Chapter 3

Question 1

Product decisions

Answer 1

Product decisions incorporate all of the conscious decisions created by organisations with regard to their products. If we could compartmentalise product decisions into two categories, they would be individual product decisions and multiple product decisions and strategies.

Question 2

Individual product decisions

Answer 2

Individual product decisions relate to decisions based on the actual product or product type, and typically involve the characteristics of a singular product item. Decisions based on features, branding, labelling and packaging and design are all characterised as individual product decisions

Question 3

Product features

Answer 3

Product features incorporate all the tangible representations of performance that a consumer intends using.
These frequently represent an organisation’s differentiating factor in its competitive landscape.
Product features are sometimes innovative and the first to market, whereas at other times they mimic or copy features in order to gain marketing approval and validity.
Product feature decisions stem largely from market research and consumer trends.

Question 4

Product quality

Answer 4

Product quality is a key consideration that product managers and marketing managers need to be aware of.
It relates to all iterations of quality, ranging from the level of quality in the desired product’s performance (How does my new car meet my original expectations?), right through to the quality of the service experienced in the product’s supportive service (What was the level of satisfaction with my last car service experience?).

Question 5

Product quality can therefore be characterised in terms of the following:

Answer 5

functionality 
 reliability
 usability
 maintainability y efficiency
 portability

Question 6

• International Organisation for Standardisation

Answer 6

Internationally, the International Organisation for Standardisation (ISO) is the world body for standards formulation and definition, and comprises various member countries each of which subscribes to the ISO’s standards definition.
Organisations that are ISO compliant generally confer and deliver according to an internationally accepted norm of operations and procedures.
This standard may instil a higher level of consumer confidence in the respective organisation because ISO compliancy is a measure of quality or performance.

Question 7

• SABS

Answer 7

Locally, consumer products subscribe to South African product standards. 
The SABS (South African Bureau of Standards) is a statutory body, which operates in accordance with the Standards Act 29 of 2008, as the national institution for the promotion and maintenance of standardisation and quality with regard to products.

Question 8

Total Quality Management (TQM)

Answer 8

TQM is a modern managerial concept that attempts to employ all of the fundamental concepts and philosophies of quality management in every organisational element and function.
This concept becomes entrenched in operations, managerial decisions, leadership, human resources, support services, customer facing departments, financial planning and all other organisational departments and services. Everyone should be prepared to accept and implement the standard quality definitions formulated by the organisation.

Question 9

Product design and styling

Answer 9

Style and design are two different things.

Product styling decisions are again primarily modelled on user experience, ergonomics and innovation, ultimately with the end-goal of achieving competitive differentiation.
Unfortunately, consumers evaluate design and style according to their own set of intrinsic evaluations.
It is therefore necessary to gauge target consumers’ expectations in order to deliver a product that not only subscribes to its original design but also caters for the target segment needs.

Question 10

• Style

Answer 10

Style relates specifically to the overall appearance of a product, thereby incorporating elements of aesthetics.

Question 11

• Design

Answer 11

Design is multifaceted and conducted in more depth than product style.
Truly innovative and successful designs target not only the aesthetics of the product but also influence the product’s usability, performance and mobility.

Question 12

Support services: The Augmented Product

Answer 12

Product-related services give a product the necessary dimensionality. This is especially true of products that are more technical, requiring a higher level of consumer involvement.
These so-called “after-sales” services often provide the definitive value that sets a product apart from those of its competitors.

Question 13

The total product offering and where services “fit” in

Answer 13

Core product
Basic product
Expected Product
Augmented Product
Potential Product

Question 14

Potential Product

Answer 14

This includes the total augmentation of the product, in its present existence and in its future and includes upgrades, replacements, etc.

Question 15

Core product

Answer 15

The core product is transformed into a tangible item, able to meet the needs of the consumer, i.e. a motor car, soft drink, hotel room, etc.

Question 16

Basic product

Answer 16

This is the most fundamental level of a product and represents the basic service or benefit that a consumer really buys, i.e. transport, thirst quencher, rest, etc.

