The 4 Ps – Product (2/2)

The 4 Ps – Product (2/2)

In this lesson, you’re expected to:
– learn the difference between a product mix, product line and product extension
– discover how to develop a new product

What is a Product Line?

A product line is a group of related products under a single brand sold by the same company.

Companies sell multiple product lines under their various brands and often expand their offerings by adding to existing product lines, because consumers are more likely to purchase products from brands with which they are already familiar.

Let’s take a look at a simple example. We’ll use the idea of a national coffee chain.

The various types of coffee served at the coffee chain are one of its product lines. For example, the product lines may consist of espresso, cappuccinos, lattes, mochas, café au lait and various signature coffee drinks created by the company. The coffee shop may also have a product line of pastries and muffins that are served in the morning and sandwiches and soups that are served in the afternoon and evenings.

Product Mix

The product mix is the composite of products offered by the firm’s product line. It refers to a group of products that are closely related in terms of use/function, market, customer groups, price ranges and channels of distribution. 

There are three primary dimensions of a firm’s product mix width, depth and consistency.

– Width refers to the number of product lines the firm handles.
– Depth refers to the average number of products in each line.
– Consistency refers to the similarity of product lines.

Examples of Famous Product Lines

– Microsoft Corporation as a brand sells several highly recognized product lines including Windows, Office, Xbox and SharePoint.

– Nike Inc.
 has product lines for various sports, such as track and field, basketball, and soccer. The company’s product lines include footwear, clothing and equipment.

– Starbucks Corporation‘s product lines include coffee, ice cream and beverages.

Product Line Extension

Companies create product lines as a marketing strategy to capture sales of consumers already buying the brand. The operating principle is that consumers are more likely to respond positively to brands they know and love and are willing to buy the new products based on their positive experiences with the brand.

Advantages of Product Line Extension:

1) Reaching New Consumers 
Companies add new items to their product lines, sometimes referred to as a product-line extension, to introduce brands to new customers. Extending product lines allows companies to maximize their reach.

2) Diversifying Markets 
Product lines allow companies to reach regions and socioeconomic groups, sometimes worldwide. In some cases, such as the cosmetic industry, companies also launch product lines under their best-selling brands. Multinational corporations, such as restaurants, often launch product lines specifically for the countries in which they operate.

[Optional] To learn more about a product line, product mix and line extension, visit the link below:
https://www.linkedin.com/pulse/what-product-line-mix-extension-width-depth-senthilnathan-srinivasan
Packaging & Branding

Distinctive or unique packaging is one method of differentiating relatively homogeneous products*, such as toothpaste or soap.

The design of packaging should focus on the size of the product, ease of use, strength of the packaging, attractiveness and costs.

Many companies use branding strategies to increase the product image. Factors to be considered include:
– product quality (the product does what it claims to do)
– consistent advertising (brands tell their story well)
– brand personality (the brand stands for something unique)

A good brand name can evoke feelings of trust, confidence, security and strength.

*Homogeneous Product: A product that cannot be distinguished from competing products from different suppliers. In other words, the product has essentially the same physical characteristics and quality. One product can easily be substituted for the other.
Product Bundling

“Bundling is pervasive in several markets, and it works in many cases”
– Vineet Kumar, assistant professor at Harvard Business School

Product bundles are several individual goods or services that are sold to consumers as one combined package. Sometimes called “package deals,” product bundles are generally made up of complementary items or, less frequently, similar items.

When retailers offer multiples of the exact same item, this is generally referred to as a “multipack,” not a product bundle.

Examples of product bundles would be a fixed price meal at a restaurant or a beach kit that includes sunscreen, sand toys, flip flops and towels as one saleable item.

[Optional] Better by the Bundle?
Read this article in which Harvard Business School professor Vineet Kumar shares his research:
http://hbswk.hbs.edu/item/better-by-the-bundle
Product Bundling – Retail vs. Online

Some retailers only sell certain inventory items as part of a product bundle rather than offering them as either individual or bundled items.

