products - introduction

A product is defined as: "Anything that is capable of satisfying customer needs" This definition includes both physical products (e.g. cars, washing machines, DVD players) as well as services (e.g. insurance, ban ing, private health care). The process by which companies distinguish their product offerings from the competition is called branding. !or most companies, brands are not developed in isolation " they are part of a product group. A product group (or product line) is a group of brands that are closely related in terms of their functions and the benefits they provide (e.g. Dell#s range of personal computers or $ony#s range of televisions). There are two main types of product brand: (1) Manufacturer brands (2) Own-label brands %anufacturer brands are created by producers and use their chosen brand name. The producer has the responsibility for mar eting the brand, by building distribution and gaining customer brand loyalty. &ood e'amples include %icrosoft, (anasonic and %ercedes. )wn"label brands are created and owned by distributors. &ood e'amples include Tesco and $ainsbury#s. The main importance of branding is that, done well, it permits a business to differentiate its products, adding e'tra value for consumers who value the brand, and improving profitability for the company. *usinesses should manage their products carefully over time to ensure that they deliver products that continue to meet customer wants. The process of managing groups of brands and product lines is called portfolio planning. Two models of product portfolio planning are widely nown and used in business: + The *oston &roup &rowth"$hare %atri', and + &, %ar et Attractiveness model These models are described in more detail in other tutor-u revision notes.

*usinesses need to regularly loo for new products and mar ets for future growth. A useful way of loo ing at growth opportunities is the Ansoff &rowth matri' which suggests that there are four main ways in which growth can be achieved through a product strategy: (1) Market penetration " .ncrease sales of an e'isting product in an e'isting mar et (2) Product development " .mprove present products and/or develop new products for the current mar et (3) Market development " $ell e'isting products into new mar ets (e.g. developing e'port sales) ( ) !iversification " Develop new products for new mar ets

products - product life cycle

0e define a product as 1anything that is capable of satisfying customer needs. This definition includes both physical products (e.g. cars, washing machines, DVD players) as well as services (e.g. insurance, ban ing, private health care). *usinesses should manage their products carefully over time to ensure that they deliver products that continue to meet customer wants. The process of managing groups of brands and product lines is called portfolio planning. The stages through which individual products develop over time is called commonly nown as the "Product Life ycle". The classic product life cycle has four stages (illustrated in the diagram below): introduction2 growth2 maturity and decline

!ntroduction "tage At the .ntroduction (or development) $tage mar et si3e and growth is slight. it is possible that substantial research and development costs have been incurred in getting the product to this stage. .n addition, mar eting costs may be high in order to test the mar et, undergo launch promotion and set up distribution channels. .t is highly unli ely that companies will ma e profits on products at the .ntroduction $tage. (roducts at this stage have to be carefully monitored to ensure that they start to grow. )therwise, the best option may be to withdraw or end the product. #rowth "tage The &rowth $tage is characterised by rapid growth in sales and profits. (rofits arise due to an increase in output (economies of scale)and possibly better prices. At this stage, it is cheaper for businesses to invest in increasing their mar et share as well as en4oying the overall growth of the mar et. Accordingly, significant promotional resources are traditionally invested in products that are firmly in the &rowth $tage. Maturity "tage The %aturity $tage is, perhaps, the most common stage for all mar ets. it is in this stage that competition is most intense as companies fight to maintain their mar et share. 5ere, both mar eting and finance become ey activities. %ar eting spend has to be monitored carefully, since any significant moves are li ely to be copied by competitors. The %aturity $tage is the time when most profit is earned by the mar et as a whole. Any e'penditure on research and development is li ely to be restricted to product modification and improvement and perhaps to improve production efficiency and 6uality. $ecline "tage .n the Decline $tage, the mar et is shrin ing, reducing the overall amount of profit that can be shared amongst the remaining competitors. At this stage, great care has to be ta en to manage the product carefully. .t may be possible to ta e out some production cost, to transfer production to a cheaper facility, sell the product into other, cheaper mar ets. 7are should be ta en to control the amount of stoc s of the product. 8ltimately, depending on whether the product remains profitable, a company may decide to end the product. %&a'ples $et out below are some suggested e'amples of products that are currently at different stages of the product life"cycle: !()*O$+ )!O( #*O,)M.)+*!)/ Third generation mobile (ortable DVD (layers (ersonal 7omputers phones ,"conferencing All"in"one racing s in" suits ,mail *reathable synthetic fabrics !a'es 7otton t"shirts $% L!(% Typewriters 5andwritten letters $hell $uits

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