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CHAPTER 2: Introduction to Product
PRODUCT MANAGEMENT CHAPTER 2: Introduction to Product
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LEARNING OBJECTIVES: After studying this chapter, you should be able to: Understand definition of product Understand the different levels of a product Make individual product decisions Grasp the concept of product life cycle Make product line and product mix decisions
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CHAPTER OUTLINE Product – Definition and Concepts
Levels of Product/Product Classifications Individual Product Decisions Product Line and Product Mix Decisions Product Life Cycle
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Product - Definition Product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want
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Product - Definition Service is a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in ownership
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Product - Definition Experiences represent what buying the product or service will do for the customer
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Product Classifications
Consumer products Industrial products
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Product Classifications
Consumer products are products and services for personal consumption Classified by how consumers buy them Convenience product Shopping products Specialty products Unsought products
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Product Classifications – Consumer products
Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort Newspapers Candy Fast food
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Product Classifications – Consumer products
Shopping products are consumer products and services that the customer compares carefully on suitability, quality, price, and style Furniture Cars Appliances
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Product Classifications – Consumer products
Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort Medical services Designer clothes High-end electronics
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Product Classifications – Consumer products
Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying Life insurance Funeral services Blood donations
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Product Classifications – Consumer products
Marketing Considerations Convenience Shopping Specialty Unsought Customer Buying Behavior Frequent purchase, little planning, little comparison or shopping effort, low customer effort Less frequent purchase, much planning and shopping effort, comparison of brands on price, quality and style Strong brand preference and loyalty, special purchase effort, little comparison of brands, low price sensitivity Little product awareness, knowledge (or, if aware, little or even negative interest) Price Low price Higher price High price Varies Distribution Widespread distribution, convenient locations Selective distribution in fewer outlets Exclusive distribution Promotion Mass promotion by the producer and resellers Advertising and personal selling by both producer and resellers More carefully targeted promotion by both producer and resellers Aggressive advertising and personal selling by producer and resellers Examples Toothpaste, magazines, laundry detergent Major appliances, televisions, furniture, clothing Luxury goods, such as Rolex watches or fine crystal Life insurance, Red Crescent blood donations
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Product Classifications – Industrial Product
Industrial products are products purchased for further processing or for use in conducting a business Classified by the purpose for which the product is purchased Materials and parts Capital Raw materials
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Product Classifications – Industrial Product
Materials and parts include raw materials and manufactured materials and parts usually sold directly to industrial users Wheat Lumber Iron Cement
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Product Classifications – Industrial Product
Capital items are industrial products that aid in the buyer’s production or operations Buildings Elevators Computers
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Individual Product Decisions
Product attributes Branding Packaging Labeling Product support services
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Individual Product Decisions
Product attributes are the benefits of the product or service Quality Features Style and design
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Individual Product Decisions
Quality in terms of the product or service is the lack of defects Quality in terms of the customer is the value and satisfaction provided by the product or service
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Individual Product Decisions
Product quality includes level and consistency Quality level is the level of quality that supports the product’s positioning Performance quality is the ability of a product to perform its functions
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Individual Product Decisions
Quality consistency is the freedom from defects and the delivering of a targeted level of performance
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Individual Product Decisions
Quality consistency is the freedom from defects and the delivering of a targeted level of performance
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Individual Product Decisions
Product features are a competitive tool for differentiating a product from competitors’ products Product features are assessed based on the value to the customer versus the cost to the company
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Individual Product Decisions
Product style and design add value to customer value Style describes the appearance of the product Design contributes to a product’s usefulness as well as to its looks
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Branding Brand is the name, term, sign, or design, or a combination of these, that identifies the maker or seller of a product or service
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Branding Consumer benefits Quality Consistency Seller benefits
Segmentation Communicate product features
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Packaging & Labeling Packaging involves designing and producing the container or wrapper for a product Label identifies the product or brand, describes attributes, and provides promotion
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Product Support Service
Product support services augment actual products Companies must continually: Assess the value of current services to obtain ideas for new ones Assess the costs of providing these services Develop a package of services to satisfy customers and provide profit to the company
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Product Line Decisions
Product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges
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Product Line Decisions
Product line length is the number of items in the product line Line stretching Line filling
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Product Line Decisions
Product line stretching is when a company lengthens its product line beyond its current range Downward Upward Combination of both
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Product Line Decisions
Downward product line stretching is used by companies at the upper end of the market to plug a market hole or respond to a competitor’s attack Upward product line stretching is by companies at the lower end of the market to add prestige to their current products
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Product Line Decisions
Combination line stretching is used by companies in the middle range of the market to achieve both goals of upward and downward line stretching
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Product Line Decisions
Product line filling occurs when companies add more items within the present range of the line More profits Satisfying dealers Excess capacity Plugging holes to fend off competitors
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Product Mix Decisions Product mix width is the number of different product lines the company carries Product mix length is the total number of items the company carries within its product lines
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Product Mix Decisions Product line depth is the number of versions offered of each product in the line Consistency is how closely the various product lines are in end use, production requirements, or distribution channels
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Product Mix Decisions Product line depth is the number of versions offered of each product in the line Consistency is how closely the various product lines are in end use, production requirements, or distribution channels
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Product Life Cycle Product life cycle (PLC) is the course that a product’s sales and profits take over its lifetime Product development Introduction Growth Maturity Decline
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Product Life Cycle Product life cycle (PLC) describes: Product class
Product form Brand
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Product Life Cycle Product classes have the longest life cycles, with sales of many product classes in the mature stage for a long time Product forms have the standard PLC— shape, introduction, rapid growth, maturity, and decline Brands have changing PLCs due to competitive threats
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Product Life Cycle Introduction Growth Maturity Decline Style Sales
Profits Fashion Fad Time Innovators - Early Adopters - Early Majority - Late Majority - Laggards
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Product Life Cycle Strategies
Style is a basic and distinctive mode of expression Fashion is a currently accepted popular style in a given field Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity
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Product Life Cycle Strategies
Style is a basic and distinctive mode of expression Fashion is a currently accepted popular style in a given field Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity
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Product Life Cycle Strategies
Market modifying Product modifying Marketing mix modifying
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Product Life Cycle Strategies
Market modifying strategy is when a company tries to increase consumption of the current product New users Increase usage of existing users New market segments
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Product Life Cycle Strategies
Marketing mix modifying strategy is when a company changes one or more of the marketing mix elements Price Promotion Distribution channels
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