Question 17

Expected Product

Answer 17

This dimension represents the standard attributes, conditions or benefits that the user expects to receive upon purchase, i.e. seatbelts, indicator lights, etc.

Question 18

Augmented Product

Answer 18

These attributes, conditions or benefits usually exist outside the “standard” expectations of a product, i.e. a top-end entertainment system in a hotel room.

Question 19

Labelling

Answer 19

Labelling adds a significant functional value to any product. Not only does it convey important pricing and identification criteria, but it is often a standard legal requirement. From medicines to crisps, products need to contain the necessary medicinal or nutritional information (respectively) in order to inform consumers and remain legally compliant.

Question 20

Foodstuff labelling

Answer 20

Foodstuff labelling is a key regulatory requirement for providing the necessary information on the content and composition of products in order to guarantee consumers’ health and wellness requirements.

Question 21

Nonfoodstuff labelling

Answer 21

Nonfoodstuff labelling generally contains information necessary for consumers to make a purchasing decision. This may relate to performance attributes, quality guarantees, contact information and support information, to name but a few.

Question 22

Consumer Protection Acts

Answer 22

With the emergence of consumer protection Acts protecting the rights of consumers against various business and marketing practices, labelling will now more than ever provide the necessary correct information to consumers, empowering them against ineffective and potentially harmful marketing practices.

Question 23

Guarantee

Answer 23

A guarantee is a free written statement, typically provided by a manufacturer, whereby the manufacturer undertakes to repair or replace an item within a specific period of time from the date on which the item was purchased.
Guarantees are part of the consumers’ right to protection, and generally pertain to durable goods such as furniture, cell phones, washing machines, microwave ovens and suchlike.

Question 24

Warranties

Answer 24

Warranties differ somewhat from guarantees, in that they act as “insurance policies” that provide a consumer with a certain level of cover after the original manufacturer’s guarantee has expired.

Question 25

As a rule, marketers need to be aware of the following three forms of warranties:

Answer 25

An express warranty
An implied warranty
A lifetime warranty

Question 26

The importance of these additional attributes

Answer 26

Guarantees and warranties are legally binding and therefore enforceable through a court of law.
Both of these attributes provide the total product with an augmented benefit and are often serious considerations when purchasing premium products.

Question 27

mass production and customisation.

Answer 27

The principle of mass production has the combined goal of developing, producing, marketing and delivering goods and services at prices low enough that nearly every- one can afford them. The evolution from mass production to mass customisation was more of a mindset change than anything else. Mass customisation is a synthesis of two long-competing management systems, namely mass production and customisation.

Question 28

Customisation

Answer 28

Customisation, which includes the synthesis of various product or service attributes into different combinations, was originally a highly specialised, time-intensive and costly ex- ercise. Generally viewed as one and the same as personalisation, the skills and technolo- gies used in this production technique had one thing in common: servicing individual needs for various individuals.

Question 29

Mass customisation

Answer 29

Mass customisation is therefore the amalgamation of customised and personalised products and services to consumers at mass production prices.
These types of product and service can be built from combinations of different components, all of which are produced relative to mass production techniques.
Organisations generally focus on mass customisation in order to benefit from economies of scale (in terms of production), while still providing “tailored” products and services to their respective target markets.

Question 30

Product Lines

Answer 30

Product lines are categories of products in a specific product class, which are closely related to one another and target the same market, through the same distribution channels at similar prices.

Question 31

Product lines can be further be categorised :

Answer 31

Depth.

Breadth.

Question 32

Depth.

Answer 32

Product depth includes the number of different sizes, brands, symbols of flavours in a specific line. Increasing the depth of a product line is known as line filling.

Question 33

Breadth.

Answer 33

Product breadth has to do with the different variations of products in a line. For example, an ice-cream product line could include yoghurt variations of the various flavours.

Question 34

Line stretching

Answer 34

Organisations can lengthen (also known as line stretching) product lines by trading up or down, or in both directions.
This process is again conducted in order to target different segments and/or provide entry barriers for competition.

