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.
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.
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.
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.
– 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.
Read this article in which Harvard Business School professor Vineet Kumar shares his research:
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.
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
• 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?
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
New product ideas have to come from somewhere. But where do organizations get their ideas for new product development Sources include:
– Market Research
– Distributors and Suppliers
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.
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.
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.
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.
– 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?
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.