PRODUCT
MANAGEMENT
CHAPTER 2: Introduction to Product
LEARNING OBJECTIVES:
After studying this chapter, you should be able to:
1.
Understand definition of product
2.
Understand the different levels of a product
3.
Make individual product decisions
4.
Grasp the concept of product life cycle
5.
Make product line and product mix decisions
CHAPTER OUTLINE
1.
2.
3.
4.
5.
Product – Definition and Concepts
Levels of Product/Product Classifications
Individual Product Decisions
Product Line and Product Mix Decisions
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
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
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
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
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
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
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,
Luxury goods, such as
Rolex watches or fine
Life insurance, Red
Crescent blood donations
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
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
Product Classifications – Industrial
Product
Capital 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
 Consistency
Seller 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
Introduction
Growth
Maturity
Decline
Style
Profits
Fashion
Fad
Time
Innovators - Early Adopters - Early Majority - Late Majority - Laggards
41
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
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
Product Life Cycle Strategies



Market modifying
Product modifying
Marketing mix modifying
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
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