Product Management: A Comprehensive Guide to Product Development, Pricing, and Branding

Posted on Aug 30, 2024 in Economy

Product

A set of benefits and services offered by a trader in a market. A favorable product is everything a person receives in an exchange.

A product includes tangible and intangible attributes such as (packaging, color, price, reputation of the manufacturer) that the consumer accepts as something that gives satisfaction to their desires or needs.

Classification of Products

• Consumer Products

These are products intended to be used and purchased by consumers, according to their wishes and needs. They can be used without an additional manufacturing process and are ultimately purchased to be consumed or used at home. These products are further divided into subgroups.

• Durable and Non-Durable: Durable goods are tangible items of daily use, for example (TVs, stereos, refrigerators, blenders, etc.). Non-durable goods are those that have a short lifespan (food).
• Convenience and Routine: These are products that consumers buy on a regular basis, without planning, for example (cigarettes, toothpaste, candy, etc.).
• Choice or Purchase: These are products that consumers compare in the process of selecting and purchasing, for example (clothing, perfumes, watches, etc.).
• Special or Specialty: These are items that consumers are willing to acquire and sacrifice their economy or effort for. They do not consider purchasing other items, such as (cars, computers, life insurance).
• Not Searched: These are items for which the consumer does not make an effort to buy. They arise from a need, for example (coffins, funeral services, health insurance).

• Industrial Products

These are goods or services used in the production of other articles, i.e., not sold to final consumers. Industrial goods include supplies, accessories, services, and even factories or equipment, and are classified as:

• Facilities (industrial plants, land)
• Equipment (tools)
• Operating materials (oil, stationery, light bulbs)
• Services (tax and accounting firms, advertising agencies, banks, etc.).

Positioning of a Product

Positioning refers to an overall marketing program that influences the mental perception (feelings, opinions, impressions, and associations) that consumers have of a brand, product, product group, or company, in connection with the competition.

It is very important that companies carefully develop marketing programs to create and reinforce the desired positions. Otherwise, consumers will define their position.

Marketers have different strategies to achieve and strengthen the desired position for their company, brand, product, or product group. Among those available are the following:

• Positioning based on attributes. The best example is perhaps the Volkswagen sedan car, which for more than 35 years held the position of small cars in the minds of consumers. While it may not be the best-selling small car now, it still holds a leading position for small cars in everyone’s mind.
• Positioning based on benefits. These are products purchased by consumers for their benefit once established. An example is a toothpaste like Crest, which “fights tooth decay,” or Sensodyne for “sensitive teeth.”
• Positioning based on the occasions of use: These are products that are purchased only for certain periods or dates, such as turkeys, which are consumed more regularly at Christmas, or some brandy like Old Orchard, which once marketed the product as being consumed only at night.
• Positioning based on users: These depend on the promoters that appear in marketing campaigns, such as Zucaritas, which made the promise of “Breakfast of Champions” where elite athletes promoted this product, and thus reached the target market.

Product Line and Mix

Product Line: A group of closely related products because they satisfy a need or be used together. It is a large group of products with similar characteristics or uses, such as:

White goods (refrigerators, stoves, cabinets, etc.)

Online electronics (TVs, irons, radios, consoles, stereos, toasters, etc.)

Cosmetics line (pencils, lipsticks, blushes, enamels, stains, etc.)

Product Mix: A list of all the products a company offers to the consumer. The structure of the mix has two dimensions: width and depth.

Width is measured by the number of products offered by the company in a line. These are also known as variety.

Depth is the range of sizes, colors, models, prices, and quality that a line offers.

Factors Affecting Changes in Product Mix

• Population of consumers and industrial users. A sector of the population can induce the company to change its product mix, as tastes and needs change.
• Purchasing power. When purchasing power changes, it is necessary to change the product mix and market segments that are enlarged or reduced.
• Consumer behavior. This includes the motivation, attitude, preferences, and buying habits of consumers.

Product Portfolio

The set of all products grouped into lines that an organization offers to its market. For example, Hickok sells products grouped into four major product lines: perfumes, jewelry, belts, and leather.

