Chapter 7: Product management

Consumer products vs intermediate products

Consumer products	Intermediate products
Flavour / taste / smell Texture Appearance Service Intangible characteristics: properties related to the production process (eg. safe, organic…)	physical specifications (eg. pH, composition) Service Durability

Product strategy - related concepts

1) Product positioning : see STP

2) Product mix

• Product mix Width

• Line Depth

• Product mix Length

3) Product life cycle - PLC

4) Product innovation

5) The broader P of product

Product strategy: Product mix (2)

Dimensions

• Width = number of product lines

• Depth = number of items in a product line

• Length = assortment of models, sizes, colors

• Consistency = degree of relatedness of product lines

Possible expansion paths

• Add new product lines = increase width of product mix

• Add variations in line = deepen product lines

• Add items = lengthen product mix

Product strategy: Product Life Cycle (3)

1) Introduction

• sales are low

• Losses → high R&D and promotional costs

• Monitor product adoption process or “diffusion process of new product adoption”

• Key role of innovators, trendsetters

2) Growth

• Sales growth

• Increasing acceptance

• More and more trials plus first repeat purchases

• High profit potential → profit margins peak

• New rivals are attracted because of success

3) Maturity (eg. coca cola stretched maturity range by changing small things over time)

• Sales peak and flatten: saturation is reached

• Mainly repeat purchases, while innovators have already switched to something new

• Profit margins under pressure

• Survivors battle for market share

• Brand leaders are the strongest and survive

  • Long life cycle = extended maturity stage

4) Decline

• Sales and profits fall → profit turns into loss

• Changing consumer taste and preference

• New technologies take over

• Seek to maintain profit margin

• Cease / Stop production

Message

“Try to maintain possible profits as long as possible, but stop before it is too late”

Product strategy: Product Life Cycle (3) - Types

Product strategy: Product innovations (4)

• Repositioning products

  • Extending the maturity stage

  • Real vs. psychological repositioning

Product strategy: Product innovations (4) - New product categories

• Me-tooproducts = copies of existing products

• Line extensions = new variants or flavours in existing product line

• New forms of existing products (e.g., powders)

• Reformulations: new formula, e.g., sugar-free version

• New packaging, e.g., modified atmosphere packaging

• Innovative products: ready-to-cook, convenience added

• Creative products: real new products, real (radical) innovations

Product strategy: Product innovations (4) - Reasons for new product failure

• Product lacks meaningful uniqueness

• Poor planning during introduction

• Badly timed introduction

• Market is not ready for the product

• Too enthusiastic take off

• Inconsistencies in marketing mix

• = Poor marketing

Product strategy: Product innovations (4) - Launch Pricing Strategies (during introduction)

• Skimming strategy (intro with high price)

  • High product value

  • Ability to pay

  • Consumer differs from bill payer

  • Lack of competition

  • Pressure to buy

• Price penetration strategy (intro with low price)

  • If this is the only feasible alternative

  • To quickly gain market presence

  • To realise experience curve effect

  • Make money later

Product strategy: The broader P of product (5)

1) Packaging

2) Branding

3) Guarantee

4) Service

5) Image

Product strategy: The broader P of product (5): Packaging

Definition

• activities related to

  • box

  • wrapper

  • container

Significance of packaging

• packaging is costly

• Many products are packed several times

Importance of packaging in terms of cost / benefit

provides benefits	raises costs
Raising revenues ( Communication, Selection, Appearance) Lowering costs (Less spoilage, Checkout)	Raising costs (materials, labour) Lowering revenues (own selection, elastic demand effect)

Product strategy: The broader P of product (5): Packaging - Components / Functions of packaging

1) Protection

• Against physical damage

• Longer shelf life

• Refrigeration, moisture, light

  • Let in

  • Keep out

2) Cost efficiency

• Packaging materials

• Fabrication, manufacturing of packaging

• Labour involved in packaging

3) Recognition

• Colour, Shape, Size, Font type

4) Handling

• Transport

• Display

• Handle, Store, Open, Close

• Disposal of used packaging (recycling, reuse)

5) Vehicle for information

• Price, quantity

• List of ingredients

• Nutritional information

• Dates: production, packaging, expiry

• Nutritional and environmental performance (EcoScore, NutriScore)

• Guarantee, label

• Use: storage, preparation, recipes

Product strategy: The broader P of product (5): Branding

Definition

• Any Name, Term, Sign, Symbol, Design

• Name = by which the product can be called

• Mark = by which it can be visually recognised

Importance

• Source of consumers’ trust

• Key to advertising

• Key to brand loyalty, repeat sales

• Umbrella or platform for intro of new products

• Indication of a specific quality level

• Reducing uncertainty for buyers / consumers

Problems with building brands

• Time-consuming and expensive

• Heavy competition from other brands including private brands (private labels)

• Generic or non-branded products

Product strategy: The broader P of product (5): Guarantee

• Sales promotion element (= additional value)

• Protection of and added value to consumer

• Protection of producer

Product strategy: The broader P of product (5): Service

• Content?

  • What is included in the service?

  • How far does the service reach?

• Make or buy?

  • Do it ourself?

  • Have somebody doing it for us?

• Price?

  • Included in the product’s base price

  • Sold as an extra to consumers

Product strategy: The broader P of product (5): Image

• Overall picture

  • How people think and feel about the product / brand / company

• All P’s together