An Understanding of Product Is Essential for Effective Marketing - Essay Example

An Understanding of Product is Essential for Effective Marketing Table of Contents Introduction 3 Importance of ‘Product’ in context of Marketing Mix4 Product Management for Effective Marketing 6 Product Development 6 Product Life Cycle 9 Product Strategies 11 Consumer Behaviour and Product Management 12 Conclusion 14 Reference 15 Introduction The modernisation of trade and business has led to evolve many new concepts. The business environment has changed significantly due to this modernisation. The business organisations have been able to differentiate the concept of ‘sales’ and ‘marketing’. ‘Sales’ is a very narrow concept and focuses on delivering of a product to the final consumers. It does not consider customer satisfaction, consumer retention, consumer value and value added services. The primary objective of ‘Sales’ is to maximise the sales revenue. However, it is not the proper way of doing a business. The welfare of customers and other stakeholders must be considered as the primary objective of a business. In this respect, marketing activities includes all these important factors that enhances the value of an organisation and ultimately leads to wealth creation of its stakeholders. Marketing is broad concept and a crucial primary activity of a value chain. According to Robert Skrob, “using sound marketing principle, strategies, and techniques will allow you to build a large list, form great relationships with your clients, and provide them with outstanding products and services - things they want, get value from, and that you are proud of” (Skrob, 2008, p.63). Therefore, for establishing and achieving long term success, a business organisation must formulate an effective marketing strategy. The increasing competition in the business world is one of the vital reasons that have increased the significance of marketing strategy. A successful marketing strategy enables an organisation to achieve competitive advantage. It enables a company to gain an upper hand position in the market. Product or service is the core factor that serves the consumers’ demand and utility. It is the prime factor for running a business. This paper will attempt to deal with the understanding of product for effective marketing. In this respect, the paper will discuss various aspects of product that affect product strategies. Various theories and models will be presented to support the primary objective of this essay. Finally in the conclusion section, overall discussions and analysis will be summed up. Importance of ‘Product’ in context of Marketing Mix In the process of strategic management, a marketer must consider four primary component of marketing. These marketing components are product, price, promotion and place. The four components of marketing are known as ‘marketing mix’ or four ‘Ps of marketing’. Marketing mix can be defined as the basis of marketing strategy and it “establishes the strategy of the brand in a systematic and structured manner” (Kumar, 2009, p.73). For developing an effective marketing plan, the components of marketing mix must be prioritised. Prioritising of marketing mix should not be considered as focusing on particular marketing component by ignoring other important areas. Therefore, an organisation must prioritise its core product and services for serving its target market. A marketer should formulate the pricing, promotional and distribution strategy as per the nature and demand of the product. Therefore, it is necessary to understand the importance of product offerings. In marketing ‘product’ means services and goods offered by an organisation to the final consumer groups. According to Kotler, “a product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need” (Pezzullo and American Bankers Association, 1998, p.148). For example, Goods like food stuffs, apparels, automotive products etc and services like tourism, academic, air travel etc are example of products. Basically, product is the key component of marketing and there are two basic reasons for its importance. Firstly, product is the prime reason for the existence of a firm and these firms are meant to satisfy the consumer needs by offering products. Secondly, other components of marketing are determined by considering products. Specifically, the product is the central attraction of the marketing strategies. In case of starting new venture, an entrepreneur must determine about its product offerings. The success of business mainly depends on its offered products and services. It must satisfy the core utility of consumers. The success of a product depends on the other elements of marketing i.e. price, distribution and promotion, quality of raw materials, manufacturing process and availability of good suppliers, skilled labours and technology etc (Ehmke, Fulton and Lusk, n.d.). The pricing, promotion and distribution strategy should be framed according to product categories,. For example, for consumer goods, the pricing strategy must consider the economy of consumers and demand of product. Product can be divided as per its features and utilities. Basically, the consumer goods can be classified into four types. These are shopping goods, convenience goods, speciality goods and insistence goods. According to industrial Goods product can be classified into four categories. The following chart shows the classification of product. Figure 1: Classification of Product (Source: Kumar and Sharma, 1998, p.201) The above figure shows the product category as per its utilization. Product can also be divided as per price, demand, durability etc. It is essential for a marketer to understand the basics of product categories for implementing product based strategies. For example, for convenience products like drugs, newspaper, grocery products, distribution channels