The Concept of Product in the Context of Marketing - Essay Example

Product Overview The research paper is on product marketing. Here, different concepts regarding product marketing shall be discussed. Concept of a Product A product is a tangible object that can be seen, touched and felt. Generally, in marketing sense, a product indicates a bundle of goods and services. A product can also mean the following – merchandise, the output of certain process, and consequence of certain action (Princeton, n.d.). The Concept of Product in the Context of Marketing Product in marketing has an entirely different concept and meaning. In Marketing, before defining a product, it is really important to understand the following factors: Where is the company now? What is the potential market? Where does the company want to go? What do the customers want? What are the ways in which the company can enhance its methods? Is the technical development feasible? (King, n.d.) Concepts Relevant To the Definition of a Product Finding the needs of the customers: In modern economy, understanding the needs and wants of the customers is very important. It is very essential to understand the fact that a particular product must match with the customer’s requirements. For this it is essential to segment the market to find out the appropriate customer segment. After market segmentation, the particular product must match with the particular customer segments requirements. Laying down the requirements of the company offers the following benefits: Explicating the needs of the company Understanding the scope of the customer’s requirements Helping to get an insight into market trends and sizes Understanding the competitive and regulatory environment Factors That Influences Product in Marketing Context The factors are marketing mix, distribution of products, pricing structure and the overall macro – economic environment. Even extrageneous factors like strength of the competitor, market share of the competitor are also equally significant factors. A product is the heart of marketing. Marketing means understanding the needs and requirements of the customers and delivering them a product that exactly fits their requirements. Therefore, the very purpose of marketing is to develop a product that matches with what the customers want. Marketing becomes very convenient and a simple process if the whole product exactly suits what the customer has been looking for. This proves that marketing is in-complete without the right product to sell. How Can Business Develop The Right Product? A product can be developed only after a proper market study. Studying the market means studying the consumer behaviour. This can be accomplished through market research. After getting the inputs from studying the market, it is central to identify the apt technology of production and the feasibility of production. Moreover, the market segmentation needs to be done. The objective of segmenting the market is to ascertain the segment of consumers who requires the product and can afford to buy it. Product has different levels and each of these levels constitute a hierarchy. The hierarchy of product levels is: Basic Product Expected Product Augmented Product Potential Product At the heart of the product hierarchy is the customer benefit. A product can be distinguished with respect to durability and tangibility. Using the durability and tangibility parameter, a product can be differentiated into three groups – Non durable goods – tangible goods like bread, chocolate, wine, and milk Durable goods – not consumed at one time. Common examples include refrigerators, cars, television, and so on Services – they are in-tangible, variable and perishable products. It should be noted that services cannot be separated from the service provider Products can also refer to Consumer goods and industrial goods. Consumer goods might be classified on the following basis – Shopping goods Speciality goods Unsought goods Industrial goods can be classified on the basis of their entry into the manufacturing process and their relative worth (Kotler & Keller, n.d.). Why Should A Product Be Differentiated? There are different kinds of products available in the market vying for customers’ attention. Are all the products similar? The answer is no. Then what is the need for differentiating one product from another? The answer is simple. All the products available in the market may not cater to the customer’s requirements. Moreover, for one particular use there can be hundreds of products in that category. For example, the case of toothpastes can be considered. Toothpastes satisfy the requirement of cleaning the mouth. However, there are different companies that sell toothpastes in the market. Popular among them are Colgate and Pepsodent. However, both these companies have succeeded in differentiating their products. They have done this to deliberately create a different image of their product in the minds of the customers. All products may not satisfy similar needs of the customers. A product that satisfies the need of customer A may not satisfy the need of customer B. Therefore, in such a case a product need to be differentiated. Companies differentiate their products to create a unique selling point in the minds