Hoofdstuk 6
Marketers define a product as being a bundle of benefits. Primary characteristics
are those core benefits of the product that it has in common with its competitors;
auxiliary characteristics are the features and benefits that are unique to the
product. Marketers need to be aware of the ways in which the needs and wants of
consumers are changing, so that the benefits offered by the product range can be
tailored to fit those needs and wants. This is the function of market research but
it is important to make good use of the information gathered to see which new
products might be developed, or which old products might be adapted, and also
to see which products are nearing the end of their useful lives.
Products bought to satisfy personal and family needs are consumer products;
products bought for the purposes of resale or to be used to make other products
are industrial products.
In some ways, industrial buying has parallels with consumer buying behaviour, so
parallels can also be drawn with the types of product purchased. In both cases,
the buyer is obtaining three levels of benefit from the product:
• the core product benefits;
• the actual product benefits; and
• the augmented product benefits.
The product life cycle (PLC) is a useful concept to describe how products progress
from introduction through to obsolescence. The theory is that products, like living
things, have a natural life cycle beginning with introduction, going through a
growth phase, reaching maturity, then going into decline, and finally becoming
obsolete. In the introduction phase, the product’s sales grow slowly, and the
profit will be small or negative because of heavy promotion costs and production
inefficiencies. If the product is very new, there will also be the need to persuade
retailers and others to stock the product. In the growth stage, there will be a
rapid increase in sales as the product becomes better known. At this stage profits
begin to grow, but competition will also be entering the market so the producer
may now need to think about adapting the product to meet the competitive
threat. In the maturity phase the product is well known and well established: at
this point the promotional spend eases off and production economies of scale
become established. By this time competitors will almost certainly have entered
the market, so the firm will need to develop a new version of the product. In the
decline phase, the product is losing market share and profitability rapidly. At this
stage the marketer must decide whether it is worthwhile supporting the product
for a little longer, or whether it should be allowed to disappear; supporting a
product for which there is little natural demand is very unprofitable, but
sometimes products can be revived and relaunched, perhaps in a different
market. Maintenance is where the marketing manager is using various tactics
(sometimes called mid-life kickers) to keep the product in the public eye and
maintain sales, and proliferation is where the firm introduces variations on the
original product in order to extend the life cycle. Sometimes these maintenance
tactics will keep the product alive and successful for many years, but eventually
the PLC theory implies that the product will be superseded and will go into
decline.
The Boston Consulting Group (BCG) developed a matrix for decision-making:
Stars are products with rapid growth and a dominant share of the market.
Cash Cows are the former Stars. They have a dominant share of the market, but
are now in the maturity phase of the life cycle and consequently have low
growth.
Dogs have a low market share and low growth prospects.
, The Problem Child (?) has a small share of a growth market, and causes the
marketer the most headaches since it is necessary to work out a way of building
market share so as to turn the product into a Star.
Dodos have a low share of a negative growth market, and are probably best
discontinued.
Products can also be divided into physical products and services. For many
marketers, the difference between services marketing and the marketing of
physical goods is negligible. This is for the following reasons:
• The marketer’s definition of a product as being a bundle of benefits. An
individual seeking to be cheered up may achieve this by going to a good movie (a
service) or by buying a new shirt (a physical product). The benefit is basically the
same.
• Difficulties of definition. Most physical goods contain a service aspect, and most
services contain a physical product. In other words, most products lie somewhere
along a continuum between purely service and purely physical products.
• Consumer orientation means that we should be looking at what the consumer
thinks, needs and wants, not at defining our product in terms of its
characteristics.
Services carry additional risks.:
• Consequential losses arise when a service goes wrong and causes a loss to the
customer.
• Purchase price risk is the possible loss of the purchase price when the
consumer buys a service that does not work. The usual consumer response is to
refuse to pay for the service, so it is advisable for the supplier to check during the
service process that everything is satisfactory.
• Misunderstanding is common in service provision because of inability to try out
services (trialability). Particularly in professional services the provider may feel
that the customer would not understand the finer details of what is being done,
and may therefore not bother to explain properly. This can easily result in post-
purchase dissonance and refusal to pay.
- Physical evidence gives the consumer something to refer to and to show
other people if necessary. Since service products are usually intangible, the
consumer of (say) an insurance policy will need some written evidence of
its existence in order to feel confident in the product.
It is therefore difficult to generalise about the process, but a frequently quoted
model of the NPD process was given by Crawford,7 and follows this sequence:
1 New product planning. The firm examines its current portfolio, opportunities
and threats and decides what kind of new product would best fit in with future
strategy.
2 Idea generation. Specific ideas for the product are expressed, perhaps through
a brainstorming session of the venture team.
3 Screening and evaluation. The ideas are checked for feasibility and
marketability.
4 Technical development. The engineering aspects of the product are
investigated, and a prototype is developed.
5 Market appraisal. Formal market research is carried out to assess the product’s
viability in the market.
6 Launch. Assuming the market research is positive about the product, the firm
puts it into production.
There are six broad types of innovation strategy:
1 Offensive. Pride in being the first.
2 Defensive. ‘Me-toos’, copies of other companies’ products, but slightly better
3 Initiative. Straight copies of other companies’ products. 4 Dependent. Led by
bigger companies, perhaps customers or suppliers.
