PRODUCT MANAGEMENT

The concept of product

A product is any item or service that is offered for sale to the market with the aim of
satisfying a consumer’s needs or want The product can be tangible or intangible . In order to
maximise profitability, the firm has to develop its product carefully so as to attract
consumers. This is especially important in a market where there are products of the same
nature. Something about the product must stand out in a good way. The success of any
product will depend on three important attributes
The core product- The core product represents the actual benefit that a consumer is
seeking from the purchase and use of the product. What is the main or essential reason for
purchasing the product?
The actual or formal product - The actual product focuses on the attributes or features of
the product. More than likely, these features will be the differentiating factor between this
product and other products. The actual or formal product includes such things as quality,
brand name, packaging and design.
The augmented product - The augmented product focuses on the additional benefits and
services that the consumer receives from purchasing and using the product. It represents the
post-sale benefits or features associated with the product. This may include such things as
after-sales service, warranty, delivery and installation.

Dimensions of the product mix

A firm that produces or markets more than one product is said to have a product mix.
Therefore, the term ‘product mix’ can be defined as the group of products that are sold or
distributed by the company. The dimensions of the product mix are measured in terms of its
breadth and depth.

Breadth or width - The breadth of the product mix measures the number of product lines
or different products that the firm has. It shows the level of diversification within the firm and
its ability to manufacture and/or sell different products. The more products that the firm has,
the wider will be the product mix. Having a wide product mix can be beneficial, especially in
a very competitive market. If one product or marketing segment fails, the firm might be able
to survive on the others until its problem is sorted out.
Depth - The depth of the product mix relates to the variations or features of each product
line. It includes such aspects as model, sizes, design, colour, flavour, etc. Firms that desire to
cover a number of segments usually have a very deep product mix. However, this can be
counterproductive, especially where the products start competing against each other.

Product line and product extension

A product line represents a group of products, offered by a firm, which has similar
characteristics and similar intended uses. The length of the product line is often dependent on
the objectives of the firm or the amount of resources to which it has access. The firm should
also assess whether or not its product line is too short or too long. Firms that have product
lines falling within any of the two extremes may find that they are operating inefficiently or
even at a loss. If this is the case, then the firm may need to either shorten or lengthen the
product line, depending on the situation. Where the product line might be too short the firm
can develop new additions to its existing product line. This is referred to as a ‘product line
extension’. This is usually done to gain more market share, profits or growth. Product line
extensions can take one of two forms: line stretching or line filling. A firm can ‘stretch’ its
product line by lengthening it either upwards or downwards or a combination of both, beyond
its current length. For example, a brewing company may add another beer to its alcoholic
beverages line. An upwards extension could be to offer a new product of higher quality and
price to the lower end of the market, while a downwards extension could be to offer a new
product of lower quality and price to the higher end of the market. Conversely, the firm could
simply add new products to the existing range of the product line. This would then be
referred to as ‘line filling’. These products would have slightly different features from
existing products. The reasons for this action could include taking advantage of unused
capacity, getting rid of gaps in the market and discouraging competition. Examples of line
filling include Milo 3 in 1, Colgate Herbal and Sunshine Snacks’ honey roasted peanuts.
The Boston Matrix
This is also referred to as the ‘Boston Box model’ and was developed by the Boston
Consulting Group. It is a well-known method that is used for product portfolio analysis. It
consists of an illustration showing the total percentage market share of each product and the
rate of growth in the market, ranging from high to low. The Matrix postulates four categories
under which a product can fall, namely: Star Cash cow Dog and Question mark or problem
child. Each category gives the firm a clear view of the product’s position.
A star product is one that is doing extremely well in the market. It has a high market
share and is growing in the market but needs heavy investment in order to continue doing so.
This product is one that will generate substantial revenue and profits for the firm into the
foreseeable future. In order to maintain this possibility, the firm may commit a large portion
of its resources to such a product, especially in the form of promotion. Eventually, this
product will slow down and may very well become a cash cow in the future.
‘Cash cow’: high market share and low market growth This product is very important
to the firm and most firms have at least one of these products. Cash cows are known by their
high market share that has been developed over the years and their low growth rate due to
maturity. These products are termed this way because they generate substantial cash or
revenue for the firm. This revenue is often used to finance and sustain other products such as
stars. The firm is less likely to spend a lot of its resources on promotion for these products
since they are well known in the market and are generating high volumes of sales. However,
they need to be properly managed so that their lives can be perpetuated and more cash can be
‘milked’ by the firm.
‘Question mark’ (‘problem child’): low market share and high market growth This
product is usually still in the development stage and is characterized by low market share and
high growth rate. It is using up resources for promotion but is not established enough to
generate much resources at the moment. There is some uncertainty about the viability and
success of such a product but it has potential.
‘Dog’: low market share and low market growth The dog represents those products
with low market share and low growth rates. Such products are likely to be in the decline
stage of life and are not offering many, if any, benefits to the firm. As such, they are not
worth investing in since they may not be able to provide any returns on the investment. These
products will soon be discarded by the firm as it concentrates on finding new investment
options.
Application of the Boston Matrix