For retailers who sell the same items both individually and as part of a product bundle, the bundle tends to cost less than if a customer were to purchase those items individually. Making the savings explicit is one way to entice the user to purchase the bundle, though they might have intended to only purchase a single item.

Product bundles can be especially popular with customers who appreciate the bundle’s discount. They also appeal to customers who value speed or simplicity over the ability to tailor their product options.

For online retailers, product bundles are appealing for several reasons:
– Bundling can effectively increase average order value, by selling more without incurring higher transaction costs.
– It makes it harder for customers to price-comparison shop.
– Bundling can encourage cross-selling if the product bundle includes items from new categories.

Improving and updating products is an ongoing task as consumer “needs and wants” continuously change. A failure to develop products could result in a reduction in sales if consumers decide to buy competitor products. 

Every business needs to innovate to stay ahead of the competition. No business can continue to offer the same unchanged product; otherwise sales would decrease and profits reduce.

Below are some of the reasons why a lack of product development can affect sales and profit:

– Consumer Needs and Wants Change
– Product Reaches the End of its Product Life Cycle
– Product is at the Maturity Stage of the Product Life Cycle
– Environmental Changes
– Competitors

As mentioned in Lesson 4, when developing the right product, you need to answer the following questions:

• What does the customer want from the product/service?
• How will the customer use it?
• Are there any necessary features that you missed out?
• What’s the name of the product? Does it have a catchy name?
• What are the sizes or colors available?
• What does the product look like?
• How is the product different from the products of your competitors?

Stages of New Product Development

The eight stages of new product development are listed below:

Stage 1: Idea Generation
Stage 2: 
Idea Screening
Stage 3: 
Concept Development and Testing
Stage 4: 
Marketing Strategy Development
Stage 5: 
Business Analysis
Stage 6: 
Product Development
Stage 7: 
Test Marketing
Stage 8: 
Commercialization

Stage 1: Idea Generation

New product ideas have to come from somewhere. But where do organizations get their ideas for new product development Sources include:

– Market Research
– Employees
– Consultants
– Competitors
– Customers
– Distributors and Suppliers

Stage 2: Idea Screening

This process involves shifting through the ideas generated above and selecting ones which are feasible and practical to develop. Pursuing impractical ideas is expensive and a waste of resources.

Stage 3: Concept Development and Testing

The organization may have come across what they believe to be a feasible idea, however, the idea needs to be taken to the target audience.

What do they think about the idea? Will it offer the benefit that the organization hopes it will or have they overlooked certain issues? Will there be a demand for the product?

Note the idea taken to the target audience is not a working prototype at this stage, it is just a concept.

Stage 4: Marketing Strategy Development

How will the product/service idea be launched within the market? A proposed marketing strategy will be written laying out the marketing mix strategy of the product, the segmentation, targeting and positioning strategy and expected sales and profits.

Stage 5: Business Analysis

The company has a great idea, the marketing strategy seems feasible, but will the product be financially worthwhile in the long run?

The business analysis stage looks more deeply into the cashflow the product could generate, what the cost will be, likely market share and the expected life of the product.

Stage 6: Product Development

At this stage, the prototype is produced. The prototype will undergo a series of tests, and will be presented to a selection of people made up of the the target market segment to see if changes need to be made.
Stage 7: Test Marketing

Test marketing means testing the product within a specific geographic area. The product will be launched within a particular region so the marketing mix strategy can be monitored and if needed modified before national launch.

Stage 8: Commercialization

If test marketing is successful, the product is ready for national launch. The following decisions regarding the launch need to be made:
– timing of the launch
– how the product will be launched
– where the product will be launched
– will there be a national roll out or will it be region by region?

Conclusion

The eight stages of product development may seem like a long process but they are designed to save wasted time and resources.

New product development ideas and prototypes are tested to ensure that the new product will meet target market needs and wants. There is a test launch during the test marketing stage as a full market launch is expensive.

Finally, the commercialization stage is carefully planned to maximize product success. A poor launch will affect product sales and could even affect the reputation and image of the new product.

Jim Rohn Sứ mệnh khởi nghiệp