. By effecting minor changes in the product and plant, the company can substantialy improve its capacity and make up for the high fixed cost element in its operations.

5. Quick Gains: 
Line extensions provide an opportunity to achieve quick gains in sales performance. Launching a new brand may cost a firm five to six times the amount needed to launch an extension. Moreover, creation involves a lot of uncertainty and risk. It is a long drawn out process. Hence, managers see line extensions as a vehicle to generate more sales quickly and relatively inexpensively. The path of line extension is far more predictable. Unlike brand creation, lien extensions depend less on cross functional integration.

6. Competitive Reasons:
A marketer with a more extensive product line up is usually in a better position to get access to the shelf space. This is the case with Hindustan Lever. One walks into any store and discover how much retail space is occupied by a brand which offers a number of variants  in different forms, shapes, sizes and flavours. This obviously comes at to the expense of the competition: 

7. Trade Demands:
Marketing environment has seen the emergence of new forms of trade partners and retail channels. The trade partners often exert pressures on marketers to extend the line by developing products which  meet their unique marketing strategy needs. They may place demands for bulk-packages, multi-packages, customised and derivative models.

8. Counter Competition:
Sometimes a firm may be forced to extend the line because of competitive conditions. That is, extending the line may become imperative to counter competition. 

9. Image Benefits:
Line extensions can recharge the image of the brand. If there is danger associated with unbridled extensions, there are gains which could be reaped by careful extensions. There is very real opportunity to build a positive image and renew it. A well-managed extension can bring enormous benefits.

Types of Product Modification

Types of Product Modification:
 the object of product modification is either to stimulate new sales or to attract new users. In the case of a firm with an uneven new product line, modification can be justified as a viable alternative to developing new products. This approach is less expensive and often shows a high rate of success. The modifications are generally grouped into the following categories.

1. Functional Changes:
All changes which make the product work better or satisfy additional needs are known as functional changes. Sometimes, the right change can bring a big jump in the product sales. While proposing functional changes, a company should consider the cost of changes and whether the changes will appeal to a broad segment of the market.

2. Quality Changes:
A product quality can be changed either by introducing changes in the materials from which it is constructed or by modifying the engineering process. There are two types of quality changes:
i) Upgrading : When the quality of product is made more attract a more sophisticated market, it is known as upgrading.

ii) Downgrading: On the other hand, downgrading, the quality of products involves lowering the price of the product to serve lower income groups.

3. Style Changes:
When the appearance of the product is changed, it is known as style change. Although changes is style have no effect on the performance of a product, they often have visible effect on the reaction of the consumers.

4. Environmental-Impact Changes:
Such changes are generally carried-out on account of the consumers pressure or the firm's commitment to social responsibility. These changes either improve a product's safety or lessen its impact on the environment.

Classification of products

Classification of products:
Products and services fall into two broad classes based on the types of consumers that use them

A) Consumer Product:
"Product bought by consumer for personal consumption" Its includes or consumer products divided into four classes.

i) Convenience product:
Consumer product that the customer usually buyers frequently, immediately, and with a minimum of comparison and buying effort consumer products can be divided further into staples, impulse products, and emergency products. Staples Products are those product that consumers buy on a regular basis, such as ketchup, tooth path etc.,

ii) Shopping product:
Consumer good that the consumer, in the process of selection and purchase, characteristically compares as such bases as suitability, quality,price, and style.
Example: furniture, clothing,sued cars, major appliances and hotel and motel services.

iii) Specialty products:
Consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. e.g. Specific brands and types of cars, high-priced photographic equipment, designer clothes etc.

iv) Unsought Products:
Unsought products are consumer products that the consumer either does not knows about or knows about but does not normally think of buying.
 
B) Industrial Product
Industrial Goods:
While a consumer goods classification system is useful for developing effective marketing mixes, an industrial goods classification is even more valuable. In the family, even allowing for the growing importance of husbands and children, the wife is the prime buyer; she buys all types of goods.

