The marketing mix contains elements required to successfully market any product. Therefore, marketing efforts and strategies should focus on these aspects to achieve excellence.
The conventional marketing mix (or 4 P’s) includes:
Then, the experts added three other elements to accommodate service marketing, namely:
- Physical evidence
The seven elements above are known as the 7 P’s.
Now, let’s talk about the first element: the product.
Product refers to goods or services marketed to meet consumer needs and wants. Companies sell them to make a profit. Meanwhile, consumers buy them to fulfill their needs and wants. In the marketing mix, products cover various aspects such as function, features, design, and quality.
Products must have added value, either functional value or emotional value. Functional value is related to its use to satisfy consumer needs and wants. Meanwhile, the emotional value represents emotional appeal, such as pride or happiness, when using it.
Products are divided into two types:
Goods represent tangible products. They may be for end use or for further processing. Examples are various consumer goods, raw materials, and capital goods.
Services represent intangible products. They are activities related to helping, doing something, or providing solutions to other parties. Unlike goods, services have no physical substance, so we cannot see or touch them. We can only feel the benefits. Services can be consumer services or business services.
Four aspects characterize services and differentiate them from goods:
- Intangibility. Services have no physical substance. We cannot see or touch it. Thus, judging its merits using any real evidence would be challenging.
- Inseparability. Services are produced and consumed at the same time. When you buy a plane ticket, you will enjoy the services when you get on the plane.
- Heterogeneity. It’s hard to tell the consistency. Services provide a unique experience, where different people will have different experiences with the same service. Likewise, if we use the same service another time, it will also provide a different experience.
- Perishability. We cannot store services and then use them at a later date. Likewise, we cannot transfer or send them to another place or person. Services we receive when interacting with providers either directly or indirectly. For example, we receive health consulting services when discussing with consultants. We can receive banking services when, for example, we are using mobile banking.
Durable goods vs. nondurable goods
Durable goods provide benefits for some time. They have a life span of more than three years. And we can use them repeatedly from time to time. Bicycles, motorcycles, cars, refrigerators, and laptops are examples.
Nondurable goods are consumed in less than three years. Some may only be used once, such as packaged food and beverages.
Compared to nondurable goods, durable goods require more calculation and consideration. This is because they usually have a high price. So, buying them can cost quite a large budget.
For this reason, some consumers buy durable goods not with cash but on credit or apply for loans from banks. In addition, consumers are considering delaying their first purchase during difficult financial periods such as a recession.
Homogeneous product vs. differentiated product
Homogeneous products do not have unique characteristics. Several homogeneous products satisfy buyers in the same way. They are not markedly distinguishable from one another. So, the lower price is the main reason to buy.
Mass products are sold to all populations. They may be homogeneous, and therefore, companies compete on price. They try to sell to as many consumers as possible.
Companies assume customers have the same needs and tastes. Thus, they offer standard products similar to competitors’ products.
Standardized products are made to certain specifications, making them uniform and similar. Commodities are examples of standardized products.
Differentiated products are made unique by which consumers perceive them to have different values from one another. This uniqueness can come from features, quality, performance, or packaging. In fact, it may just be branding where the company creates a unique perception even though the product has the same function as a competitor’s product.
Consumer products vs. business products
We can differentiate the product into two based on who uses it.
- Consumer product
- Business product
Consumer products are sold directly to consumers for final use. There are many different categories and terms for consumer products, including:
Fast-moving consumer goods (FMCG) have a high turnover, quickly depleting their inventory on retail shelves. They are usually inexpensive and are used to meet everyday needs such as soap and shampoo.
Consumer perishables have a limited shelf life, and usually, their demand is seasonal. As a result, they may sell for a higher price than FMCG.
Consumer nondurable goods have short economic benefits, usually less than three years. FMCG and consumer perishables are examples.
Consumer durable goods have more than three years of economic useful life. Therefore, they are relatively expensive and require more consideration when buying.
Convenience products are purchased and consumed regularly and are available at wholesale or retail.
Necessary goods, such as food and drinks, are purchased to fulfill our basic needs.
Impulse goods are purchased without prior planning, such as candy on display near the checkout.
Shopping goods have a higher price than convenience goods but are bought infrequently and require more consideration and budget planning. Examples are clothing.