of the customers. If customers do not feel the difference between the products of company A and company B, then why shall they buy the products of company A or for that matter company B. Companies have smart ways to differentiate their products. They do it through advertising (aggressive at times), colourful packaging, branding, and marketing propaganda. Let an example of how smart differentiations have improved a company’s sale be considered. People use elevators without any idea of their destination. Otis introduced a smart concept in its elevators. It introduced a centralised panel. This panel exactly told which floor a person would be taken to. This smart differentiation helped Otis beat its rivals and considerably improve its sales. There are different basis of differentiating a product. They are on the basis of – Form Features Durability Reliability Performance Quality Conformance Quality Reparability Style Porter’s Five Forces Model and Product Marketing Porter’s five forces model have important implications for product marketing. First and foremost, it is important to understand Porter’s five forces model before understanding the implications. Michael Porter’s five forces model facilitates a marketer to understand the competitive environment around them. The five forces model is similar to other tools of management like SWOT analysis, and SBU (Strategic Business Unit). The reason of developing this model is to provide a tool to managers to derive a competitive advantage over and above the other players. The five components of the five forces are – Supplier power – The company should try to keep the bargaining powers of the suppliers to minimum. Buyer power – The product company should have well segmentation of their target market so that the buyers are not concentrated. If the buyers are not concentrated, they can keep the bargaining power of the buyers within the desired limit. Threat of substitutes – The product company should have well dedicated research and development department in place. This would help the company to safeguard itself from the threat of the substitutes. Degree of rivalry – Rivalry basically involves inter-firm rivalry among the firms that produce same products. More the rivalry, higher is the cost for the firms and there it should be avoided. Barriers to entry - If the barriers to enter in to the industry are high, it would result to lesser competition and vice versa. The Implications of Porter’s Five Forces Model on Product Marketing Porter’s five forces model have important implications for substitute products, supplier power and buyer power. According to Porter, the basic feature of a substitute product is that it has to be from a different industry. Threat of substitute products is prevalent as and when the demand of the basic product is influenced by the change in price of the substitute product. The more the substitute products, the more elastic the demand of the product is. Large number of substitute products restricts the firm’s ability to raise prices. As for example, let the case of the automobile industry be considered. For the manufactures of tires in the automobile industry, retreads of tires are substitute products. The cost of new tires is not very expensive for cars. However, this is not the case in the trucking industry. In the industry of trucking, the expenses of the new tires not too high. Therefore, retreading becomes very important. The old tires must be changed. Therefore, in the trucking industry, retreading is a viable substitute product. When the threat of substitutes which can be in the form of price, competition affects the industry then there can be reasons for concern. A manufacturing industry needs raw materials and labour to manufacture its products. They have to get these from suppliers on a regular basis. This leads to the creation of a relationship between the buyer and the suppliers. If the suppliers are strong, they can sell the raw materials at a very high cost. Suppliers becomes powerful in the following cases- Forward Integration Concentration of Suppliers Significant cost to switch suppliers. There can be situations when a buyer is more powerful than the suppliers. If buyers are stronger than suppliers, then it can have a profound impact on the producing industry. Normally, Competition is assumed to be in a market condition when there is a free entry and free exit of the firms. This is said to be a condition of perfect competition in Economics. However, in a market condition when there are large array of suppliers and a sole buyer, then the market situation is called monopsony. In such a situation, it is the buyer who determines the price. Even though in reality, very few situations of monopsony exist, however, there exists certain asymmetry between the buyers and the sellers. Buyers are powerful in the following cases – When there is a high concentration among the buyers When buyers purchase a major portion of the output – distribution or when there is a standardized product Buyers can also be powerful is there is a strong threat of backward integration. They can have the ability to buy out the producing firms or the rivals (Purdue University, 2004) The Concept of Product Life Cycle A very important concept in the understanding of