Product Levels, Decisions, and Development Process
Three Levels of a Product
Products can be categorized into three levels:
- Core Customer Value: The fundamental need or want that the customer satisfies.
- Actual Product: This includes the brand name, quality level, packaging, features, and design.
- Augmented Product: Additional services and benefits, such as delivery, after-sales support, and warranty.
Consumer vs. Industrial Products
Consumer Products
- Convenience
- Shopping (or Durable Goods)
- Specialty
- Unsought
Industrial Products
- Materials and Parts
- Capital Items
- Supplies and Services
Three Levels of Product Decisions
1. Individual Product Decisions
a. Attributes
These include benefits, quality, features, style, and design.
b. Branding
A brand is a name, term, sign, symbol, or a combination of these, intended to identify and differentiate a product or service. Customers attach meaning to brands. Brands represent consumers’ perceptions about products and their performance.
Brand Equity: The differential effect that knowing the brand name has on customer responses to a product. High brand equity offers a competitive advantage, leading customers to seek out the product and accept line and brand extensions.
Brand Value: The total financial value of a brand, considered one of the most important assets.
Brand Development Strategies
- Line Extension: (e.g., Coca-Cola Light)
- Multibrands: (e.g., Virgin)
- Brand Extension: (e.g., Volkswagen Group)
- New Brands: (e.g., P&G)
c. Packaging
The container or wrapper for a product, designed to attract attention and communicate benefits.
d. Labeling and Logos
Graphical elements that identify the product.
e. Product Support Services
Services like delivery, assembly, returns, and credit, which are an important part of the overall brand experience.
2. Product Line Decisions
A group of products that are closely related because they function similarly, are sold to the same customers, or are distributed through the same channels. The length of the product line is the number of items it contains.
- Product Line Stretching: Adding items beyond the current range.
- Product Line Filling: Adding items within the current range.
3. Product Mix (or Portfolio) Decisions
The set of all product lines and items sold by an organization.
New Product Development
New products can come from two sources:
- Acquisition
- Internal Development
Innovation can be expensive and risky. It’s crucial to understand the environment (consumers, market, competitors).
The New Product Development Process
- Idea Generation: Systematic search for new product ideas.
- Internal and external sources
- Crowdsourcing: Inviting broad communities of people into the innovation process.
- Cross-functional collaboration
- Open innovation
- Segmentation, targeting, positioning
- The 4Ps (Product, Price, Place, Promotion)