must be fluent and these products must be available in convenient places. Product marketing is an integral part of strategic management that includes various factors that influence a product strategy. These are product mix, product development, product life cycle, consumer behaviours etc. While formulating product strategy, these factors must be analyzed and evaluate for the success of a product of service. These factors will be analysed in the following sections. Product Management for Effective Marketing Product Development The term ‘product development’ can be defined as the creation of product. The product development can be introduced in the existing product or an organisation can develop a new product. The product development is crucial for a new venture and an existing business organisation. Product development is the prime essence of a product strategy. In order to bring product development, an organisation should follow a set of steps. In the first step, an organisation must create new ideas for generating new products. These ideas can be obtained from various sources, like customers’ feedback, distributors’ feedback and marketing research. For developing a new product, marketing research is useful as its helps to identify the new opportunities in market. Customers’ feedback is important for bringing product development in the existing product. For example, PepsiCo realised the consumers’ awareness regarding obesity and hence, it lunched ‘Diet Pepsi’ for its health conscious consumers (Friedman, 2010). In the second step, the generated ideas for the product development must be analysed to evaluate its feasibility and suitability. It means that how far the new product is helpful to serve customer and society. The new product must be able to satisfy the consumer needs. The third step involves the analysis of business. In this step, it is necessary to determine the basic features, price and demand of product. The fourth step deals with the development of new product. In this stage, a business organisation needs to invest in its research and development for technical and lab testing. For producing a new product, a company can use the exiting process or should develop a new method of manufacturing process. The next step includes the activities related to marketing of new developed product. Initially, marketers use test marketing for that new product for determining its actual effectiveness in market. In case of successful product development, the consumers accept the new product and vice versa. In the final step, marketers commercialise the new product after the successful test marketing. An organisation starts its full production of new product with proper product strategy (Onkvisit and Shaw, 2004, p.277). PACE model is an important strategic framework for product development. PACE primarily concentrates on product and its life cycle. The quick deliveries of product and consumer needs are the two main priorities in PACE model. In order to implement PACE strategy for product, there are four phases. The first phase deals with vision of product strategy that provides proper context and direction to produce a product. The vision of product strategy can vary as per product development techniques. The next phase involves the strategy for product platform. This platform helps to estimate reliable cost and distribution schedule. The third phase includes the strategies for product line. It determines the sequence of the product line manufacturing. The final stage deals with development of new product. In this phase, the manufacturing departments are given the necessary resources and information for generating a new product. For managing these four phases, an organisation must focus on three main areas i.e. core team for product management, process for reviewing phases and proper structured methodology (McGregor and Russ, n.d.). The following figure shows the philosophy and process of product development. This model was proposed by Matti Otala to explain the philosophy of product development. Figure 2: Product Development Philosophy (Source: Shahin, 2002, p.146) The above model includes the important criteria for product development. The QFD (Quality Function Deployment Method) helps to gather consumers’ feedback and it is used for bringing further product development in the existing product (Shahin, 2002, p.146). Product Life Cycle The product strategy formulation includes a number of aspects like product life cycle and product mix. In order to develop a new strategy for an existing product, the product life cycle stage must be analysed and evaluated. The product life cycle (PLC) can be applied for a similar range of product like television, computer, camera etc. The PLC analysis cannot be done for a product of any particular brand. In product life cycle there are four stages i.e. introductory stage, growth stage, maturity stage and declining stage. The following figure shows the four stages of product life cycle. Figure 3: Four Stages of Product Life Cycle (PLC) (Source: Kurtz, MacKenzie and Snow, 2009, p.341) The above figure shows the stages of a product that affects the profitability of industry and its players producing that product. It is an effective evaluation of product that indicates the direction of future product strategy. At the introductory stage, the demand of product remains low. This stage indicates high potential demand in market and organisation must invest for promoting the product. When a product enters into the growth stage, the demand starts increasing and consumers start to accept the product. At this stage, many competitors enter into the market due to increasing profitability of industry. At the maturity stage, the product demand reaches at its peak point and the market starts to shift toward saturation point. The demand graph shifts to down ward movement. This indicates