Since the Boston Matrix divides the firm’s product into distinct categories,
management can make certain important decisions regarding these products. This includes
the decision to:
● Hold – in holding, the firm may want to maintain its present market position. This is
especially so where there is a good combination of the four categories of products
● Build – taking such action will mean that the firm is willing to invest heavily to
improve its market position. This investment could be geared towards expanding the
market share of a ‘star’ product or trying to establish a ‘problem child’
● Harvest – this may involve the process of milking as much from the ‘cash cow’
product in the short term. A firm using a harvesting strategy may not want to take on
long-term investments but may simply want to gain short-term profits from the market
● Divest – where there are products that are underperforming or bleeding resources
from the firm, with no hope of generating revenues, the best thing to do is to get rid of
them. In most cases, the ‘dogs’ will be divested or discarded.

Using the Boston Matrix provides management with the following advantages:
● The entire product mix can be examined together and closely scrutinises
● It gives a firm an overview of all its products and the level of success, failure or
potential for each product
● It assists marketers in planning the firm’s promotional strategies
 New product development process

1. Generating ideas
This is the very first stage of the process and is a very important one. A new product begins
in the mind of someone and then it is created in the plant. The challenge at this stage is to
generate ideas that will be successful and preferably ideas of a product that has not yet
created. Even though building on a competitor’s product can be successful, creating
something different is even better.
New product ideas can be generated from a number of sources, including:
● Studying the product offerings of competitors in a bid to improve upon them
● Market research to find out what consumers want
● Advancement in technology creates an opportunity for other products
● Group discussions which bring a number of creative minds together to formulate ideas
● Employees’ input and ideas.
The firm can generate a large number of ideas as it prepares for the next stage in the
process

2. Screening ideas
It should be obvious at this point that not all the ideas that have been generated can be
transformed into product offerings. This is for various reasons, including financial viability,
the firm’s plant capacity and technological capabilities. It means, therefore, that the ideas
generated above will have to be screened so that the best ones are pursued by the firm. This
process will help to reduce the number of generated ideas into a smaller and more realistic
pool of potential products. To make this process effective, the firm should use a checklist
with the factors that would make an idea worth pursuing. Each idea must be assessed against
the checklist and a decision made concerning whether to keep or discard it.
The checklist may be different for different firms but some general issues that could
be covered would be:
● Financial viability
● Estimated cost of production
● Benefits to the target market
● The firm’s technical capability to produce the product.
 3. Concept development and testing
Having settled on a new product idea or group of ideas, it is time to create a proper product
concept. In this section the idea is refined and shaped into something more practical. The
product concept would include things such as the product features, a possible design, cost of
production and proposed pricing information. Once the concept has been developed, the firm
can test the idea in the target market. The product could then be presented to the market by
giving a full description, showing a picture or using simulation. Information can then be
gathered from the potential consumers. This can be done by using one or more research
techniques to gather consumers’ views on the idea of using such product. The information
gathered can be further used to make adjustments to the product concept before initiating
production.

4. Business analysis
If the product completes the above stages successfully, the firm will now do a business
analysis on the product. This analysis will include the creation of a marketing plan for the
product. In addition, information regarding estimated costs, sales and profitability must be
fine-tuned and carefully analysed. The marketers may also be asked to draft a statement of
forecasting sales for upcoming years. This is important, as the firm would want to ensure that
it can recoup its initial capital outlay and maintain profitability. The business analysis will
help to decide whether the product is worth investing in and should be developed. if this is
favourable, the firm can move to the next stage of developing a prototype of the product.

5. Developing a prototype
So far, the idea has existed on paper but now the firm will move to create the actual product
or, in cases such as buildings or very large items, it may create a model of the product. This
stage helps the firm to get a clearer picture of what the product will look like and also the
actual cost of developing it. Developing a prototype can be an expensive process and so the
firm will also be able to shelve some ideas at this point. A prototype will also give the target
market customers something tangible to view or, in the case of a service, something real that
they can experience.
 6. Test marketing
This stage involves the actual testing of the product and marketing strategy in the target
market. The aim of this process is to ascertain how consumers will respond to the product and
marketing strategy. This strategy is used regularly when new drinks or cosmetics are
developed, where people are asked to try the product and give their feedback. The firm can
used this feedback to make improvements to the product. Since the product will more than
likely be tested on a representative sample of the targeted population, if their response is not
favourable the firm could discard the idea at this stage. This would prevent it from incurring
huge losses associated with creating a product that is a failure. It must be pointed out here,
though, that the firm may not necessary use the actual product but could also use simulated
test marketing. Here, the firm would create a situation that mimics the actual situation in
which consumers would purchase and use the product. Their response to the new product can
then be observed and used to make changes to the product if necessary.