A portfolio of merchandising products has four fundamental characteristics: width, extension, depth, and consistency:

Width: Product lines offered by a company (belts, jewelry, perfumes, leather goods).

Depth: Relates to the number of variants or versions of products that a company offers in each of its product lines (perfume 500ml, 250ml, etc.).

Extension: Is the total number of products that make up a portfolio.

Consistency: Is the point on how the lines are related in terms of end use, demand for products, distribution systems, procurement, and so on.

Model Portfolio Analysis

The “BCG” matrix, developed and popularized by a group of consultants from Boston (BOSTON CONSULTING GROUP), uses market share-market growth to analyze a product portfolio.

The BCG matrix is divided into four cells, each of which illustrates a different type of product, question or problem children, stars, cows, dogs.

Question or problem children: Products with low market share require a lot of resources to finance growth (machinery, manufacturing processes, personnel, etc.). These products are on the market as a question is “blown.”

Star: Question mark products that have become successful stars. They have a high market share and high growth. These products are generally profitable and become “cash cows” later.

Cash Cow: These products generate large cash flows to their businesses and do not need to finance expansions in their plants to meet demand and maintain a leading market share. When products are worn out, cash cows become “dogs.”

Dog: These are products for which the market is not growing. They are products that consume more resources than they create. These products should be disposed of as soon as possible from the product portfolio and become “flea products.”

Stages of Life Cycle

Stage of Market Introduction

The introduction phase (also called presentation) occurs just after a new product is introduced into the market. Sales are low because there is not a wide acceptance of the product on the market. The availability of the product (for the buyer) is limited. Competition is limited or nonexistent.

Growth Stage

If the market accepts the product, sales increase rapidly. Physical distribution planning is difficult at this stage of growth (also called acceptance). However, product availability is extended rapidly throughout the geography to accrue the buyer’s interest in the product. Profits increase because customers know what product they want.

Maturity Stage

The previous stage of growth can be quite short, followed by a longer period of maturity. The increase in sales is slow or has stabilized at a level, the maximum levels of sales. At this point, you reach higher profitability and more time can be extended with different marketing techniques.

Decline Stage

There comes a time when sales decline (decline or decadence) in most products due to changes in technology, competition, loss of interest, or by the customer. Often prices fall and profits shrink.

Brand

A brand is a name or symbolic term used to identify products or services of one seller or group of sellers, to differentiate consumer products.

Purpose of the Brand

• Differentiation from competition
• Be a sign of warranty and product quality
• Give prestige and seriousness to the manufacturer
• Help the product be sold through promotion
• Place the product in the consumer’s mind

Features of the Brand

• Short name
• Be easy to remember
• Pleasing to the eye
• Be adaptable to any advertising medium
• Gather the necessary requirements for registration and be protected by law

Classification of the Brand

• Brand family is used for all items of a company, such as Nestle, which uses its brand name for all its products.
• Individual brand refers to the name that the manufacturer provides to a specific product, regardless of the firm that produces and manufactures other articles.

Example: Nestle milk

Advantages of the Brand

• A well-designed brand is easily identified, which favors the purchase.
• Protects consumers by ensuring consistent quality.
• An established brand ensures that consumers can compare the quality of the products they buy.
• There is a tendency to improve the products over time.

Importance of the Brand

• To the consumer: The brand is the means by which the buyer identifies the product or service and the identification of product quality.
• For the seller: Allows the seller the opportunity to announce the product, expand the product, control, and participate in the market.

Container and/or Packaging

Kotler defines a package as follows:

The activities consist of designing and producing the container or packaging of a product. It may include up to three levels of material.

The primary package is the packaging of the product. The bottle of lotion is the primary package. The secondary packaging refers to material that protects the primary packaging and is discarded when you use the item. The cardboard box containing the bottle of lotion is a secondary packaging that provides extra protection and promotion opportunities. The shipping packaging refers to packaging needed for storage, identification, and transportation. A corrugated box containing six dozen lotion is a shipping package.

Packaging is defined as any material that contains an item with or without packaging to preserve and facilitate its delivery to the consumer.