Question 35

Product line strategies

Answer 35

Product line strategies are not static strategies and are therefore modified periodically. The following diagram depicts the various types of product line strategies that product managers and marketers have at their disposal

Question 36

Line modernisation

Answer 36

180Constant upgrades and technological innovations compel organisations to update or modernise their products. Line modernisation is performed on a continuous basis and allows organisations to remain current and competitively viable.

Question 37

Planned obsolescence.

Answer 37

One of the strategies carried out through updating and modernising products is planned obsolescence.
This term defines the process of products becoming obsolete before they need replacing.
This strategy typically relates to the clothing industry.

Question 38

Product mix expansion

Answer 38

Product mix expansion includes adding an entire product line to an organisation’s market offering. This strategy is generally conducted in order to increase market penetration in new segments. Expanding product mixes also helps the organisation to diversify its risk potential, because it is now competing in more markets. However, the downside of this strategy is that it may lead to product and/or brand dilution.

Question 39

Product mix contraction

Answer 39

Product mix contraction typically relates to the elimination of an entire product line in an organisation’s product mix (or assortment mix). However, it may also include simplify- ing an assortment in a product line.
Organisations typically apply this strategy to reshift their operating capital and maximise efficiency.
The downside of this strategy is that the organisation competes in one less market and therefore has a higher level of market risk.

Question 40

Boston Consulting Group’s (BCG’s) portfolio analysis.

Answer 40

The product or marketing manager can view the overall organisational product mix as a collection of items to be balanced in a specific product set, known as a product portfolio.
One of the tools used to assist product and marketing managers in this endeavour is the Boston Consulting Group’s (BCG’s) portfolio analysis.
This matrix is characterised according to an organisation’s cash utilisation and cash generation potential, and typically has two dimensions: relative market share and market growth rate.

Question 41

The traditional BCG growth share matrix

Answer 41

Problem child
Stars
Cash cows
Dogs

Question 42

Problem child

Answer 42

The so-called “problem child” or “question mark” is a product characterised by relatively low market shares, but it exists in a highly competitive industry. These products typically relate to new products that are yet to establish a competitive industry position.

Question 43

Stars

Answer 43

“Stars” are the best performing products an organisation has on the market.
They are characterised by high market shares and market growth potential.
Businesses often support product stars by reinvesting in innovation, research and marketing in order to maintain their preferential market position.
Product decisions inherent in this category include product line expansions, line modernisation and differentiation.
Stars are also typically identified by their aggressive marketing status.

Question 44

Cash cows

Answer 44

“Cash cows”, as the name suggests, indicate that the specific organisational offering is a high cash generator.
These types of market are generally stable and therefore require less investment than what is required for stars.
Cash cows also generally exist during the maturity phase of the product life cycle, and organisations tend to keep this position as much as possible and hence “milk” the positive cash-generating advantage.

Question 45

Dogs

Answer 45

So-called “dogs”, however, have a relatively low market share and growth potential.
These offerings typically correlate to the decline phase in a products life cycle.
Unless there is a radical reshift of resources and new innovation, products classified as dogs will often be harvested for as much cash flow as possible until they are ultimately phased out of the market.

Question 46

192The BCG matrix is a useful tool for managing a product portfolio, but managers need to be vigilant of the various pitfalls that may exist in its implementation, as highlighted below:

Answer 46

The immediate limitation of a BCG matrix is its simplicity.
The overall quantitative and qualitative analysis of the market is sometimes difficulty to define.
The matrix also assumes that market share and growth are directly linked.
Unfortunately growth rate is only one aspect of the attractiveness of an industry or y market and therefore tends to ignore smaller more agile competitors.
Management may often overlook certain product-specific intricacies. For instance, when a new product is launched, organisations typically spend a lot of time and resources on promoting the product in its relative market. If organisations do not constantly remain balanced in their approach to managing their product portfolios, positively performing products may find themselves struggling in an increasingly competitive expanding market.