Reading: Lesson 1 - Product Management

11.1.A - Product Management

1. PRODUCT DEVELOPMENT

1. Companies develop a marketing mix to satisfy customers and make a profit. The marketing mix is made up of the product, distribution, price, and promotion plans. Offering products that meet the needs of customers would seem to be a company’s most important responsibility. The product is important, but it must be carefully coordinated with each of the other mix elements. We will examine how companies manage their products and make distribution decisions. A product consists of all attributes, both tangible and intangible, that customers receive in exchange for the purchase price. It includes both physical goods and services. Some products are very simple and easy for the customer to understand and use, and others are very complex. Because of the variety of customer needs, the uses for products, and the number of competing companies producing and selling products, product development decisions must be made carefully. If companies produce the wrong products in the wrong quantities without the features and services customers need, they will have invested a great deal of time and money with no chance to sell the products at a profit. They will quickly lose out to competitors who make better product decisions.
   
2. Product managers need to ensure that the company’s products satisfy customer needs. They need to ensure that the right products are designed, that the products are at the right location when needed by customers, and that the proper service, packaging, and branding enhance the product’s value. As described at the beginning of the chapter, the company that manufactures the machine that Alexis needs to purchase designed a product to perform a specific production function. The company is expert in the technology of equipment design, so it builds what it believes to be a good product that customers will prefer over the alternatives. Alexis wants a good piece of equipment but is also very concerned about delivery, installation services, maintenance, and cost. If the equipment manufacturer does not carefully consider all of Alexis’s needs, it probably won’t make the sale. Even the simplest products are made up of several components. An inexpensive handheld calculator consists of the operating unit to make the calculations, a case, display, and keys. It may be battery operated or use solar power or electricity. It could have a backlight to illuminate the display in the dark. It could be pocket- or desk-sized and be capable of special mathematical functions. Also, it might come in a variety of colors and include a protective case and an instruction manual. Given the combination of features, the price of the calculator could range from a few dollars to as much as $100 or more. If you were the person responsible for designing a calculator to sell, what combination of design features would you include? This example shows that product planning can be very complex. Businesses have many choices in designing products. In developing their product strategy, marketers pay close attention to their customers’ needs and wishes.
   
3. There are three levels of product design—a basic product, an enhanced product, and an extended product. The basic product is the physical product in its simplest form. It should be easy for consumers to understand and see how it can meet a need. The basic product of one company is usually similar to that of its competitors. The basic product will meet an important consumer need. However, most consumers are attempting to satisfy several needs at one time with a purchase, or they have very specific needs different from those of other consumers. In that case, the basic product will not be satisfactory. Therefore, a business develops an enhanced product, which offers different features and options for the consumer. For example, a computer can be produced as a desktop, laptop, or tablet. Other choices might include the size of the screen, the speed of the processor, and the memory capacity. If you visit the website of a computer manufacturer, you can see the many options available to prospective purchasers. Choices are grouped by categories of customers, such as education, home, small business, and large enterprises, making it easier for customers to design the computer system they need. The third level of product design involves the planning of extended products. An extended product includes additional features that are not part of the physical product but increase its usability. Examples are customer service, information on effective use of the products, and even additional products that improve the use of the original purchase. If you purchase a new tablet computer, you may want to purchase a service contract in case there is a problem. In addition, accessories such as an external keyboard could make keying easier. Some tablet computers require a wireless connection for printing. The right combination of choices allows customers to get just the right product to meet very specialized needs. Companies may offer a warranty (a statement from the seller about the product’s qualities or performance) or a guarantee (an assurance from the seller that a product will perform to the customer’s satisfaction for a certain period of time). This can help reassure the customer about the product.
   

