Product

Question 1

What is a product?

Answer 1

Product refers to the means by which value is delivered to the customer. 
It is whatever is offered for sale in the exchange (a good, service, idea, place, person)

Question 2

What are the features of a product?

Answer 2

• Customers buy what the brand is suggesting and how they perceive the brand
• Products are dynamic; the features that create values for customer are constantly evolving.
• Includes the development of new product/service, building the brand, repositioning the brand, augmented product, design and packaging of a good, its physical features and quality of any associated services such as delivery.

Question 3

What are the 3 levels of a product?

Answer 3

core, actual and augmented

Question 4

What is the core product?

Answer 4

The core product is all the basic benefits or functions, or the minimal requirements, the product will provide for consumers.

Question 5

What is the expected product?

Answer 5

The expected product is the actual physical attributes that provides for the utility of a product. Tangible or physical benefits, such as quality level, product and service features, styling, branding and packaging, colour, fashion, style.

Question 6

What is the augmented product?

Answer 6

The augmented product refers to the non-tangible benefits or features the product can offer that differentiate it from competitors in the market. It is the “cherry on top”. Includes attributes that go beyond expectations.

Question 7

What is the product life cycle?

Answer 7

Product Life Cycle is a concept that explains how products go through four distinct stages/phases from birth to death: introduction, growth, maturity and decline.

Question 8

Is PLC an effect or a cause?

Answer 8

Effect

Question 9

What is the duration of PLC determined by?

Answer 9

Competition and consumer behaviour

Question 10

What are the 4 stages of PLC?

Answer 10

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

Question 11

How is a product first introduced?

Answer 11

The first stage of the PLC in which slow growth follows the introduction of a new product in the marketplace:

• Lower profits, due to costs of development
• Product – new and innovative
• Price – premium
• Place – specialist outlets, full service
• Promotion – inform consumers, encourage trial, focus on innovators & early adopters

Question 12

What happens in the growth stage of the PLC?

Answer 12

The second stage in the PLC during which the product is accepted and sales increase rapidly (market share). They are early adopters.
Begin to gain profits and market share:

• Product – improve quality, style, features, add new products
• Pricing – pricing stability, possibly lower to increase market share
• Place – increase number of outlets & routes to market
• Promotion – shift from awareness advertising to comparative messages (facts, what makes the brand different from others)

Question 13

What happens in the maturity phase of PLC?

Answer 13

The third and sometimes longest stage in the PLC in which sales peak and profit margins narrow. Peak, top of your game, where we are as good as we can be dominant in market share. Product has reached its full capacity to sell and to remain competitive and maintain market share during the maturity stage, firms may adjust their marketing mix and add new product features to attract some new users of the product:

• Product – modify product usage, race to find market niches and remaining segments (laggards)
• Pricing – lower prices, markdowns, value bundles
• Place – increase distribution efforts, promotion to channel members
• Promotion – concentrate on product positioning, positions product against others in the market

Question 14

What happens in the decline stage of PLC?

Answer 14

The fourth and final stage in the PLC in which sales decrease as customer needs change. At this stage, there are usually many competitors, with none having distinct competitive advantage. Firms should start to introduce new products as their old products begin to decline, so that they are able to maintain their market share and profitability.

Firms may decide to:
(1) phase the product out as it declines, and let existing stock run out

(2) simply remove the product as soon as possible.

As the product declines, firms do not want to spend more, so they do their best to cut costs.

• Product – maintain a basic product, cut unprofitable segments, possibly withdraw
• Pricing – maintain pricing, possible raise prices
• Place – limit distribution efforts, perhaps low-cost channels
• Promotion – cut back on advertising and sales promotion

Question 15

Where can product life cycle be applied to?

Answer 15

3 areas: product categories, product forms and brands.

Question 16

What is adoption?

Answer 16

An individual processes; from first hearing about the product to finally adopting it. Individuals who first adopt an innovation require a shorter adoption period.

Question 17

What is diffusion?

Answer 17

Group phenomenon; suggests how innovation spreads.

Question 18

Define innovators:

Answer 18

Innovators refer to the segment of the population who are adventurous, and willing to adopt new products and take risks. Typically well-educated, younger and financially better.

Question 19

Define early adopters:

Answer 19

Early adopters refer to those who adopt an innovation early in the diffusion process, but after the innovators. They have greater concern for social acceptance than early adopter. They are opinion leaders, as the population often looks to them for their opinions on various topics. This makes early adopters the key to a new product’s success.

Question 20

Define early majority:

Answer 20

Early majority refer to those who avoid being either first or last to try an innovation.

Question 21

Define late majority:

Answer 21

Late majority refer to those who are willing to try new products when there is little or no risk associated with the purchase, when the purchase becomes an economic necessity, or when there is social pressure to purchase.

Question 22

Define laggards:

Answer 22

Laggards refer to those consumers who are last to adopt an innovation. By the time they adopt a product, it may have already been superseded by other innovations.

Question 23

What is diffusion of innovation?

Answer 23

Firms can gain relative advantage by facilitating diffusion. This is a process used to ensure that innovation is accepted by the target audience , and can be achieved by firms by not only understanding, meeting and going beyond the needs and expectations of their target consumers

Question 24

What are the 5 factors that influence the rate of diffusion of innovation?

Answer 24

1. compatibility
2. complexity
3. divisibility
4. communicability
5. timing

Question 25

What is compatibility?

Answer 25

The innovative nature of a product can be adopted quicker if firms ensure what they deliver is consistent and compatible with their existing company values and standards.

Question 26

What is complexity?

Answer 26

Ensure that the product, while innovative, is simple and easy for customers to use. The less complex the product, the faster the acceptance rate.

Question 27

What is divisibility?

Answer 27

Ensure that the product is available for testing on a limited basis. Could offer trials to reduce the risk to consumers

Question 28

What is communicability?

Answer 28

Ensuring that the right benefits of the product are communicated to the right target audience. If the firm targets innovators and early adopters, they could transmit message about the functionality and development of the product. If the firm targets less-educated consumers, they should mention the basic product features, which are not too complicated to comprehend. The firm would need a well-thought-out promotional campaign to capture the relevant segments to ensure quick adoption of the product.

Question 29

What is timing?

Answer 29

Timing – ensuring that the product is introduced to the market at just the right time, where both the firm and their target consumers are ready for the uptake of the innovative product.

Question 30

Is product development important?

Answer 30

Yes, Continual innovation and product development is the lifeblood of every firm, as it is essential for profitability and hence business survival.

Question 31

What are the objectives of product development?

Answer 31

In order to be successful in the market, firms should aim to minimise (cycle) time to the market. They should be quick, adopt a first-mover advantage in order to increase the chances of their product being accepted as the dominant design before anyone else’s. However, this may entail high costs to firms from initial R&D, as well as the cost of failure.

Question 32

How has the Co-creation approach developed over the past decade?

Answer 32

Over the past decade, customer involvement in new product development has increased. The boundaries between the firm and its customers are disappearing, as firms consider the potential for customer-firm co-creation of products for its long-term survival. Firms are now working together & cooperating with their customers (and other key stakeholders) to build and produce new products together. Customers may be actively involved in designing prototypes.

Question 33

What does customer involvement increases? (5)

Answer 33

• Perceived switching costs
• Tolerance of service failure
• Perceived control and opportunity to make choices
• Firm productivity
• Service innovations