Specialty products are unique, and often, consumers are willing to spend time and effort to acquire them. Examples include jewelry and luxury cars.
Unsought products are bought even though the consumer does not know or has not thought about them beforehand. The desire to buy arises, for example, when a loss occurs. Examples are insurance products and fire extinguishers.
Low-involvement products require less time to decide on a purchase. They are inexpensive and pose a low risk to consumers if they are disappointed by purchasing them.
High-involvement products require more time to decide when buying. They carry a high risk for consumers. They cover expensive purchases like cars and computers.
White goods include household appliances such as freezers, refrigerators, stoves, and washing machines. In the past, they were white, hence the name.
Brown goods include light electronic devices such as radios, computers, and digital media players. The naming is similar to white goods.
Business or industrial products are purchased by businesses or organizations rather than individual consumers. They include business goods (industrial goods) and business services. They may be:
- Raw materials – natural resources without further processing. Examples are iron ore and crude oil.
- Intermediate goods – used to produce other goods, not for final consumption. Also known as intermediate goods.
- Capital goods – end products used in the production process. Unlike raw materials and semi-finished goods, they are not part of the output. Examples are machinery and equipment.
Other than these three, business products, such as various office goods, maybe for end use. Or they are purchased for resale, such as goods purchased by a retailer.
Product line, product mix, and product range
Product line refers to a group of related products marketed under a single brand name and sold by the same company. Products in a line may be differentiated by color, size, or price. For example, Samsung sells plasma TVs and LCD TVs.
Product mix refers to the different product lines offered by a company. Some companies may have multiple product lines with several products on each line. For example, Unilever has product lines for food, beverages, personal care, and cleaning products. Sometimes we call it a product assortment.
Product range includes all product lines in the various product mixes sold by the company. They may be distinguished by the product mix’s width, length, depth, and consistency.
Product life cycle
Product life cycle is the series of stages a product goes through, from its development to its disappearance from the market. The stages are broken down into:
- Development stage
- Launch stage
- Growth stage
- Maturity stage
- Decline stage
The stage classification is usually based on sales growth over time, which in turn has implications for aspects such as:
- Competitive strategy
- Cash flow
Does a product go through the five stages above, and how long each stage takes? Some products may have a short cycle. For example, product launches and then grows over time. However, the product soon declined as more sophisticated substitute products emerged. Several industries have short product life cycles, including clothing, agricultural products, fresh food, and software.
Companies understand the life cycle because each stage impacts their marketing strategy. For example, each stage requires a different marketing mix to be successful. By understanding these phases, companies know when to adjust prices, increase sales or extend product life.
The research and development stage is the earliest stage, covering ideas, design, and prototype development to product testing before being sold to the market. The product is not yet on the market.
The development stage has the following characteristics:
- Requires significant resources, including time, effort, and money
- No money comes into the company from sales
- Negative cash flow
- Ongoing research, development, and testing
- Alpha and beta product launch for testing in the final part of this phase
New product development involves different stages, including:
- Generate ideas
- Develop prototypes
- Test the product
- Product modification, if necessary
- Register patents and copyrights
- Test marketing
- Launch to market
The launch or introduction stage is the stage where the product is first sold to the market. Companies usually charge high prices to cover expensive development costs. If it is a new invention, competition has yet to emerge because only one company (first mover) is producing.
- First mover – the first company to enter a market with a new product.
The introduction stage has the following characteristics:
- Consumers are unaware of the product, and some are reluctant to take risks by trying new products.
- The marketing strategy is directed at educating consumers and building awareness among consumers.
- Marketing costs are high, as are those for advertising and developing distribution channels
- Sales grew slowly due to low sales volume and new customer acquisition.
- The company considers a skimming price strategy by charging a high price for a short time and slowly lowering it.
- Distribution is selective and limited until the product is widely accepted by consumers.
- Profits are meager or may still be at a loss due to high costs while low sales revenue.
- Cash flows into businesses tend to be less than cash flows out
Growth stage is when sales begin to accelerate. In other words, sales are growing at an increasing rate. More people use the product, supported by higher awareness and broader distribution channels.
Companies see their profits increase, which in turn, invites new players into the market. These new players might be:
- Second mover – a new player after the first mover enters the market.
