PRODUCT

What is a product? Products are bundle of benefits that the customer values. Benefits may be tangibles, such as good design and functionality, or intangible, for example image. Meaning of a product A product is a physical good, service, ideas, person or place that is capable of offering tangible and intangible attributes that individuals or organisation regards as s o necessary worthwhile or satisfying that they are prepared to exchange money, patronage or some other unit of value in order to acquire. Product Mix Is the total sum of all the products and variants offered by an organisation. A small company serving a specialist need in an organisational market may have a very small tightly focus product mix. Van Dyck Belgian chocolates for example offer boxed chocolates, chocolate bars, fruit flavoured chocolate. Product Line A product line is a group of products that are closely related to each other. This relationship may be production orientated, in that the products have similar production requirement. A company such as Minolta may define three of its products lines as still camera, video camera Product Item These are the individual products or brands, each with its own features, benefits Product Length The total number of items within the product line is the product length. Product attributes a. Tangible attributes 1 Availability and delivery 2 Performance (usefulness, effectiveness, efficiency) 3 Price 4 Design (appearance, feel etc) 5 Packaging (durability, convenient size, information given) 6 The range of complementary products in a line 7 The availability of accessories and suppliers for product use or maintenance b. Intangible attributes 1 Image 2 Perceived value

Product level/Anatomy of product

Core product Represents the heart of the product the main reason for its existence and purchase. The core benefits of any product may be functional of psychological and its definition must provide something for the marketer to work on to develop a differential advantage. Actual/basic product This is essentially the means by which the marketer puts flesh on the core product, making it a real product that clearly represents and communicates the offer of the core benefit. The tools used to create the product include design specification,, product features, quality level, branding and packing. Expected product These are the attributes that customers expect when they buy a product/service. For a car it will be the level of performance, reliability Augmented product This represents add-on extras that do not themselves form an intrinsic element of the product, but may be used by the producer or retailer to increase the product package. None of this affects the actual computer system itself, but will affect the satisfaction and benefits that gets from the exchange. Potential product The potential product layer acknowledges the dynamic and strategic nature of the product. The first three layers have describe the product as it is now, but marketer also needs to think about what the product could be and should be in the future. The potential product can be defined in terms of its possible evolution for example new ways of differentiating itself from the competition.

Product classification
Products can be classified as consumer goods or industrial goods. Consumer goods are sold directly to the person who will ultimately use them. Industrial goods are used in the production of other products FMCG Fast Moving Consumer Goods items such as packaged food, beverages, toiletries, and tobacco. Classification of convenience goods Convenience goods Weekly groceries are typical example. It is also classified as staple goods (eg bread and potatoes) and impulse buys, like chocolate and toffees at the supermarket counter. Shopping goods durable items like furniture, washing machine Speciality goods items like jewellery or expensive items of clothing

Unsought goods goods you did not realise you need them e.g wardrobe organisers Classification of industrial goods Industrial goods Installations, e.g. major items of plant and machinery like a factory assembly line Accessories, such as PCs Raw materials, for example plastic, metal, wood Components, e.g. Intel microchip in most PCs Supplies, such as office stationery and cleaning materials

Packaging
Packaging deals with the product design, the shape, size, colour etc. It is basically used dot make the product attractive to consumers and also to facilitate handling. For promotional purposes packaging should have the following. Functions of packaging 1. It must protect the product before the consumer uses it, ensuring that there is no damage in transit. 2. It should facilitate a product use by the consumer for e.g. it should make the product easy to handle. 3. It must satisfy legal requirement for e.g. food products must display composition and expiry date. 4. It should act to inform consumers by providing necessary instruction for usage or display facts about nutritional value.