Marketers define a product as being a bundle of benefits. Primary characteristics
are those core benefits of the product that it has in common with its competitors;
auxiliary characteristics are the features and benefits that are unique to the
product. Marketers need to be aware of the ways in which the needs and wants of
consumers are changing, so that the benefits offered by the product range can be
tailored to fit those needs and wants. This is the function of market research but
it is important to make good use of the information gathered to see which new
products might be developed, or which old products might be adapted, and also
to see which products are nearing the end of their useful lives.
Products bought to satisfy personal and family needs are consumer products;
products bought for the purposes of resale or to be used to make other products
are industrial products.
In some ways, industrial buying has parallels with consumer buying behaviour, so
parallels can also be drawn with the types of product purchased. In both cases,
the buyer is obtaining three levels of benefit from the product:
• the core product benefits;
• the actual product benefits; and
• the augmented product benefits.
The product life cycle (PLC) is a useful concept to describe how products progress
from introduction through to obsolescence. The theory is that products, like living
things, have a natural life cycle beginning with introduction, going through a
growth phase, reaching maturity, then going into decline, and finally becoming
obsolete. In the introduction phase, the product’s sales grow slowly, and the
profit will be small or negative because of heavy promotion costs and production
inefficiencies. If the product is very new, there will also be the need to persuade
retailers and others to stock the product. In the growth stage, there will be a
rapid increase in sales as the product becomes better known. At this stage profits
begin to grow, but competition will also be entering the market so the producer
may now need to think about adapting the product to meet the competitive
threat. In the maturity phase the product is well known and well established: at
this point the promotional spend eases off and production economies of scale
become established. By this time competitors will almost certainly have entered
the market, so the firm will need to develop a new version of the product. In the
decline phase, the product is losing market share and profitability rapidly. At this
stage the marketer must decide whether it is worthwhile supporting the product
for a little longer, or whether it should be allowed to disappear; supporting a
product for which there is little natural demand is very unprofitable, but
sometimes products can be revived and relaunched, perhaps in a different
market. Maintenance is where the marketing manager is using various tactics
(sometimes called mid-life kickers) to keep the product in the public eye and
maintain sales, and proliferation is where the firm introduces variations on the
original product in order to extend the life cycle. Sometimes these maintenance
tactics will keep the product alive and successful for many years, but eventually
the PLC theory implies that the product will be superseded and will go into
decline.
The Boston Consulting Group (BCG) developed a matrix for decision-making:
Stars are products with rapid growth and a dominant share of the market.
Cash Cows are the former Stars. They have a dominant share of the market, but
are now in the maturity phase of the life cycle and consequently have low
growth.
Dogs have a low market share and low growth prospects.
, The Problem Child (?) has a small share of a growth market, and causes the
marketer the most headaches since it is necessary to work out a way of building
market share so as to turn the product into a Star.
Dodos have a low share of a negative growth market, and are probably best
discontinued.
Products can also be divided into physical products and services. For many
marketers, the difference between services marketing and the marketing of
physical goods is negligible. This is for the following reasons:
• The marketer’s definition of a product as being a bundle of benefits. An
individual seeking to be cheered up may achieve this by going to a good movie (a
service) or by buying a new shirt (a physical product). The benefit is basically the
same.
• Difficulties of definition. Most physical goods contain a service aspect, and most
services contain a physical product. In other words, most products lie somewhere
along a continuum between purely service and purely physical products.
• Consumer orientation means that we should be looking at what the consumer
thinks, needs and wants, not at defining our product in terms of its
characteristics.
Services carry additional risks.:
• Consequential losses arise when a service goes wrong and causes a loss to the
customer.
• Purchase price risk is the possible loss of the purchase price when the
consumer buys a service that does not work. The usual consumer response is to
refuse to pay for the service, so it is advisable for the supplier to check during the
service process that everything is satisfactory.
• Misunderstanding is common in service provision because of inability to try out
services (trialability). Particularly in professional services the provider may feel
that the customer would not understand the finer details of what is being done,
and may therefore not bother to explain properly. This can easily result in post-
purchase dissonance and refusal to pay.
- Physical evidence gives the consumer something to refer to and to show
other people if necessary. Since service products are usually intangible, the
consumer of (say) an insurance policy will need some written evidence of
its existence in order to feel confident in the product.
It is therefore difficult to generalise about the process, but a frequently quoted
model of the NPD process was given by Crawford,7 and follows this sequence:
1 New product planning. The firm examines its current portfolio, opportunities
and threats and decides what kind of new product would best fit in with future
strategy.
2 Idea generation. Specific ideas for the product are expressed, perhaps through
a brainstorming session of the venture team.
3 Screening and evaluation. The ideas are checked for feasibility and
marketability.
4 Technical development. The engineering aspects of the product are
investigated, and a prototype is developed.
5 Market appraisal. Formal market research is carried out to assess the product’s
viability in the market.
6 Launch. Assuming the market research is positive about the product, the firm
puts it into production.
There are six broad types of innovation strategy:
1 Offensive. Pride in being the first.
2 Defensive. ‘Me-toos’, copies of other companies’ products, but slightly better
3 Initiative. Straight copies of other companies’ products. 4 Dependent. Led by
bigger companies, perhaps customers or suppliers.