- Late mover – can refer to the second mover or player after.
Growth stage has the following characteristics:
- Advertising costs may still be high, especially in the early growth stage.
- Sales increase at a higher rate
- Products begin to be widely adopted.
- Costs decrease through higher economies of scale.
- The break-even point is reached, and the company sees profits increase.
- Positive cash flow because revenue is higher than expenses
- The company started to build market share and loyalty.
- Companies try to create brand preferences to prevent consumers from switching to competitors.
The maturity or saturation stage is where growth is still positive but at a slower rate. In other words, sales are still growing but slower than before.
Some characterize the maturity stage:
- The sales growth rate gradually slows down.
- Positive cash flow increases as the gap between revenue and expense become larger
- Almost all consumers have used the goods, and at the end of this phase, all consumers have used the product.
- New customers are getting scarce.
- New customer acquisition grew more slowly.
- Companies increasingly rely on repeat purchases and capturing competitors’ customers to achieve high growth.
- Competition is intensifying as companies must win customers from competitors to grow sales.
- Several uncompetitive players exit the market.
- Promotion is more directed at strengthening loyalty and winning competitors’ customers.
- The marketing strategy is directed at differentiating products from competitors’ products by, for example, increasing product features.
- Mergers and acquisitions began to intensify in the market.
The decline stage is the final stage in which sales decline. The company seeks to squeeze as much cash as possible and invest it in other products. They may prolong the decline phase with an extension strategy to allow more time to collect cash.
Reasons for the decline:
- Consumer tastes and preferences change.
- Substitute products with new technology appear.
Several characterize the decline stage, including:
- Sales grew negatively
- Consumers usually stop buying the product seeing newer and better alternatives
- Companies take efficiency measures such as reducing promotion and advertising costs
- Acquisition and merger activity increased
- There are fewer opportunities to continue making profits
- Some companies withdraw their products before they start losing money
The extension strategy aims to extend the product’s life and maximize the cash extracted. It may involve:
- Product redesign, for example, by adding special features or launching a limited edition
- Repackaging, for instance, new colors, materials, or other physical elements
- Price reduction to entice repeat customers to buy
- Market expansion by finding new markets for existing products
- Changing usage as practiced by watch manufacturers from marketing products as time markers to lifestyle products
Product portfolio refers to all the products a company offers, each with different performance, market share, and growth prospects. For example, Sony Group Corporation’s product portfolio is spread across various segments, such as computers, cameras, televisions, and games. Alike, Nestlé has products ranging from baby food, bottled water, breakfast cereals, coffee and tea, and snacks.
The pros and cons of having a product portfolio
Managing a product portfolio has its pros and cons. Meanwhile, it provides advantages such as:
- Generate revenue from more than one source by selling different products
- Benefit from diversification by spreading risk between markets
- Creating greater brand awareness through multiple products to satisfy various needs and wants
- Drive customer loyalty because customers are more likely to buy various products from the same brand
- Easier to launch new products due to higher brand awareness
- Mitigate risk due to seasonal fluctuations in one or two markets
- Benefit from economies of scope by optimizing existing resources by using them to manufacture more than one product
However, maintaining an extensive product portfolio comes with limitations, including:
- Increased research and development costs for each product
- High marketing and promotion costs because it involves many products
- Contagious effect when negative publicity on one product harms another
- More complex management in making each product successful
- Cannibalization, where success in one product jeopardizes another
Product portfolio analysis
In product portfolio analysis, a company examines each product line’s performance and evaluates its suitability against business objectives. Then, its output is considered to determine precisely what marketing mix and activities need to be done for each.
Product portfolio analysis is essential to help allocate resources effectively among different products. In addition, the analysis provides input for continuous planning.
The Boston Consulting Group matrix (BCG matrix) is a marketing planning tool for classifying products based on market share and growth. It helps manage portfolios, determine resource allocation, and determine the right strategy.
The BCG Matrix classifies products into four quadrants:
- Question marks
- Cash cow
Star is a product with a high market share in a fast-growing market. They need support to strengthen or maintain their market position until the market reaches maturity. And investing in them is less significant than investing in question mark products. If successful, they become the next cash cow.
Question mark is a product with a low market share in a fast-growing market. They are also called the problem children products.
