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PRODUCT MANAGEMENTCHAPTER 2: Introduction to Product
LEARNING OBJECTIVES:
After studying this chapter, you should be able to:
1. Understand definition of product2. Understand the different levels of a
product3. Make individual product decisions4. Grasp the concept of product life cycle5. Make product line and product mix
decisions
CHAPTER OUTLINE
1. Product – Definition and Concepts2. Levels of Product/Product
Classifications3. Individual Product Decisions4. Product Line and Product Mix Decisions5. Product Life Cycle
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
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
Product - Definition
Experiences represent what buying the product or service will do for the customer
Product Classifications
Consumer products Industrial products
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
Product Classifications – Consumer productsConvenience 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
Product Classifications – Consumer productsShopping products are consumer
products and services that the customer compares carefully on suitability, quality, price, and style
Furniture Cars Appliances
Product Classifications – Consumer productsSpecialty 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
Product Classifications – Consumer productsUnsought 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
Product Classifications – Consumer productsMarketing
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 Varies
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
Product Classifications – Industrial ProductIndustrial 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
Product Classifications – Industrial ProductMaterials and parts include raw materials
and manufactured materials and parts usually sold directly to industrial users
Wheat Lumber Iron Cement
Product Classifications – Industrial ProductCapital items are industrial products that
aid in the buyer’s production or operations
Buildings Elevators Computers
Individual Product Decisions
Product attributes Branding Packaging Labeling Product support services
Individual Product Decisions
Product attributes are the benefits of the product or service
Quality Features Style and design
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
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
Individual Product Decisions
Quality consistency is the freedom from defects and the delivering of a targeted level of performance
Individual Product Decisions
Quality consistency is the freedom from defects and the delivering of a targeted level of performance
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
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
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
Branding
Consumer benefits Quality ConsistencySeller benefits Segmentation Communicate product features
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
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
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
Product Line Decisions
Product line length is the number of items in the product line
Line stretching Line filling
Product Line Decisions
Product line stretching is when a company lengthens its product line beyond its current range
• Downward• Upward• Combination of both
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
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
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
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
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
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
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
Product Life Cycle
Product life cycle (PLC) describes:• Product class• Product form• Brand
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
Product Life Cycle
41
Time
Introduction Growth Maturity Decline
Style
Fashion
Fad
Sal
es
Innovators - Early Adopters - Early Majority - Late Majority - Laggards
Profits
Product Life Cycle StrategiesStyle 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
Product Life Cycle StrategiesStyle 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
Product Life Cycle Strategies Market modifying Product modifying Marketing mix modifying
Product Life Cycle StrategiesMarket modifying strategy is when
a company tries to increase consumption of the current product
New users Increase usage of existing users New market segments
Product Life Cycle StrategiesMarketing mix modifying strategy
is when a company changes one or more of the marketing mix elements
Price Promotion Distribution channels