BRANDING
Branding is the culmination of a range of activities across the whole marketing mix, leading to a brand image that conveys a whole set of messages to the consumer about quality, price, expected performance and status. Blythe, J. (2005)p151 A brand is a name, term, sign, symbol or design intended to identify the product of a seller and to differentiate it from those of competitors Objectives of branding The key benefit of branding is product differentiation and recognition. Products may be branded for a number of reasons It aids product differentiation, conveying a lot of information very quickly and concisely. This helps customers readily to identify the goods or services and thereby helps to create a customer loyalty to the brand. It is therefore a means of increasing or maintaining sales

It maximises the impact of advertising for product identification and recognition. The more similar a product (whether an industrial good or consumer good) is competing goods, the more branding is necessary to create a separate product identity Branding leads to a readier acceptance of a manufacturers goods by wholesalers and retailer It reduces the importance of price differentials between goods It supports market segmentation, since different brands of similar products may be developed to meet specific needs of categories of uses. (Think of all the cereal brand produced by Kelloggs, for example.) It supports brand extension or stretching. It eases the task of personal selling, by enhancing product recognition

BRANDING STRATEGIES Brand extension is the introduction of new flavours, sizes etc to a brand, to capitalise on existing brand loyalty Multi-branding is the introduction of a number of brands that all satisfy very similar product characteristics. This can be used where there is little or no brand loyalty, in order to pick up buyer who are constantly changing brand e.g detergents Family branding uses the power of the brand name to assist all products in a range. This strategy is being used more and more by large companies, such as Heinz Service and service marketing Service include: those separately identifiable but intangible activities that provide want-satisfaction, and that are not, of necessity, tied to, or inextricable from, the sale of a product or another service. To produce a service may or may not require the use of tangible goods or assets. However such use is required, there is no transfer of title (permanent ownership) to these tangible goods. (Cowell, 1995) any activity of benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.(Kotler et al, 2002) Characteristics of service marketing Intangibility: services cannot be touched or tasted Inseparable: services cannot be separated from the provider

Heterogeneity: (or lack or sameness): the standard of service will vary with each delivery Perishability: services cannot be stored for provision later Ownership: service purchase does not transfer ownership of property The product life cycle The product life cycle uses a biological analogy to suggest that products are born (or introduced), grow to reach maturity and then enter old age and decline. Products move through 4 stages, which are Introduction, Growth, Maturity and Decline. Introduction: High initial unit cost of production Takes time to be accepted by consumers Initially, a loss maker Growth: Sales rise with acceptance profits Unit costs fall within increased production Competitors attracted to market Maturity: Sales growth slows stable profits Increasing competition prices/profits fall Prolonging life by modification, repositioning Decline: Profits decline as sales volumes fall Gradual withdrawal of production, promotion

Product portfolio
A companys product portfolio (or product assortment or mix) is all the product lines and items that the company offers for sale. Product mix description Width number of product lines: e.g. cosmetics, haircare, toiletries and health products Depth average number of items per product line: e.g. cosmetics including moisturiser, cleanser, toner, lipstick, and eyeshadow Consistency closeness of relationships in product range e.g. end users, production, and distribution Managing the product portfolio The product mix can be reduce or extended 1 Introducing variations in models or style e.g. a paint manufacturer introducing different colours, types and pot sizes 2 Differentiating the quality of product offered at different price levels eg

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premium paint and value paint e.g. paint roller and brushes, paint trays, colour charts Developing associated items Developing new products with little technical or marketing relationship to the existing range

The BCG matrix The BCG matrix divides product into four categories: Problem Child, Star, Cash Cow, and Dog. This relates to a products market share and the rate of growth in the market for that product. It classifies products or brands on the basis of their market share and according the rate of growth in the market as a whole, as a way of assessing their role in the product portfolio. a. Problem child (or question mark): A small market share in a high growth industry. The generic product is clearly popular, but customer support for the particular brand is limited. A small market share implies that competitors are in a strong position and that if the product is to be successful it will require substantial funds, and a new marketing mix. If the market looks good and the product is viable, then the company should consider a build strategy to increase market share: increasing the resources available for that product to permit more active marketing. b. Star: A high market share in a high growth industry. The star has potential for generating significant earnings, currently and in the future. It still needs to spend on marketing to maintain its position. c. Cash Cow: A high market share in a mature slow-growth market. Product development costs are typically low and the marketing campaign is well established. The cash cow will normally make a substantial contribution to overall profitability. The term cash cow is derived from the fact that it is these products which generate considerable sums of cash for the organisation but which, because of lower rate of growth, use relatively little. Because of the SBU position in the market, economies of scale are often considerable and profit margins high. If market growth is reasonably strong then holding will be appropriate, but if growth and/or share are weakening, then a harvesting strategy may be more sensible: cuts back on marketing expenditure and maximise short-term profit. d. Dog: A low market share in a low-growth market. Typically they generate either a low profit or return a loss. The decision faced by the company is whether to hold on to the dog for strategic reasons (e.g. in the expectation the market will grow, or because the product provides an obstacle, albeit a minor one, to a competitor). Dog businesses frequently take up more management time than they justify and there is often a case for phasing out the product. The usual strategy would be to consider divestment, unless the cash flow position is strong, in which case the product would be harvested in the short term, prior to deletion from the product range.