product management is the product life cycle. Like a human being, a product also passes through various stages right from its inception to its withdrawal from the market. A human being has to pass through different stages in his life cycle – birth, young age, adolescence, maturity, middle age, old age, extreme old age and death. Likewise, a product also has to pass through several stages in its life cycle. They are introduction, growth, maturity and decline. Brief Descriptions of the Various Stages of the Product Life Cycle Introduction – This stage covers all the stages right from the conceptualization of the product to its launch in the market. Before a product is launched in the market, it is conceptualized. A concept can be an idea of a product. After developing the concept, the idea is passed through a screening test. Here, the feasibility of developing the concept into a product is done. After the concept passes the screening test, the product is commercially developed. Not all concepts are developed into final products. Growth – If the product meets the tastes and preferences of the customers, it results in high sale. The growth phase of a product is that stage where the product is extremely popular in the market. This attracts competitors into the market. More than the price, it is the innovation of the product that sustains the high sales. Producers look for export of the product to capture the overseas market. Maturity – In the maturity stage, the product is well established due to standardization of products and distribution. Here it is very difficult to increase sales. The reason is competition among large number of firms. Therefore, firms look to increase their sales by lowering the cost of the product. Decline – In the decline stage, the sales diminishes. This happens for outdated technology and distribution systems becoming in-effective. Products are generally retired from the market (University of Delaware, n.d.) In his paper, ‘Competitive Strategies for New Product Marketing over the Life Cycle’, Philip Kotler focuses on the strategy of formulating competitive marketing dimension for long run for a new product that is launched into the market. He has dealt with the problem through dimensions. He first deals with the market model and the accounting model for computing the profits. Then he deals with the different strategies for developing a long run marketing strategy. Kotler further concentrates on the various duopoly models for firms dealing with competition. Then he switches his attention to developing various alternative strategies which will make his findings on the topic more meaningful. The basic purpose of Kotler’s paper is to enable firms to make the right decisions for competitive marketing before launching the product and taking it through its entire life cycle. However, firms need to take into account several variables like advertising cost, cost of distribution, and marketing cost (Kotler, 1965). In their paper ‘Innovation Diffusion and New Product Growth Models in Marketing’, the authors Vijay Mahajan and Eitan Muller have assessed modern models for new product acceptance. A wide range of issues for further study of the topic have been discussed. The purpose of a diffusion model is basically to put forward the extension of innovation among the set of customers in a given time period using functions of mathematical models. The model wants to inform the number of adopters and the likely number of adopters (Mahajan & Muller, 1979). Importance of Product Quality A customer has several options and choices in the market. Competitors have similar products to sell. The Information Technology can provide product information to the customer. Thus, it is very difficult for a firm to convince the customer to buy its product. Therefore, a firm needs to concentrate on quality than volume to succeed. A good quality product has the highest probability of sale in the market. In the Journal of Marketing in 1994, the authors Niraj Dawar and Philip Parker have conceived the terminology of Marketing Universals as Consumers’ use of Brand Name, Physical Appearance, Price and Retailer Reputation as Signals of Product Quality (Dawar & Parker, 1994). The concept of Marketing Universals means, consumer behaviour towards a segment and a specific category of products that are not variant irrespective of cultures. Using quite a few definitions of culture and three criteria for universality, the authors have evaluated if the use of, price, retailer reputation, brand and physical product appearance as signals of quality can be considered as marketing universals for products related to consumers electronics (Dawar & Parker, 1994). The Importance of Product Life Cycles A product life cycle infers the development of a product in terms of sales and revenues. Any product has to go through the four stages in its life cycle. They are – introduction, growth, maturity and decline. Previous work on the topic has endorsed the importance of product life cycle as an important tool for product planning and control. Even though product life cycle has been considered within the framework of management, qualitative methods have been used for their measurements. The author in this work addresses measurement of the product