What are Products?
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, banking, private health care).
The process by which companies distinguish their product offerings from the competition is called branding. For 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 offer (e.g. Dell’s range of personal computers or Sony’s range of televisions).
There are two main types of product brand:
(1) Manufacturer brands
(2) Own-label brands
Manufacturer brands are created by producers and use their chosen brand name. The producer has the responsibility for marketing the brand, by building distribution and gaining customer brand loyalty. Good examples include Microsoft, Panasonic and Mercedes.
Own-label brands are created and owned by distributors. Good examples include Tesco and Sainsbury’s.
The main importance of branding is that, done well, it permits a business to differentiate its products, adding extra value for consumers who value the brand, and improving profitability for the company.
Businesses should manage their products carefully over time to make sure 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 known and used in business:
- The Boston Group Growth-Share Matrix, and
- GE Market Attractiveness model
Businesses need to regularly look for new products and markets for future growth. A useful way of looking at growth opportunities is the Ansoff Growth matrix which suggests that there are four main ways in which growth can be achieved through a product strategy:
- Market penetration – Increase sales of an existing product in an existing market
- Product development – Improve present products and/or develop new products for the current market
- Market development – Sell existing products into new markets (e.g. developing export sales)
- Diversification – Develop new products for new markets