Objective of the Package

To protect the product, packaging, or both, and be a promoter of the article within the distribution channel.

Classification of the Package

In terms of packaging, in the Mexican market, there are so-called “untouchables” and “ephemeral” packages.

The Untouchables become virtually immovable packages for years and their life cycle is very long, because of their physical presentation and psychological connotations that give consumers. An example is the packaging of beer or non-returnable packaging of cardboard toothpaste.

Most of the products of more recent onset packaging changes frequently, sometimes every two or three years, supplementing or replacing the function of advertising. These packages are called ephemeral. An example is a detergent plastic bag or a cardboard box for a drink.

Rules

The container or package shall bear the following rules:

• The name of the company
• Place of origin
• Company address
• Population
• Content
• Shall be governed by the Health Code in question, which requires the presentation of the packaging or packaging.
• Date of manufacture and expiry, or both, depending on the product.

The following table describes some of them:

Packaging

It brings together a set of objects or packages, equal to or different from one another, in order to facilitate its handling. The grouping can be done through boxes, bags, or containers, which have the function to cover or protect small and fragile objects, as well as heavy machinery or specialized equipment.

Packaging, in its most brief, is the housing that will protect the goods for transport and storage.

Features:

• It acts as a means to bring the goods more efficiently from its origin to the place of usage.
• In its application, it is used in art, science, and technology for preparing and transporting goods to final sale.
• Find the appropriate way to ensure the delivery of a product to the ultimate consumer in good condition at minimal cost.

Objective of the Packaging

To take a product and protect its contents during transportation from factory to consumer centers.

Functions of Packaging

Protect products against shrinkage, moisture, dust, insects, and rodents, or theft. It is labeled to indicate the product and manufacturer-destination.

Classification of the Packaging

• Packing for export.

The following characteristics of the product, market, and types of transportation to be used for export should be taken into account:

• Engineering aspects. (Material, size, protection from weather conditions, height of stowage, security during transport, set to open or close).
• Design. (Labels, instructions, colors, product differentiation on competition).
• Laws and regulations in the country of origin and destination. (Requirements for labels, hazard statements, information on size, weight, and price, language).
• Shipping and transport. (Type of transport, handling, and inventory control)
• Packaging product line.

This type of packaging requires that all the packaging is identical for all products or to use a feature on all packaging, consumer products such as food.

• Packing for later use.

In this type of packaging, a package is designed and promoted that demonstrates anything after consuming the product. This type of packaging is unusual.

• Multiple packaging.

This type of packaging places multiple units in one box. It helps to increase overall sales and unit sales of a device used to introduce special offers and help retailers because they cut the unit costs of handling and relevant market prices. Examples include motor oil, beer, soap, candy, towels, sheets, etc.

Service

The set of activities, benefits, or satisfactions offered for sale or supplied in relation to sales.

Features

• Effectiveness
• Functionality
• Fast
• Opportunity
• Customer service
• Honesty
• Reliability

There are four characteristics that distinguish the service of good:

• Intangibility: A service is not perceived by the senses.
• Perishable nature: The service is momentary, meets the need of consumers, and need not be stored for some time.
• Standardization: A service is dependent on action to create the benefit without being standardized, and did not occur online.

Involvement: The service takes place within a timeframe where the purchaser of it is in the Formula

Price Strategy

Price

In ancient times, man purchased the items needed by barter, that is, through the exchange of goods. Money subsequently appeared as a means to facilitate trade transactions.

Money is only the social measure of value. There are two types of values:

• Use value. When the value of a thing depends on the value specified for the individual representing this value, it is subjective and individual.
• Exchange value. When the value of a thing depends on the importance that others will award and meets the needs of who owns it indirectly.

The price is the amount of money needed to acquire in exchange the combination of a product and accompanying services. The key to determining the price of a product is to understand the value consumers receive from it.

The most common conflicts in the price of the product arise within the distribution channels between the buyer and the seller, and the maintenance of resale prices.

Importance of Price to the Economy

Balanced pricing is the most substantial to maintain a healthy economy.