But is an industrial plant, there are a number of buying influences, depending mostly on the product but partly on the company involved. While most purchases are made by a purchasing agent, the major influence may be exerted by the office manager, plant foreman or the executive group.

Industrial Goods Classifications:
Industrial goods buyers do relatively little shopping as compared with consumer goods buyers. The accepted practice is for the seller to come to the buyer. This means that a product classification system based primarily on shopping behavior is not appropriate.

The industrial goods classification we will use is determined by how buyers look at products. Our  categories are:

i) Installations:
Installations are large and expensive items which do not become a part of the final product, but instead are used up over many years. All installations are capital items. They represent major expenditures for the company and are depreciated over a period ranging from 2 or 20 or more years.
There are two major classification of installations  buildings and land rights and major equipment. Buildings and land rights include factories, warehouses, barns, retail stores, office buildings, wheat fields, deposits, timber rights, etc.

ii) Accessory Equipment:
Accessory equipment (like installations) does not become a part of the final product. These products are usually less expensive and shorter lived than installations, but still are capital items.
Actually, accessory equipment is very similar to the smaller standard installations.

iii) Raw Materials :
Raw materials are those products which have undergone no more processing than is required for convenience, protection or economy in storage, transportation or handling. In contrast with our first two categories, they become part of the physical product.

iv) Component parts and Materials:
Component parts and materials (like raw materials) become a part of the finished product. Both are treated as expense items and have somewhat similar characteristics. These, however, undergo more processing than is required for raw materials.

v) Supplies: 
Supplies (like raw materials and component parts and materials) are continually used up in a company's operation. Because of this, they are expense items. Unlike the previous two categories of products, however, supplies do not become apart of the physical product.
Supplies may be divided into three categories:
Maintenance,
Repair,
Operating supplies.
 

Features of Product

Features of Product:

1. Tangibility:
It should be perishable by the touch. An item to be called a product, should have a tangibility character touch, seen or feeling. For instance, car shirt, book etc.

2. Intangible Attributes:
Such attributes may be, brand, package, warranty. For instance. banking insurance services, repairing etc, It is an associated feature. For instance,scooter is a tangible product and when free servicing is offered by seller, then the product is only a stainable item but also an intangible one. 

3. Associated Attributes:
Such attributes may be, brand, package, warranty, For instance Hindustan Lever vanaspati ghee has a brand name dalda and with is package it can be identified by the consumers.It has a developed an image that all kids of vanaspati . ghee sold are being referred to as dalda ghee.

4. Exchange value : 
Whether the  product is tangible or intangible ,it should have exchange value and must be capable of being exchanged  between seller and buyer for mutually agreed price.

5.  Consumer Satisfaction: 
Product should have the ability to offer value satisfaction to the consumer .The satisfaction may be both real and psychological .  

Concept of Product

Concept of Product:
Product is a complex of tangible and intangible attributes, including packaging, color, price, manufacturer's prestige, retailer's prestige and manufacturer's and retailer's services which the buyer may accept as offering satisfaction of wants or needs. product planning embraces all activities which enable producers and middlemen to determine what should constitute a company's line of products. Ideally product planning will ensure that the full complement of a firm's products that are logically related, individually justifiable items, designed to strengthen the company's competitive and profit position.

Meaning of Product:
Product is anything that can be offered to a market that might satisfy a want or need. There are two concepts of product narrow concept and wide concept. 
In its narrow concepts a product is a bundle of physical or chemical properties which has some utility. A product is not a non-living object; it is not a mere assemblage of matter - physical and chemical. Utility alone is not the function of the product. 
A product means an object which satisfies the need of the customer. Thus fan, table , pen , cooler, chair etc. are products. In its wider concept, all the brands, all the colours all the packaging or all the designs of a product is taken to be different products.

 Definitions of Product:

"According to George Fisk",
product is a cluster of psychological satisfactions.

"According W.Alderson",
A product is a bundle of utilities consisting of various features and accompanying service.