Understanding Products: Levels, Classification, Life Cycle & Portfolio
Understanding Products and Their Market Dynamics
Defining a Product
According to Jobber (2004), “A product is anything that has the ability to satisfy a consumer need.”
Levels of Product: Core to Potential
Products can be understood at five distinct levels, each building upon the last:
Core Product: The Fundamental Benefit
This is the most fundamental level, representing the core benefit or service the consumer is truly buying. It is the fundamental problem-solving benefit that a product delivers.
Basic Product: The Actual Offering
This is the actual product a consumer is buying. It is the version of the product containing those characteristics or attributes absolutely necessary for it to function.
Expected Product: Buyer Expectations
This is a set of attributes and conditions buyers normally expect when they purchase a product. Quality is one of the main examples.
Augmented Product: Beyond Expectations
This is what the customer receives beyond their basic expectations for a product. For example, a color television might come with an extended warranty or premium customer support.
Potential Products: Future Possibilities
This is the highest level, which can incorporate all the possible benefits the product provides today and could provide tomorrow, including future enhancements and transformations.
Product Classification: Consumer & Industrial
Products are broadly classified based on their intended use:
Consumer Products: Personal Consumption
“Products bought by final consumers for personal consumption.” Consumer products are further divided into four classes:
Convenience Products: Frequent & Easy Purchase
Consumer products that the customer usually buys frequently, immediately, and with a minimum of comparison and buying effort. Convenience products can be divided further into Staples, Impulse Products, and Emergency Products.
Shopping Products: Comparison-Based Buying
Consumer goods that the consumer, in the process of selection and purchase, characteristically compares on such bases as suitability, quality, price, and style. Examples include furniture, clothing, and used cars.
Specialty Products: Unique & High Effort
Consumer products with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Examples include specific brands and types of cars, or high-priced photographic equipment.
Unsought Products: Unrecognized Needs
Unsought products are consumer products that the consumer either does not know about or knows about but does not normally think of buying. Most major new inventions are unsought until the consumer becomes aware of them through advertising. Examples include life insurance and blood donations to the Red Cross.
Industrial Goods: Business & Production Use
Industrial goods are meant for use in the production of other goods or for some business or institutional purposes. Industrial goods are classified into:
- Production Facilities and Equipment
- Production Materials
- Production Supplies
- Management Materials
Factors Influencing Product Mix Decisions
Several factors can influence a company’s product mix:
- Change in demand
- Marketing influences
- Production efficiencies
- Financial influence
- Use of waste
- Competitor’s strategy
- Profitability
The Product Life Cycle: Stages of Evolution
A product life cycle (PLC) is the amount of time a product goes from being introduced into the market until it is taken off the shelves. Products often go through a life cycle with four distinct stages: introduction, growth, maturity, and decline.
Introduction/Development Stage
This is the first stage in the product life cycle. Before a new product is introduced into the marketplace, it must be created. The processes involved in this stage include idea generation, designing the new product, engineering its details, and the entire manufacturing process.
Growth Stage: Rapid Sales & Revenue
This is a period where rapid sales and revenue growth are realized. However, growth can only be achieved when more and more consumers recognize the value and benefits of a certain product.
Maturity & Saturation Stage
In the maturity stage, the product reaches its full market potential, and the business becomes more profitable. During the early part of this stage, one of the most likely market scenarios every business should prepare for is fierce competition.
Decline Stage: The Final Phase
The decline stage is the final course of the product life cycle. This unwanted phase will take place if companies have failed to revitalize and extend the life cycle of their product during the maturity stage’s early part.
Benefits of Effective Product Portfolio Management
Effective product portfolio management offers several key advantages for a business:
Strategic Data for Management
It helps provide crucial and important data to key members of management, enlightening them about the performance of products in the market. This data aids in the planning and execution of the business’s next strategies and plans.
Optimizing Cash Flow
The company requires a regular flow of cash for day-to-day business operations, such as paying overheads and staff salaries, along with the money required for investments in existing and future product lines.
Fostering Internal Team Synergy
All the products offered by the company and their operations are not managed by a single person, but rather by various departments and individual teams formulated by the firm’s management.
Target Industry Selection & Performance Analysis
Product portfolio management helps the management figure out why certain product lines are performing extremely well, working as cash cows for the firm, while some are not matching the required and envisioned plans and objectives.
Types of New Products: Innovation & Modification
New products can generally be categorized into two main types:
Innovative Products: Original Creations
A product resulting from study, research, and invention is called an innovative product. Other products to substitute such products cannot be found in markets. These are also called original products.
Modified Products: Enhanced Alternatives
If more useful products than those currently available are brought out in the market as alternatives, they are called modified products. In such products, some newness can be found. Products can be modified by changing color, design, features, packaging, brand name, etc., to give them a new appeal.