7. Commercialisation (launch)
This stage involves the roll-out of the final product to the market. It is the full-scale launch of
the product to its target market. The Marketing Department is integral especially at this stage,
as the word has to reach the customers. Having an effective product without properly
informing the public about it is almost as bad as making an inferior product that is well
known.
 The product lifecycle

There are four distinct stages in the lifecycle:

1. Introduction
2. Growth
3. Maturity
4. Decline.

Stages of the product lifecycle

1. Introduction
The first stage of the product lifecycle begins with the commercialisation or launch of the
product as was discussed earlier under the new product development process. This stage is
characterised by low sales and low profits, if any at all. There is usually very high spending
on promotion at this stage, as the firm tries to increase consumer awareness and create brand
image and loyalty. Monitoring the product is especially important at this stage, to ensure that
it become poised for growth. If the product introduction fails, it may be advisable to
withdraw the product, make adjustments and reintroduce it.
2. Growth
This stage is characterised by increasing sales and profits as the firm’s promotion efforts take
effect in the market. Vigorous promotion will help to build customer loyalty and brand image.
As sales increase within this stage, the firm may also benefit from economies of scale from
large-scale production. However, increased success within the market will foster increased
competition. Therefore, competition increases at this stage which also has the ability to force
prices downwards even as growth starts to show signs of weakening. Firms may seek to
maintain their competitive edge by changing their marketing and promotion strategies.
3. Maturity
By this time the product is well known in the market and has reached or has almost reached
the point of market saturation. The product’s growth begins slowing down, sales peak and
start levelling out while profits are maximised. As competition becomes fierce, the firm may
attempt to sustain the life of the product and maintain its market share through promotions,
product differentiation and/or price competition. The firm may also implement what is called
‘product life extension’. This concept is dealt with separately below.
4. Decline
Eventually, a product will reach this stage at some time in its life. This is where the product’s
sales fall and profits decline. In some cases the fall in sales is not limited to the firm but the
entire industry. At this stage the firm will withdraw investment from the product and abandon
production. Products that reach this stage are referred to in the Boston Matrix as ‘dogs’. It is
important to note that a sometimes a five-stage product lifecycle is used. In this version
another stage called ‘saturation’ is added between ‘maturity’ and ‘decline’. Such a product
lifecycle would then be:
1. Introduction
2. Growth
3. Maturity
4. Saturation
5. Decline.
The saturation stage suggests that the product is well known and most people interested in it
would have already purchased it. The stage also suggests that there are other competitors in
the market who may have a superior and cheaper product. At this stage the firm would
basically decrease sales and advertising expenditure since there is no incentive to spend on
the product. Different products go through the stages of the lifecycle at different paces.
The pace of a product may be dependent on:
● The marketing strategies of the firm
● Rate of changes in technology, especially where the product is technologically based
● The level and frequency of innovations in the market
● Volatility in consumers’ tastes and preferences.
While the product lifecycle works as a good means of analysis and guide for decision
making, it has some limitations:
● The stages of the cycle may not be very distinctive and so it may be difficult to place
the product within a particular stage
● Not all products will go through all the stages, as some products have an almost
endless life
● It focuses only on one product rather than the firm’s entire product offering
 ● The model may be self-fulfilling, as firms can still be successful without using the
product lifecycle.
As was mentioned above, maturity or saturation of a product does not mean automatic
decline and discard. The firm can prolong the life of its product by implementing extension
strategies. This will lead to an extension of the current product lifecycle diagram
Some of the possible extension strategies that can be utilised by the firm are:
● Making modifications to the product. This could be done by adding a new
ingredient or mix or flavour – for example, Malta Refresh or Velvet
● Discovering new uses for the product – this will create fresh demand for it
● Rebranding or repackaging – this has been known to revitalise the product and
create new demand
● Create a complementary product to increase the demand of the existing
product.
 Branding and Packaging

Branding
Branding occurs where a firm places its name, mark, symbol and/or design on its product.
This acts as a means of identification and helps consumers to differentiate the product from
others.
Brand- This is a name, mark, sign or symbol or any combination of these factors which is
used to identify the product and differentiate it from competing products or firms.
Brand name- The brand name can be a combination of words, letters and numbers which can
be spoken or verbalised.
Brand mark - This is the non-verbal part of the brand which is easily recognised and is used
to identify the product.
Brand equity- This refers to the amount of value that a brand adds to a product. Simply
placing a brand name on a product can change the perception of it in the market because of
the value that is associated with that brand name.
Trade mark - A trade mark can be a brand or part of a brand which the firm has the legal
right to use exclusively. Any infringement of such a mark can lead to lawsuits.