that the players of an industry must prepare themselves for bringing product development. The final stage is declining stage and at this stage, the product becomes weak and consumers deny purchasing such product. Industry’s profitability become too low and it become difficult survive with that product. In such situation, organisations must diversify themselves or introduce new product in the market that is able to meet the new demand of consumers. If the players of an industry it able to bring further development, the curve again starts to move upward (Burke and Wilks, 2006, p.131). Product Strategies The product is also helpful for segmenting the market. Different types of products are used by various kinds of consumers. As per the product features and utility, the market can be segmented. For example, Mark and Spencer offer various kinds of apparels to target young female and male consumers. In this respect, the product positioning is related with market segment. Kotler defined the product positioning as “a product’s position is the way the product is defined by consumers on important attributes” (Iman, 2006, p.245). The product positioning determines the key issue of a products like, target market, competitors, product differentiation, benefit to the consumers. Product posting helps to identify the category of product from consumer point of view. These attributes differs as per the product features. The following figure shows an example of product positioning. Figure 4: Product Positioning (Source: University of Northern Iowa, n.d.) The product positioning can also be done in respect of two competitive products to evaluate positioning of two brands. Product mix is a useful method for improving a position of a brand. Consumer Behaviour and Product Management Understanding of product is also very important for analysing the consumer behaviours. If an organisation can identify the consumer behaviours regarding offered product or services, it is able to build its brand value and brand image in the market. This ultimately leads to develop higher level of consumer satisfaction and consumer retention. Consumer behaviour is affected by number of factors like, socio-culture and economy of the consumer groups and consumer perception regarding offered product and services. The socio-cultural and economy of consumers are the external factor that an organisation cannot control. However, in case of product perception, organisations can influence the consumer behaviours by offering value added products or services. The consumer buying behaviour depends on the product category and its quality. The consumers change their buying behaviour as per previous experience of purchasing (University of Delaware, 2010). In order to understand the influence of product in consumer buying behaviours, Black Box Model of consumer behaviour is very useful. This model of consumer behaviour distinctly identifies all the factors in a consumer buying process. This model treats consumers as ‘problem solvers’ “and concentrate on the influences upon behaviour and the processes involved in purchase” (Lancaster and Massingham, 2010, p.43). The following figure shows the Black Box Model of Consumer behaviour. Figure 5: Black Box Model of Consumer Behaviour (Source: Sandhusen, 2000, p.218) The above figure divides various aspects of consumers’ behaviours. The market stimuli include four P’s of marketing i.e. product, price, place and promotion. Marketing stimuli is the prime factor influencing consumers’ perception. Therefore, in order to influence consumer behaviour, an organisation must offer product as per market demand and should determine price, promotion and place as per product classification and demand. Conclusion The product is the main essence of a business, and the marketing strategy of a company evolves around the offered product. The product includes goods and services that are offered by business organisation to target consumer groups. In order to understand the importance of product for an effective marketing strategy, this paper has discussed many important areas relating to product and product strategy. In this respect, this paper has dealt with three main sections. The first section discussed about importance of product for marketing strategy. The marketing strategy of organisation is primarily developed as per the product and services categories. Companies formulate separate strategies for industrial and consumer products. The second section has explained various aspects of product management. In order to manage the product ranges, a company must identify the key issues influencing product management. Product development is vital for sustaining in the market. New product development is the foremost task for a venture. The product development can also be introduced for existing products lines. PACE model is ideal for introducing product development in an organisation. Product life cycle analysis indicates various stages of a product and it directs a firm for framing product related strategies. Product related strategies includes product positioning and product mix. For positioning a product, marketers have to focus on the product mix. The final section analyses the importance of product in affecting consumer behaviours. Consumers determine its buying behaviour as per market stimuli that include product, price, promotion and place. Companies can influence the consumer buying behaviours by building up effective marketing stimuli and product development. Reference 1. Burke, L. and Wilks, C. 2006. CIMA Learning System 2007 Management Accounting Decision Management. Butterworth-Heinemann. 2. Ehmke, C. Fulton J. and Lusk, J. No date. Marketing’s Four P’s: First Steps for New Entrepreneurs. [Pdf]. Available at: http://www.extension.purdue.edu/extmedia/EC/EC-730.pdf. 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