Product
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A good product is central to the marketing mix. If the business is unable to produce a quality product that consumers want to buy, it does not matter what price it charge or how easily available it is.
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Product and Market Orientation
Many businesses are product orientated. This means they design a product and then try to convince consumers to buy it, e.g., computing companies will develop new technologies and then try and convince consumers to buy them. Businesses place the emphasis on developing a technologically sound product, producing it and selling it. The only contact with customers comes at the final stage.
Businesses can also be market orientated. This is where businesses try to find out what consumers like before designing a product, for example Diet Coke was designed to suit the needs of the more health conscious consumer. Just because businesses are market orientated doesn’t guarantee success and profits. There is a chance that people still won’t like the good or service or they will continue to buy from competitors.
Research and Development
The research and development functional area is responsible for creating new products to meet the ever changing demands of the marketplace.
The research and development functional area must work closely with other functional areas. Market research - from the marketing functional area - will be undertaken to ensure that people will be prepared to buy the product. This will prevent the business spending lots of money setting up the production process for a product that will not sell. The research and development functional area will then state whether or not it is possible to develop the product. Operations will then have to decide if they are able to source the raw materials and components, and set up the production line.
Once the design has been completed a prototype define will be built which can be tested. The prototype can be altered and improved before the final version of the product is sold to the public.
The prototype may be test marketed with a sample of consumers who will provide feedback about the product. This should hopefully reduce the chances of failure when the product is finally released.
The final stage is the product launch. When the product is launched it will go through a number of phases which is known as the product’s life cycle.
Product Life Cycle
The product life cycle can be shown on the diagram below.
http://www.rivierabusiness.co.uk/gcsebusiness/17.%20Product%20encyclopedia_files/image002.gif
Whilst the product is being developed the business will incur a number of costs causing the costs/revenues curve to fall below zero. After its introduction the business will start to earn revenue leading to a rise in the costs/revenues curve. The growth phase sees a rapid increase in the level of sales which slows down as the product enters the maturity phase. As saturation takes place sales will even out until the decline phase occurs and the level of sales fall.
Extension Strategies
Businesses will attempt to use extension strategies to prevent their product from going into decline. They will have to spend money in research and development to try and retain periods of growth and maturity for as long as possible in order to maximise sales. There are various strategies that a business could employ:
• Finding new uses for the product, e.g., the basic technology in hot hair strippers is no different from that of a hairdryer;
• Targeting new market segments with the existing product, e.g., sports clothes manufacturers now advertise their products as street wear rather than just sports wear in the hope of achieving more sales;
• If the product is marketed as a new brand with a different use, e.g., Lucozade was originally sold as a product to assist those recovering from illness, by selling it as a sports drink a huge increase in sales has been achieved;
• The business could make minor cosmetic changes to the product, for example, Manchester United frequently make small changes to their kit in the hope of increasing their replica shirt sales.
The effect of extension strategies can be shown on the diagram below.
http://www.rivierabusiness.co.uk/gcsebusiness/17.%20Product%20encyclopedia_files/image004.gif
It is possible that decline is inevitable in certain markets as new technology makes existing products out dated. This means that a business will have to spend money on research and development to ensure that they have other products to sell when the present goods go into decline.
Patents
If a business comes up with a new idea they could patent it. A patent aims to protect the inventor of a new product or manufacturing process. It allows a business to design, produce and sell a new invention and prevents competitors from copying it. New inventions can be protected for up to 20 years.
Obtaining a patent can be a lengthy process. To qualify for a patent the invention must be brand new, i.e., you can’t patent an idea that is already being sold. Checks are then made to ensure the invention is authentic. The patent is published 18 months after its application and then signed and sealed sometime after this. The developer must make annual payments to the Patent Office which become more expensive after the first four years. This is done to encourage businesses to produce the product or sell the rights to somebody else so they can make it.
The benefits to business of patents are:
• A higher level of sales;
• Reduced competition;
• Legal protection that encourages research and development;
• Higher profits that can be ploughed back into research and development;
• The industry benefits from technical information as a result of the patent;
• High risk research and development is encouraged.
The consumers also benefit from patents:
• New products will lead to better to choice and a higher standard of living;
• New and more efficient production techniques mean lower costs and therefore lower prices.
The major criticism of the patent system is that it leads to a legal monopoly (where there is only one business selling a good). This means that business may try and exploit customer by charging higher prices.
The table below illustrates some ideas that have been patented in the past.
http://img.photobucket.com/albums/v505/Mr_Wonderful/Table.jpg
It is up to the patent holder to enforce the patent if he or she believes it is being infringed. This can be an expensive legal process that can be hard for small businesses to fund.
More detailed information about patents,
Branding
Does the product have an easily recognisable and unique character? For example, Coca-Cola is recognisable not only by its logo, but by the shapes of the bottles, colour of the can and the taste of the product. This is because it has created a unique brand that differentiates it from all of the other colas on the market.
Some brands are so strong that they are used to sell goods that are not related to the business’s main good or service. For example Tesco use their brand name to sell a very wide range of non-core products and services, such as life assurance and cars, in addition to its core products which are groceries. Harry Potter is another very strong brand that has been used to sell the core products, books. It has been used to sell a movie plus every type of merchandise you can imagine.
Product Mix and Product Range
Proctor and Gamble is a large business that has a very large product mix. You will probably recognise most of the brands shown below.
This large product mix should mean that Proctor and Gamble will continue to earn large profits in the future. Proctor and Gamble have grown by using conglomerate integration, in other words they have bought businesses in unrelated markets.
Product range describes the different types of the same good a business sells. For example Proctor and Gamble have a range of different flavours of Pringles or Sunny Delight.
Product Differentiation
Businesses will try and vary the shape and colour of their products to give them a distinctive image which will differentiate it from similar products. Dyson’s products are very distinctive due to their colour and design, this makes it easy to differentiate A Dyson product from any others.
A business can help to differentiate its product by using distinctive packaging, its brand name and logo.