Reasons for branding

Firms may brand their products for various reasons. Some of the most common reasons for
branding are:
● It provides identification and differentiation of the product and firm since the brand is
unique to that firm
● It provides legal protection of the firm and its product mix
● It can give an indication of the value that a company places on a product
● Successful brands can be used to launch other products within the product mix
● A successful brand can help to build the image of the firm
● A brand helps to create brand loyalty once the product is highly rated by consumers.
Types of brand

Generally speaking, firms have different types of brand for their products. Some of the most
common types are:
● Family brand – this is where the company’s name (Grace) or a product name is used
as the brand for all products (Ajax)
● Retail brand – this is where the retailer, instead of the manufacturer, attaches a brand
name to the product – for example, PriceSmart’s ‘Member’s Selection’ brand or the
WalMart brand
● Combination branding – this is where the firm incorporates more than one type of
branding for a range of products – for example, Microsoft Windows and Microsoft
Office
● Individual brand – this is where the firm attaches a different brand name to each
product – for example, Heinz operating as Farley’s baby foods and WeightWatchers
food

Packaging
In a number of cases, the brand name of the product will not be placed on the product itself
but on its packaging.
While it may be seen as just a wrapper, the packaging also helps to:
● Protect the product from damage
● Promote the product to potential customers
● Give important information about the product
● Appeal to consumers.

Care must be given to designing the packaging, as this can either attract or turn off potential
customers. The product should also be properly labelled and meet all environmental
requirements. With the emphasis recently placed on being environmentally friendly, coupled
with the on-going ‘Go Green’ campaign, the firm may also want to ensure that it is being a
good corporate citizen by using packaging that is in accordance with these requirements.
Some companies have joined in this movement by using biodegradable plastic bags instead of
those used previously. The firm should also ensure that the information provided on the
packaging is not misleading, as this could lead to lawsuits. The correct design, size and
material must be carefully chosen so as to minimise cost and at the same time provide
convenience and ease of transportation and storage.

Types of packaging
There are two distinctive types of packaging.
Primary packaging – this is the material that is used to hold or encase the product. It is the
part of the package that is in direct contact with the product (for example, a carton)
Secondary packaging – this is the outer layer of the package which is often used to group the
primary packages together (for example, a box in which the cartons are placed).

There are four notable characteristics that distinguish a good from a service.

Intangibility
A service, being intangible, means that it cannot be seen, touched or tasted. As a result,
unlike the case with goods, consumers will not be able to interact with a service before it is
purchased. There is no tangible attribute that can be used to appeal to consumers before they
purchase the product. In most cases consumers may have to depend on customer reviews,
personal references and the reputation of the person or firm offering the service. Being aware
of this, marketers often try to associate the service with something tangible – for example,
‘before’ and ‘after’ pictures of the results of plastic surgery. Some marketers also stress the
quality of the service when it is being advertised.

Inseparability
The nature of the service industry is that it is highly labour intensive. As a result, it is
difficult, if not impossible, to separate the service from the provider: they are inseparable.
Once purchased, the service is produced and consumed simultaneously and both the
consumer and provider become a part of the service. For example, if you purchase a massage,
both you and the masseuse are part of the service and you cannot have the service unless the
masseuse is present. This fact forces marketers to improve and maintain quality levels
consistently while also ensuring that service providers are competent in their respective
fields.
Variability
Unlike most goods which are standardised and produced in mass quantities by a single
producer then distributed to consumers, a service is provided and distributed together. To this
end, a service will be more than likely different, depending on when, where and how it is
provided and who provides it. It is for this reason that we often go to the same barber or
hairdresser on every visit to the salon. As it is, it is difficult to give the same quality of
service on each occasion and, as a matter of fact, maintaining the same quality comes with
experience and training. The service provider must also be aware of the consumer’s
expectations and try to meet or exceed those expectations.

Perishability
The fact is that a service disappears the moment it is provided or received: it can be described
as perishable. Once a service is sold or provided it is not possible to store it for a further date.
As a result, if the service is not consumed upon provision it will go to waste. In addition, in
most cases, firms are not able to adjust the supply of the service to meet the demand.
Therefore the quality of the service might diminish as it is demanded by more and more
people. Have you ever wondered why the service you received gets poorer during peak
season or peak hour at, say, a restaurant or bank? The fact is that the people who are
rendering the service tend to become tired or stretched during these times and so quality of
service tends to decrease. With this in mind, the firm must be aware of its supply capacity and
so monitor its service quality periodically and bring in more staff when necessary. Having
identified the characteristics of services, the marketer now has to formulate strategies to deal
with each characteristic in order to achieve success.