New product development

Reason why companies should consider extending its product mix with the introduction of new products 1. To meet the changing needs/wants of customers 2. To pace (or outpace) competitors 3. To respond to environmental threats and opportunities 4. To extend the product/brand portfolio as part of a product development or diversification growth strategy 5. To extend the maturity stage of the PLC for a product, by modifying it to maintain interest, stimulate re-purchase (because it is new and improved) and/or target as yet unreached market. 6. To refresh the product portfolio, as products go into the decline stage of their life cycle. Sources new products 1 Licensing 2 Acquire 3 Internal product development organisations own research and development team coming out with new products 4 Customers listening to customers and making changes to product 5 External freelance inventors 6 Competition 7 Patent agents 8 Academic institutions e.g. pharmaceuticals 9 PEST factor changes, representing new opportunities and threats New product development process The process a product goes through before introduction, involve the phases: Stage 1: Conception of ideas - New product ideas can come from several sources. They may come from internal sources-marketing mangers, researchers, sales personnel, engineers or other organisational personnel. Sources outside the organisation include customers, competitors, advertising agencies, management consultant and private research organisation. Screening of ideas This involves first assessing whether they match organisational objectives and resources and then choosing the best ideas for further review. Analyse the companys ability to produce and market the product. At this level more new products ideas are rejected. To screen ideas properly, it may be necessary to test product concepts; a product concept and its benefits can be described or shown to consumers. Several product concepts may be tested to discover which might appeal most to a particular target market.

Stage 2: Business analysis A companys evaluation of a product idea to determine its potential contribution to the firms sales, costs and profits. During this analysis, evaluators ask a variety of questions: Does the product fit in with the organisations existing product mix? Does the company have the right expertise to develop the new product? Is demand strong enough to justify entering the market and will the demand endure? What types of environmental and competitive changes can be expected and how will these changes affect the products future sales, costs and profits? In the business analysis stage, firms seek market information. The results of consumer polls, along with secondary data, supply the specifics needed for estimating potential sales, costs and profits. Stage 3: Product development/Marketing mix issues The phase in which the organisation determines if it is technically and financially feasible to produce a new product. Stage 4: Market testing The limited introduction of a product into certain geographic areas chosen to represent the intended market. Its aim is to determine the reactions of probable buyers Stage 5: Commercialisation The process of refining and setting plans for full scale manufacturing and marketing. Early in the commercialisation phase, marketing management analyses the results of test marketing to find out what changes in the marketing mix are needed before the product is introduced. For example, the results of test marketing may tell the marketers to change one or more of the products physical attributes, modify the distribution plans to include more retail outlets, alter promotional efforts or change the products price. The product enters the market during the commercialisation phase. One study indicates that only 8 percent of new product projects started by major companies reach this stage. PRODUCT MANAGEMENT Product management is concerned with both existing and potential products. a. Maintenance of existing products - product managers must constantly monitor product performance in areas of promotion, pricing exercise, distribution mangement etc. This will help them to decide if it is time to make any changes to the range, or part of it. Where there is poor sales revenue then managers can drop or increase promotional activities. b. Development and introduction of new products - New product development c. Product positioning - using perceptual maps to show positioning. These maps can be used by a manager to compare positioning with the competititon or to show the overall picture of a company's product range. d. Improving customer loyalty