2. PRODUCT SELECTION

1. After designing the product, product managers must make another set of decisions to plan the product mix element. The first decision is whether to offer a product line. A product line is a group of similar products with obvious variations in the design and quality to meet the needs of distinct customer groups. New and small companies may begin by offering only one category of product to its customers. That product may have choices of features, options, and enhancements, but the basic product is the same for all customers. With more experience and resources, the company may decide to expand its product line. One of the obvious ways to expand a product line is to offer different sizes of the product. That can be done with the serving sizes of food items, as well as with the sizes of automobiles. As an example, when sports utility vehicles (SUVs) were first introduced, most manufacturers produced one midsize model, such as the Chevy Blazer or Ford Explorer. As the popularity of SUVs grew, manufacturers began to appeal to other market segments with smaller models, such as the Toyota RAV4, and then very large models, including the Ford Expedition and Cadillac Escalade. Rising gas prices opened a market for fuel-efficient SUVs, such as Honda’s CR-V. Some companies offer only one model size, but others have a model in each size category for a full product line.
   
2. Another way to develop a product line is to offer variations in quality and price. If you visit an appliance store, you will usually find low-, mid-, and high- priced choices for each type of appliance, such as refrigerators, dishwashers, and microwaves. The price differences are based on the construction, quality of materials, and available features and options. A person buying a microwave for a college dorm room probably does not want the most expensive, full-featured choice, and so will be drawn to the lower-priced end of the product line. On the other hand, a gourmet chef making a purchase for a new kitchen may want only the highest quality and latest features. Once a company has made decisions about a product line, it continues planning by determining the product assortment. A product assortment is the complete set of all products a business offers to a market. A product assortment can have depth, breadth, or both. A company offering a deep product assortment carries a large number of choices of features for each product category it handles. Walk into a Bath and Body Works store and look at the variety of fragrances, colors, bottle sizes, and packages for any of the major products sold there. That is an example of a deep assortment. Compare that to the choices of bath lotions that you might find in a small drugstore, where the assortment would be limited.
   
3. With a broad product assortment, a business offers a large number of different but often related products to its customers. If you visit a garden center, you may find many different types of products for lawns and gardens, ranging from plants, shrubs, and trees to lawn mowers, hoses, and patio furniture. There may not be a wide range of choices within every product category, but customers should be able to satisfy most of their outdoor home needs at one location. As shown in the Figure below, businesses can choose any combination of depth and breadth for their product assortment. Some will be very small and specialized, and others will offer a wide variety of many different products. 
   

   
   

4. Two important product mix decisions are packaging and branding. Neither decision is directly related to the actual physical product itself, but each can be an important influence on purchase decisions. Most companies package their products before selling them. The package can serve four different purposes. First, it protects the product while it is being shipped and stored. Products can easily be damaged when they are grouped together for shipment from the factory to the retail store. Boxes and containers are needed for protection. The actual container or wrapping in which the individual product is packaged also offers protection on the store shelf and may provide security to keep the product from being lost or stolen. Second, the package can provide important information to customers on product composition, special features, and proper use. Boxes and containers also provide information to shippers on appropriate handling, storage, and delivery. A package can be designed to make the product easier to use. A plastic bottle of soda is less likely to be broken if dropped. An easy-opening lid or a container that fits the hands of the consumer makes product handling easier. Window cleaner that is premixed in a spray bottle is much more convenient than one that must be poured into a bucket and applied with a sponge. Finally, especially for consumer products, the package is often an important promotional tool. A well-designed, attractive package calls attention to itself on the store shelf, helps the customer recall previously seen advertising, and provides a reminder of the needs that the product will satisfy if purchased.
   

5. Can you name the brands of clothing, pizza, and toothpaste you prefer? Do you and your friends regularly shop at certain stores but not others? Product and store brands play a major role in buying decisions. A brand is a name, symbol, word, or design that identifies a product, service, or company. Why are brands so important to consumers? Have you ever shopped in a store that had generic (nonbranded) products or that sold only unfamiliar brands? With no information to guide you, it is difficult to make a product selection with which you are comfortable. You and people you trust have had experiences with various brands. If a particular company’s products consistently meet your needs, you will likely buy from that company again. If you have a negative experience, however, you are likely to avoid similar purchases in the future. If you are satisfied with one product from a company, you are likely to have confidence in a different product sold under the same brand. Businesses understand that brand recognition is an important influence in increasing sales. The levels of consumer brand awareness are shown in the Figure below.