Summary
A product is anything that can be offered to a consumer market and satisfy a need. There are five levels of the product: core benefit, basic product, expected product, augmented product and potential product. Three classifications of products are durability, tangibility and use. To be branded, products must be differentiated. Physical products are packaged, labeled, have well designed packages, come with a warranty or guarantee. Companies must be consistent in new product innovation. The innovation process is the idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, market testing and commercialization. All products advance through a product life cycle consisting of the introduction stage, growth stage, maturity stage and finally, the decline stage.
A. Product Characteristics and Classifications
1. A product is anything that can be offered to a market to satisfy a want or a need.
2. Examples of products are physical goods, services, experiences, events, persons, places, properties, organizations, information and ideas.
3. A marketer of products needs to address five product levels, each one adding more customer value: 1) core value, 2) basic product, 3) expected product, 4) augmented product, and 5) potential product. Marketers classify products based on durability, tangibility and use. Each type has a marketing mix strategy. Durability and tangibility – nondurable goods are tangible goods that are consumed in just a few uses and repurchased frequently. Durable goods are tangible goods that survive many uses, such as appliances. Services are intangible. Consumer-goods classification – classified according to shopping habits such as convenience, shopping, specialty and unsought goods. Industrial goods classification – materials and parts that enter a product completely and may be raw materials or manufactured materials. Capital items are long-lasting goods that are used to make the finished products.
B. Product and Services Differentiation
1. To be branded products must be differentiated. Some only offer a minimal amount of differentiation and others are capable of high differentiation.
2. Low differentiated products are chickens, aspirin and steel. Examples of high differentiated products are furniture and automobiles.
3. Marketers have many possibilities for differentiation including form, features, customization, performance quality, conformance quality, durability, reliability, repairability and style. Service differentiation is important when a product cannot be easily differentiated. Among service differentiation are ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. Design – how a product looks and feels and functions to a consumer – is another way to differentiate and position a product.
C. Product and Brand Relationships
1. Products can be related to other products to ensure the firm is offering an optimal set of products. There can be a product system – related items that are compatible, a product mix – a set of all the products a firm offers for sell, and a product line – a group of products within a product class.
2. An iPod with all its accessories is a good example of a product system. These are different products that work together and are used with the iPod.
3. Some products are designed to work together in a product system but many products are part of a product line. Companies develop a basic platforms and modules that can be added to meet customer requirements. Marketers use a product map to see which competitor items are competing against their items. This identifies market segments and shows how well the company is competing and is positioned. Longer product lines help companies achieve high market share and market growth. A company lengthens its product line by line stretching and line filling. Line stretching occurs when a company lengthens its product line beyond its current range and line filling occurs with a company adds more items within the product’s present range. Companies also modernize and improve their product lines and prune off weak items. Many multi-brand companies concentrate on their biggest and most established brands. Firms must search for a set of prices that maximizes profits on the total mix. Six situations are: 1) product line pricing, 2) Optional-feature pricing, 3) captive-product pricing, 4) two-part pricing, 5) by-product pricing and 6) product –bundling pricing. Firms often combine their products with products from other companies – called co-branding – and market them together. Co-branding can have the advantage of higher sales but a disadvantage can be when one product or the combined product doesn’t do well, it hurts both firms.
D. Packaging, Labeling, Warranties, and Guarantees
1. Packaging includes all the activities of designing and producing the container for a product. Sometimes, there are packages within packages, especially if there was shipping involved.
2. A good example of this is when you purchase a computer that is shipped to your address. There can be one big package and within that there are multiple little packages, including plastic bags that contain various components of the computer. The outside package usually contains the name of the company or manufacturer you purchased the computer from.
3. Packaging and labeling are treated as elements of the production strategy by many marketers; however, some have referred to it as the fifth P, along with price, product, place, and promotion. Packaging must achieve a number of objectives – identify the brand, convey descriptive and persuasive information, facilitate product transportation and protection, assist at-home storage, and aid product consumption. A label attached to a package can serve many purposes. It will identify the product or brand, and also may offer grade, safety or nutritional information about the product. Most products come with a warranty or a guarantee that allows a consumer to return a defective product.
E. Managing New Products
1. New products can be added by buying another firm, patents, licenses or franchises from other firms. They can also be added by innovation and development.
2. Many firms get ideas for new products by using social media sites such as LinkedIn (Philips), Facebook (Coca-Cola) and Twitter (Starbucks).
3. Many new products fail because of various reasons. The firm may not have researched the target market closely enough or may have overestimated the interest in the products. They may not have advertised and promoted the product enough. But in an environment that changes rapidly companies must create new products in order to be successful. Companies can focus on incremental innovation, which means they enter a new market by tweaking products for new customers, introducing variations on a core product and creating interim solutions for industry-wide problems. They can also focus on creating disruptive technologies that are cheaper and more likely to alter the competitive space. The stages in new product development are 1) Idea generation, 2) idea screening, 3) concept development and testing, 4) marketing strategy development, 5) business analysis, 6) product development, 7) market testing and 8) commercialization. New product launches often take longer and cost more than expected, so it’s important for a firm to allocate sufficient time and resources to the new product.
F. The Consumer – Adoption Process
1. Adoption is an individual’s decision to become a regular user of a product. It is followed by the consumer-loyalty process.
2. The iPod is an example of a great innovation. People no longer need to carry a portable cd player around in order to listen to music. The iPod is lightweight and consumers are not limited to how many cd’s they can carry with it. They can download hundreds of songs and plug in their earphones and go. You see them being used almost everywhere you go.
3. An innovation is a good, service or idea that consumers think is new, even if it’s actually been around for a long time. Innovation diffusion process is the spread of the new idea from its creation until it is actually in the hands of consumers. There are five stages in the consumer adoption process – awareness, interest, evaluation, trial and adoption. Innovators are the first to adopt something new and laggards are the last. One person’s attitude or purchase probability can be affected by another person’s influence. There are five characteristics that influence adoption of a new product: 1) relative advantage – how superior is the products to others, 2) compatibility – how does the innovation match the values and experiences of the individual, 3) complexity – how difficult or easy is the innovation to understand and use, 4) divisibility – the degree to which the innovation can be tried on a limited basis, and 5) communicability – the degree to which the benefits of use are observable or descriptive to others. Adoption of a new innovation can also be affected by the organization’s environment.
G. Marketing Through the Product Life Cycle
1. Products have a life cycle, some longer or shorter than others. This means that 1) products have a limited life, 2) product sales pass through distinct stages, 3) profits rise and fall at different stages, and products require different marketing, financial, manufacturing, purchasing, and human resource strategies at each stage.
2. The portable CD players are a great example of a product life cycle, They were introduced and became big sellers, but after just a few years they were replaced by the iPod and quickly dropped out of consumers’ awareness.
3. Product life cycles are portrayed in a bell-shaped curve featuring four stages – introduction, growth, maturity and decline. During the introduction stage, sales tend to be slow, profits low or non-existent and promotional costs high. Next is the growth stage with a rapid climb in sales. New competitors introduce new features and expand distribution and prices stabilize or fall. Profits increase in the growth stage. Sooner or later, the product reaches maturity in the market and growth slows. Firms might try to expand the market by introducing it to new users or modifying the product to make it interesting to new users. Eventually the product will move into the decline stage, where there is little consumer interest and profits decline. At some point the marketer must decide to remove a weak product from the market altogether. The product life cycle concept helps marketers to interpret product and market dynamics, conduct planning and control, and do forecasting. However, critics say that product life cycles are too generalized and that marketers really can’t determine what stage the product is in.
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