P
roduct, according to Kotler (2008), is anything that is offered to a market for attention, acquisition, use or consumption and that might satisfy a need or want. Products that are marketed include physical goods, services, experiences, events, persons, places, properties, organization, information and ideas.
William J. Stanton defines a product as a complex of tangible and intangible attribute, including packaging, color, price, manufacturer’s prestige and retailers prestige and manufacturer’s and retailer’s services which the buyer may accept as offering satisfaction of wants and needs.
Three Levels of a Product
Core Product – considered as the essence of the product. This is that part of the product that the consumer is actually buying.
Actual Product – considered as the product’s personality. This is the physical property of a product. This includes the product’s name, label, brand name, style, packaging, features, and quality level.
Augmented Product – the level where the seller provides additional services and privileges to consumers of the product. It may be in the form of after-sales service, warranty, free maintenance, discounts, and many more.
Classification of Products
Consumer products are those bought by household consumers for their personal consumption. Consumer products are divided into four classes:
· Convenience goods are those that are widely distributed and relatively inexpensivegoodswhich are purchased frequently and withminimum effort (http://www.learnmarketing.net).
Examples are bread, coffee, photocopying services, etc. Convenience goods may be staples, impulse, and emergency goods. Examples of staples are rice and sugar. Chocolates and candies are impulse goods while umbrellas and batteries are classified as emergency goods.
· Shopping goods are those that thecustomertypically compares for suitability, quality, price,features, etc. before selection andpurchase (http://en.mimi.hu/marketingweb/shopping_goods.html). These goods are usually of higher value than convenience goods, bought infrequently, and are durable.
Shopping goods may either be homogenous or heterogeneous. Homogeneous shopping goods are those that are similar in quality but different enough in other attributes (such as price, brand image, or style) to justify a search process. Examples: Laptops of Acer and Asus brands, their quality is same, but their price, brand image and styles are different. Heterogeneous shopping goods have product features that are often more important to consumers than price; examples include clothes, high-tech equipment, and furniture.
· Specialty goods are those with unique characteristics or brand identificationfor which a significant group of buyers is willing to make a special purchase effort (http://www.mbanotesworld.in). Theconsumers will conduct extensiveresearch to make sure that theirpurchase decisionis right, becausethese goods are expensive and not frequentlypurchased.
For example, one may insist on buying a North Face® backpack for his outdoor activities. Or, a customer would insist on going to David’s Salon for her regular hair treatment.
· Unsought goods are consumer products that the consumer either does not know about or knows about but does not normally think of buying. These are goodsthatconsumers did not even know they needed until either (a) an emergency arose that needed an immediate purchasing decision to help resolve said emergency; or (b) an aggressivesales representativeinfluence them into apurchase.
Memorial plans, life insurance, and security alarm systems are
examples of unsought goods.
Industrial products goodsandservicespurchased byindustrial buyersfor use in theproductionof their owngoodsandservicesor in the conduct of their business (http://en.mimi.hu/marketingweb/industrial_goods.html).
· Raw Materials are industrial goods that are processed to become part of another product. Farm products such as pork, cotton, eggs, milk, and poultry, and natural resources like coal, iron ore, and lumber make up raw materials.
· Component parts and materials are finished goods of one producer that become part of the final products of another producer.
Texas Instruments (TI) manufactures a product known as Open
Multimedia Application Platform (OMAP) which is originally intended
for use as application processors in smart phones with processors hefty
enough to run significant operating systems, support connectivity to
personal computers, and support various audio and video applications.
Now, the different
generations of TI OMAP are used in products like Nokia N900, Motorola Droid, Samsung I9003 Galaxy SL, and LG Optimus Black.
· Installations include major capital investments for new factories and heavy machinery and for telecommunications systems.
· Accessory Equipment are capital items that typically cost less and last for shorter periods than installations. They do not become part of the finished product even if it has substantial value and is used in an organization’s operations. Some examples are forklifts, copying machines, power tools, and computers.