Role of Prices

• Regular production: The price is an indicator that helps you decide what to produce and in what quantity, as the decision to produce also depends on consumer reaction to product price.
• Regular consumption: Rationing acts as an agent, adjusting production to consumption needs of society. This follows from the law of demand.
• Distribute the production: Between different members of society. This distribution depends on wages, profits, interest, and income derived during the production process.
• Sponsor research and development of the country: The gains allow companies to provide money for research and development.

Importance of Price for Companies

Winnings are determined by the difference between your income and costs. Revenue depends on both prices set by the company and the amount of products sold. The price assigned to a product has an impact on company revenue and profits or utilities.

The price of an item or service determines a significant market demand, affecting the competitive position of the company and its market share. In setting prices, marketers should consider the long-term effects and their personal desires for profit.

Objectives of Prices

The goals represent not only the purpose of planning but also the end toward which the organization is headed. The objectives of the company are the same basic plan.

• Preserve or enhance their participation in the market. To maintain or increase the participation of the company in the market, depending on what it determines.
• Stabilize prices: In industries where demand fluctuates frequently, and even violently, try to maintain stability in its pricing.
• Achieve rate of return on investment: Establishing a percentage increase on sales large enough to cover the projected operating costs plus a desired profit for the year.
• Maximize profits: It is likely that most companies aim at achieving the largest possible profit. Profit maximization is more likely to benefit a company and the consumer when practiced long-term.
• Fight or avoid competition: Many companies, regardless of size, knowingly put a price on their products to confront or avoid competition.
• Market penetration: To use relatively low prices to stimulate market growth and take over a large part of it.
• Promotion of the product line: Set a price increase of all online sales with less emphasis on profits of the product.
• Survival: It is sometimes difficult to compete in the market.

Factors Involved in the Fixing of Prices

Cost

It is an essential element in pricing because it is essential to measure the profit contribution and for comparisons between products and hierarchies. Its function is to guide the employer to determine the most profitable product mix and the costs can be incurred without affecting benefits. The cost is all money paid so that it can perform some operation.

Classification of Costs for the Determination of Price

1 .- Related evaluated primarily with:

• Direct material costs: Costs of materials in the production of an article.
• Costs of direct labor: Labor costs, skilled or not, of employees.
• Overhead costs: Expenses that cannot be readily associated with the product.

2 .- Related to the duration of benefit cost:

• Investment costs: Equipment, buildings, systems, etc.
• Operating costs: Costs incurred in the administration of the company.
• Distribution costs: Costs of physical distribution of the product.

3 .- The amount related to operations:

A) Fixed costs: Costs necessary to begin operations.

B) Variable costs: Are those who depend on the volume of production.

4 .- From the economic viewpoint:

• Total average costs: Those that result from manufacturing a product unit.
• Marginal costs: Additional costs
• Opportunity costs: Costs of doing one thing over another.

5 .- From an accounting viewpoint:

• Costs incurred or historical: Those already made at the time of registration.
• Estimated costs: Advance estimates of the costs to prevail in the future.
• Standard costs: The sum of prices obtained on the specifications of a product.

Point of Balance

The balance system is emerging as a key tool for planning of utilities, making decisions, and solving problems. This method provides employers an overview of the essential relationships of income on sales, costs, profits, and the different volumes of production and sales.

The breakeven point is where total costs are exactly equal to total income.

Demand and Supply

Product prices are determined by the market. Here, the laws of supply and demand come into play.

Request: These are the quantities of a product that consumers are willing to buy at any market prices. Reducing demand means a substantial reduction in prices. If this reduction is permanent and large-scale, it requires that for some time conducting assessments. A simple and common way to set prices based on demand is price discrimination.

Law of the Request: If prices rise, demand falls, and if prices fall, demand increases. The goods that consumers are willing to buy will be determined by the following factors:

• The groups and consumer preferences, which will be conditioned by custom, habit, and culture.
• The number of consumers.
• The price of the substitute products that will be more remarkable because most products are perfect substitutes.
• The income of consumers.
• The general level of prices.

Fluctuations in Demand

It is the shift of the demand curve in either direction, caused by changes in the determinants of demand.