lifecycle, which is necessary before its quantification. The author also provides promotional strategy for each individual stage in the product life cycle and statistical proof for each phase of product life cycle for a selected item (Cox, 1967). New Product Development Developing a new product is very important and extremely complex. For manufacturing firms, it is extremely important to introduce new products at appropriate time. However, this is not easy. In their work, ‘A model of new product development: An Empirical Test’, the authors Zirger and Maidique have tried to understand the differences between successful and unsuccessful product developments. Based on their study, the authors have come to the following conclusions regarding the important factors that affect the products outcomes. Quality of the R&D of the organisation Technical performance of the product Value of the product to the customer The support of the management during the phase of development of the product and the process of product introduction (Zirger & Maidique 1990) It is very significant for the firm to have a transparent understanding of the issues that manipulate the product development. This will help it to make a proper utilization of its R&D resources, produce quality products and increase its bottom line substantially. Product Design The design of the product is very important for its commercial success. Among the different parameters that customers use to judge a product, design plays a significant role. The basic reason why a product continues to be in the market is that consumers have accepted its design and they are comfortable in using it. In his paper, “Seeking the Ideal Form: Product Design and Consumer Response”, Peter H. Bloch has underlined the significance of either the physical form or the design of the product. According to the author, a good design makes a proper communication to the customers, and adds value to the product by increasing its usage. Moreover, to attract the attention of the researchers to the subject of product design, the author has introduced a theoretical model and several proposals to explain how the design of the product communicates to consumers’ behavioural and psychological responses (Bloch, 1995). Conclusion The entire discussion looked after the various factors related to product marketing. The concept of product is integral to marketing as no marketing is possible without it. Different concepts relevant to the topic have been discussed. The discussion has highlighted a number of key elements related to product such as product life cycle, product differentiation, difference between products and services among others. The discussion has also enabled to recognise the facts and significance of development of new product as well as product design. References Bloch, P., 1995. Seeking the Ideal Form: Product Design and Consumer Response. JSTOR. [Online] Available at: http://www.jstor.org/pss/1252116 [Accessed November 30, 2010]. Cox, W., 1967. Product Life Cycles as Marketing Models. JSTOR. [Online] Available at: http://www.jstor.org/pss/2351620 [Accessed November 30, 2010]. Dawar, N. & Parker, P., 1994. Marketing Universal: Consumers’ Use of Brand, Name, Price, Physical Appearance, and Retailer Reputation as Signals of Product quality. JSTOR. [Online] Available at: http://www.jstor.org/pss/1252271 [Accessed November 30, 2010]. Kotler, P., 1965. Competitive Strategies for New Product Marketing Over the Lifecycle. JSTOR. [Online] Available at: http://www.jstor.org/pss/2627805 [Accessed November 30, 2010]. Kotler, P. & Keller, L. K., 2009. Marketing Management. Pearson Prentice Hall. King, P., No Date. Product Definition. Vanderbilt University. [Online] Available at: http://www.google.co.in/url?sa=t&source=web&cd=1&ved=0CBYQFjAA&url=http%3A%2F%2Fwww.bme.vanderbilt.edu%2FKing%2FTeaching_powerpoints%2Fchapter_4_new.ppt&rct=j&q=Product%20Definition.%20%2B%20Vanderbilt&ei=GA31TLTdJcrlrAey3vTxBg&usg=AFQjCNGO0KSz2QTwEh11GHGjv42QZzcriw&sig2=goEx7a5UIWl1On-88s4rAQ&cad=rja [Accessed November 30, 2010]. Mahajan, V. & Muller, E., 1979. Innovation Diffusion and New Product Growth Models in Marketing. JSTOR. [Online] Available at: http://mjbrouwer.pbworks.com/f/sds.pdf [Accessed November 30, 2010]. Purdue University, 2004. Industry Analysis: The Five Forces. Purdue Extension. [Online] Available at: http://www.extension.purdue.edu/extmedia/EC/EC-722.pdf [Accessed November 30, 2010]. Princeton, No Date. WordNet Search - 3.0. Noun. [Online] Available at: http://wordnetweb.princeton.edu/perl/webwn?s=product [Accessed November 30, 2010]. SCRIBD, No Date. Strategic Management. Notes. [Online] Available at: http://www.scribd.com/doc/43927623/13084539-Strategic-Management-Notes-for-MBA-3rd-Sem-UTU-1 [Accessed November 30, 2010]. University of Delaware, No Date. Managing the Product. Contents for Class Notes. [Online] Available at: http://www.udel.edu/alex/chapt12.html#decline [Accessed November 30, 2010]. Zirger, B. & Maidique, M., 1990. A Model of New Product Development: An Empirical Test. JSTOR. [Online] Available at: http://www.jstor.org/pss/2632324 [Accessed November 30, 2010]. Bibliography Solomon, M. R. & Et. Al., 2009. Marketing: Real People, Real Decisions. 1st European Edition. Prentice Hall, London. Read More