· Supplies are also called MRO supplies (Kotler and Armstrong, 2008) because they fall into three categories: (a) Maintenance items like brooms, and lightbulbs; (b) Repair items like nuts and bolts used in repairing equipment; and (c) Operating supplies like printer cartridges, pens, and staplers.
The New Product Development Process
The three distinct categories of new products are:
a. Innovative Products
These are considered as unique products and that they satisfy needs that have not been satisfied at the time they were introduced.
b. Replacement Products
Replacement products are assigned when the current items become temporarily or permanently unavailable. OECD defines a replacement product as the product chosen to replace a sampled product either because it has disappeared completely from the market or because its market share has fallen either in a specific establishment or in the market as a whole.
c. Imitative Products
These are new to the company but not entirely new to the market. These products imitate competitive products with identical features.
New Product Development Process
Idea Generation
The new-product development process starts with the search for ideas. Top managers should define the product and market scope andthe new product’s objectives. They should state how much effort should be devoted to developing breakthrough products, modifying existing products, and copying competitors’ products. This is considered as the exploration stage of new product development.
New-product ideas can come from many sources: customers, scientists, competitors, employees, channel members, and top management.
Idea Screening
This is the stage in which alternative ideas are sorted. The purpose of screening is to drop poor ideas as early as possible. The rationale is that product-development costs rise substantially with each successive development stage. Most companies require new-product ideas to be described on a standard form that can be reviewed by a committee. The description includes the product idea, the target market, andthe competition, and it roughly estimates market size,product price, development time and costs, manufacturing costs as well as the rate of return.
Figure 4.1 New Product Development Process
Concept Development and Testing
Diola and Tichepco (2009) define this as the development of screened ideas into product concepts. A productidea is a possible product the company might offer to the market.A productconceptis an elaborated version of the idea expressed in meaningful consumer terms. Concept testing involves testing the product concept with a group of consumers to determine their reaction.
Marketing Strategy Development
This consists of three parts. The first part describes the target market, the positioning of the product, the market share, and the target sales and profits for the first
few years. The second part describes the pricing, distribution, and marketing budget for the first year of production. The third part describes the long-term potential of the goods of the company in terms of sales, profits, and marketing mix strategy (Diola and Tichepco, 2009).
Business Analysis
This stage requires both qualitative and quantitative analysis. The quality of the product and its likely success are evaluated. The new product idea is also evaluated making use of quantitative facts and figures.
Product Development
In this stage, a prototype or a trial model of the product is developed.
Test Marketing
This is an experimental procedure in which the company tests a new product under realistic market conditions so that the company will be able to measure its potential sales once distributed in a bigger area. There are instances when the design of the product and the planned production may be modified based on the results of the tests conducted. This is also the part where management decides whether to continue or not with the product.
Commercialization
Production and distribution will be full blast at this stage. This entails great risks because it involves financial, physical, and human resources.
The Product Mix
This refers to the variety of product lines that a company produces, or that a retailer stocks.With the right blend of products offered, a company can maximize sales opportunities. Product mix is sometimes called product assortment (http://www.bnet.com/topics/product+mix).
Product Line
A product line is a collection of products, offered by a firm, that satisfy similar needs for different target audiences. Thus all products within a product line are related, but may vary in terms of size, color, quality etc. The product line is part of the broader product mix, which is the full suite of products offered by the company (http://en.mimi.hu/marketingweb/product_line.html). For example, Nike produces several lines of athletic shoes, and Motorola produces several lines of telecommunications products.
Product Line Width
This refers to the number of product lines the firm offers. For example, Procter & Gamble markets a fairly wide product mix consisting of many product
lines, including paper, food, household cleaning, medicinal, cosmetics, and personal care products.
Product Line Length
This refers to the number of different products a firm carries within its product lines. Procter & Gamble typically carries many brands within each line. For example, in the Philippines, it sells fourlaundry detergents, three shampoos, and three bath soaps.