Elasticity of Demand

It is a basic tool to measure the sensitivity of turnover to a change in any of several factors operating.

Types

• When a drop in the price of goods does not alter the quantity bought, it says that the elasticity of demand is zero.
• When a small reduction in the price of a product produces a very broad increase in purchasing the property, it is said that demand is infinitely elastic.

Cross Elasticity of Demand

The elasticity of demand for a good depends on the existence of substitute products complementary.

Offer: Are the quantities for each product that producers are willing to produce at the potential market prices.

Law of Supply: The amount of goods that producers are willing to put on the market tend to vary in direct relation with price movement, that is, if the price drops, the low bid, which increases if the price increases. Such goods shall be determined by the following factors:

• The number of firms in the industrial sector
• The productive capacity of existing firms
• The cost of production factors
• Production techniques

Fluctuations of Long-Term Supply

That in determining alterations occur sufficiently intense to cause visible changes, sometimes it is necessary for long periods elapsed.

Increase and Reduction of the Offer

An increase in supply will cause a shift in the supply curve to the right of the original curve.

Elasticity of Supply

Refers to changes in the quantities of products that sellers are willing to put on the market in response to changes in the price.

• Elastic supply: When a change in price leads to a proportionally greater change in the quantities offered.
• Inelastic supply: When the induced change in the quantities offered is proportionally less than the change in price.
• Supply unit: When a change in price leads to a proportionally equal change in the quantities offered.

4 .- Competition

Price fixing in relation to competitors that the employer makes you realize exactly the price level of competition. As price is an important competitive weapon, it must make four basic considerations:

• A company must have its own policies in terms of price.
• Attention should be given that other factors are related to prices in the marketing mix.
• Prices should be related to the product life cycle.
• According to the strategic classification of products or product portfolios, price should be related to their classification strategy for generating cash and profit accounting and its position.

The importance of price differentiator lies in the fact that it induces consumers to prefer the product of a particular company solely because of differences in prices, in addition to the guarantee of high quality, fast service, good treatment, etc.

The main feature that distinguishes the powers of the monopoly is that it is not the type of constraints faced by the industrial product that is in constant struggle with the competition.

The oligopoly if you have competitors, and any changes you make an undertaking in the price of a lead, almost automatically, as other firms also change the product prices.

The competition is less keen and aggressive in a market oligopoly with unrestricted access, where considerable number of companies makes the competition in a totally impersonal phenomenon.

PRICE WAR

Reasons for starting the price war

• one competitor thinks that market prices are too high and decided to download.
• One competitor is willing to sacrifice to gain market share and margins established.
• When competitors do not know or trust each other, any movement in the price, no matter how minimal, triggers a cascading decline.
• When one of the competitors have excess capacity or inventories that financial decline.

The first step to face a price war is to know the terrain that preparing a diagnostic steps in the following areas:

• consumer sensitivity to price changes
• the cost structure of their organization, their ability to achieve economies of scale and strategic positioning.
• Position on a possible price scenario.

The second step is to stop price war:

• report publicly on their strategic intentions with respect to prices.
• Reveal the cost structure advantages.
• To seek a diplomatic settlement.
• Become the price leader or follow the price leader if it already exists.

The third step to face a price war is to implement competitive actions that have nothing to do with prices:

• Focus on quality not price
• Alert on the risk of market quality.
• Emphasize other negative consequences.
• Asking for help from the authorities.

The fourth step to a price war is to get into the price war, reasons:

• competition threatens the backbone of the business.
• There is an important segment of price sensitive market.
• It has an advantage in cost structure.
• It has more capital than the competition, which will stand longer at war.
• It has economies of scale
• You can quickly neutralize or eliminate the lustful.
• The price war can be implemented quickly.

OTHER FACTORS PRICE DTERMINANTES

LIFE CYCLE OF A PRODUCT:

• INMTRODUCCION: Depending on the strategy you want to have opted for a higher or lower price
• GROWTH: prices begin to stabilize as new competitors begin to appear.
• MATURITY: develop strategies to keep the product on the market.
• DECLINE: the firm has to make back a significant reduction in prices before deciding to modify the product.