A marketing mix component, a product is a commercial offering that satisfies a consumer’s needs/wants. Unlike a commodity, a product is usually processed or man-made. It could be tangible or intangible: tangible (finished and semi-finished goods, and raw materials); and intangible (dental treatment, insurance, holiday packages, etc.). Intellectual properties such as patents, artistic/literary works, etc. are also products. Fashion merchandise is a product; financial service projects are also products. A printer is a product; the ink cartridge used in the printer is also a product.
There exists a small line differentiating tangible and intangible items, since intangible goods may also have a solid structure. For instance, software applications are intangible products, but since they aren’t sold as standalone items and often presented through computing platforms (laptop, smartphone, etc.), they obscure the line between tangible and intangible products.
Products have their lifecycles: i) launch, ii) growth, iii) maturity, and iv) decline. A product sees increased sales during its introduction and growth. It reaches potential or stagnates at maturity. An offering is supposedly in decline mode if its sales are plummeting. At this stage, a company can choose to discontinue the product or implement new strategies to revive sales. Often, a decline happens when the makers don’t recognize a product has matured.
The maturity stage can be extended or the product may re-enter growth phase if manufacturers incorporate newer or innovative features into the offering. This may entail adding additional features. For example, Samsung Galaxy S line’s sales declined after the Galaxy S4 and S5 only iteratively improved upon the Galaxy S3 smartphone. Thanks to a fresh design and premium build, the Galaxy S6 broke the jinx, helping restore lost glory.
Understanding the different product levels helps a business structure its product portfolio for targeting different customer segments.
- Core product: Core product is essentially the core benefits of a product. For example, the core benefits of a smartphone lie in the phone’s ability to help people call and send text messages.
- Actual product: Also called generic product or basic product, actual product is the bare minimum elements needed for a product to function. A smartphone’s basic attributes are its display, software, etc.
- Expected product: Expected product is the level of performance or quality buyers expect from a product. For example, smartphone buyers usually expect an iPhone’s camera to perform much better than its competition.
- Augmented product: Augmented product is nothing but the set of extra features or benefits a product offers. These additional traits, in fact, help the product set itself apart from the competition. For example, the one-time display replacement offers by smartphone OEMs such as Samsung and LG augments their phones.
- Potential product: A product’s “potential” is its scope for enhancement and improvement going forward. Smartphones came with one rear camera in the past. Smartphones a few years later appended two or more camera sensors at the back for better image quality. The ability to add additional cameras is the potential product.
A product can be categorized based on its purpose, form, shape, buyer, etc. Generally, products are categorized as consumer products and business products. A consumer product is any good or service meant for consumption by the end user or the consumer. These products are further categorized as:
- Convenience product: A convenience good is the most frequently purchased and widely available product, and usually low-priced. Fast food, milk and sugar, newspapers, etc. are convenience goods.
- Shopping product: A shopping good is widely available too but not as frequently purchased. Moreover, the buyer spends some time researching price, quality and comparing options before making a purchase. Shopping goods are clothing, furniture, travel tickets, etc.
- Specialty product: A specialty good boasts unique traits and/or brand value that set it apart from the competition. Examples include designer clothing, sports cars, high-end cameras, etc.
- Unsought product: An unsought good, as the name indicates, is any product the consumer is not aware of and/or is not usually looking to buy. These could be life insurance, new technological innovations, etc.
Also called an industrial product, a business product is any product bought by a business for resell or to make other services or goods for resell. Business products can be categorized as:
- Materials and components: These include raw materials and manufactured components used to make another product, such as a capital item.
- Capital item: These products help the buyer with operations or production. A capital item could be an accessory equipment or help with installations.
- Supplies and services: Supplies encompass repair and maintenance products, and also operating supplies such as pencil, paper, paint, etc. Services comprise repair and maintenance services and advisory services.
Other types of products are durable good, non-durable good, fast-moving consumer good (FMCG), and customized product. Importantly, these classifications aren’t standard or may not apply to every buyer. In other words, a good could be a convenience item to one buyer, and a specialty or shopping good to another. The way a consumer perceives a product could alter based on his/her financial/emotional state, attitude and demographic.
Product prices vary based on the product type, market segment, brand, advertising and marketing. A product’s market price typically encompass costs (fixed and variable) and profits. It’s important a product is priced after considering market demand, competition, purchase frequency, market potential, and profit goals. Also, the price should be constantly reviewed to ensure it echoes market sentiments. And it must be modified if the costs change, competitors alter prices, and/or the market is experiencing recession or inflation.
A successful pricing strategy would always begin with the customer. If a seller knows its customers well, it can offer them better value and thus afford to charge higher than the competition. And understanding the customer entails learning target market demographics, what customers buy, their price-sensitivity, etc. In other words, market research is crucial. If hiring a market research team is not feasible, monitoring what the competition is doing would help. That said, trying to match competition without considering internal costs could turn out detrimental.
Product price should be raised over a period to stay in business. However, the price increases must be incremental and not dramatic. If the sales volumes don’t go down post a price increase, it means the price hike was fair. On the other hand, customers typically react acutely to steep price increases. Lowering prices is not recommended, unless the goal is to augment market share.
Selling a Product
Not all products launched are successful. In fact, the majority don’t succeed or attain sales figures the makers may have estimated. This is usually due to the product lacking in one or multiple departments or being inferior overall. However, there are also instances when even the most superior or technologically advanced products may not sell well. And there are primarily two reasons for this.
First, the product doesn’t address an existing problem. If a product offers something that the end consumer doesn’t need, it may not be embraced even if it’s the best at what it does. For instance, robots have not become mainstream yet because people are still not sure how utilitarian those technological marvels would be inside their homes. Robots, however, have made their mark in industries because they help cut down production costs and time.
The second reason why good products fail is an improper sales strategy. Pricing a product right or competitively is alone not going to do the trick. The manufacturer’s ability to sell primarily drives sales, and this entails adopting correct sales strategy – choosing the right retail stores and hiring the right sales personnel.
Selling a product at the right or profitable price warrants buying its components or raw materials at the right price. In other words, if a seller is having a hard time selling a good at a decent profit or if a competitor’s price seems too low, then it’s invariably buying the product’s raw materials for a higher price, besides incurring other avoidable costs. Revaluating costs should help address this problem.