Product Line Depth
This refers to the number of versions (such as size of packaging,
different formulations, etc.) offered of each product in the line.For example, Pantene of Procter and Gamble has Pantene Soft and Silky, Pantene Hair Fall Control, Pantene Nourished Shine, and the latest Pantene Nature Care.
Product Mix Strategies
Establishing and managing the product mix have become increasingly important marketing activities. Improving the depth, length, and width to the product mix requires careful thinking and planning. Marketers have to look at the effectiveness of its depth, length, and width. Otherwise, a company may end up with too many products including some that do not sell well.
Product Positioning
A product’s position is what the customer believes about your product's value, features, and benefits; it is a comparison to the other available alternatives offered by the competition. These beliefs tend to based on customer experiences and evidence, rather than awareness created by advertising or promotion.
There are various strategies that can be utilized by marketing executives in order to create the most useful meaning in the minds of consumers.
1. Positioning in relation to a competitor
More often than not, the best position is directly against the
competitor especially if there are only few of them.
Examples: Globe versus Smart
Jollibee versus McDonalds
2. Positioning in relation to a product class
A company may produce several brands within the same product
class in order to appeal to different segments of the market.
Example: Universal Robina Corporation offers different beverages that can be positioned to compete with the products of its rivals.
URC offers Nature's Harvest FAB which is positioned against Del Monte’s Fit n’ Right. URC also offers Xplode, an energy drink, which is positioned against PepsiCo’s Sting and Asia Brewery’s Cobra.
3. Positioning in relation to a target market
Example: The Generics Pharmacy has positioned itself to offer generic medicines to people who are not so particular with the brands of the medicines they buy and are in search for lower priced medicines.
4. Positioning by price and quality
Example: Eastwood and Rockwell are known in the Philippines as prominent malls with high prices. On the other hand, SM and Robinsons are known for relatively lower prices.
Product Mix Expansion
Another strategy a company may adopt is increasing the depth within a product line and/or the number of lines a firm offers to its market.
1. Product Line Extension is the use of an established product’s brand name for a new item in the same product category. For example, Coca-Cola, in addition to its Regular Coke, offered Diet Coke, Coke Light, Coke Vanilla, and Cherry Coke to the Philippine market.
2. Product Mix Extension occurs when a firm adds new product line to its present assortment of products. Globe Telecommunications offered Broadband services in 2007 in addition to its original assortment of services.
Trading Up and Trading Down
The product strategies of trading up and trading down involve an expansion of product line and a change in product positioning. Trading up means increasing thenumberoffeatures(and theirassociated benefits) of aproduct, improving itsquality, orbackingit with a superiorlevel of serviceto justify a higherprice (http://www.businessdictionary.com). The purpose is to boost the image or prestige of the product and increase the sale of the existing low-priced products.
Trading down means adding a low-priced item to its line of prestigious products. The purpose of this is to encourage people who cannot afford the original product to buy the new product because it carries some of the status or prestige of the higher-priced product.
Product Alteration
Product alteration means improving an already existing product. This can be more profitable, less risky and less costly than developing a completely new product. Many companies frequently redesign or reformulate their products to give them a new appeal.
For material goods, especially, redesigning is often the key to products, and renaissance packaging has been a very popular area for product alteration, particularly in consumer products (http://www.mbanetbook.co.in).
Product Mix Contraction
Product mix contraction means eliminating an entire product line or simplifying the assortment within a line. This is intended to weed out a low-profit and unprofitable products. The expected result is higher profits from fewer products.
The Product Life Cycle
All products have a particular life span, which is called the product life cycle. The length of time a product is on the market is largely contingent upon its competition, technology and even the savvy of a company's marketing department. One of the best ways of extending a product's life cycle is to continuously garner feedback from consumers, finding out what they need and want from a particular product (http://smallbusiness.chron.com).