Question mark products require more investment than stars to gain a higher market share. Say, companies may choose to invest more money to build their market position. Despite the low market share, the market offers high growth potential. Thus, there is still an opportunity to improve the market position.
The investment is geared towards generating sales faster than the average competitor. For example, the company allocated it for large-scale promotion. If successful, question mark products will become the next star products.
However, investing in question mark products is high risk. Thus, some markets actually take the opposite step. They pull products from the market and use resources to help star products.
Cash cows refer to products with high market share in slow-growth markets. The product has a dominant market position and is difficult for competitors to surpass because the market has matured, where growth has been low. They do not require further investment, although an extension strategy could be used to delay the decline. The company extracts cash from them to subsidize other product categories, especially stars.
Dog is a product with a low market share in a low-growth market. The market has matured. Thus, it is impossible to increase market share and improve market position. Moreover, they tie up cash (capital); therefore, companies should either withdraw or reposition them.
Brand refers to a name, logo, term, sign, symbol, or design to identify a company’s products and act as a differentiator from competitors’ products. A good brand must be easily remembered, recognizable, and describe the desired image.
- Brand name is the letter or word part of a brand – and thus, can be pronounced – to identify a product.
- Trademarks are the exclusive rights to use symbols, designs, and brand names. It is registered with the government and used by a company to identify and differentiate its products from competitors’ products and protect against unauthorized use.
Branding is an effort to build consumer perceptions of the company’s brand. Companies often spend a lot of money to build a brand image. It is expected to generate positive associations with the product because it conveys credibility, quality, and satisfaction. In addition, if it is successful and the company has a strong brand image, it becomes a valuable intangible asset for making more money.
Finding a unique selling point (USP) becomes essential when developing a brand. USP is the reason consumers want to buy the product. Moreover, it characterizes the product and differentiates it from other products. Long story short, the brand should represent the USP.
Branding is important to:
- Make products more easily recognized by consumers
- Differentiate the product and make it stand out from competitors’ products
- Allow the product to have a strong identity
- Create loyalty by developing a brand personality
- Allow for flexibility when setting prices
- Facilitate marketing when introducing new products
Factors to consider in choosing a brand
- Easy to spell, pronounce, or remember
- Translate a product’s unique selling proposition
- Distinctive and recognizable
- Flexible in applying to new products
- Registered and legally protected
- Customized to packaging and labeling requirements
Aspects in branding
Brand awareness points to the extent to which consumers recognize a brand. Therefore, creating brand awareness is the initial critical step to building a brand image and successfully promoting a product.
Brand development is the company’s effort to build and strengthen its brand image. A strong brand is important in an extension strategy because it slows down the decline in demand. Moreover, it increases acceptance when companies launch new products.
Brand extension, or brand stretching, is a strategy whereby an established brand name is applied to new products from the same company.
Brand preference is the extent to which consumers prefer a brand over other brands. If the company successfully builds a brand image, consumers will prefer it over competing brands.
- Brand image is the consumer’s perception of a brand. It can be formed through experience or interaction with a product or company. A strong image contributes positively to the company.
Brand loyalty is how much consumers like a brand over another. Loyal customers will buy products with the same brand repeatedly.
Brand value is the value a brand adds to a product by increasing its emotional value. It makes customers willing to pay a more premium price and stay loyal. Consumers often prefer well-known brands over competing generic products.
Types of brand
There are several types of brands, including:
- Manufacturer’s brand. The company manufactures its products, labels them with its brand, and then sells them.
- Own-label brand. The company outsources production to other parties but labels products with and sells them under its own brand. Also known as a private label.
- Product brand. The company gives a different brand name for each product it owns. Also known as an individual brand.
- Family brand. The company uses the same brand name for several related products but serves different needs. Also known as the umbrella brand.
- Corporate brand. The company uses the company name as the brand name for its products. Even though it is similar to a family brand, its successes and failures affect the product and company image.
Packaging means using outer material to protect the product inside. It involves material selection, shape design, color, and lettering on any wrapper, box, can, or container.
Packaging makes products more accessible, efficient, and safer to transport before reaching the final consumer. In addition, packaging also acts as a differentiation, increasing the appeal and promoting what’s inside.
Several reasons explain why packaging is important, including:
- Affect perception, therefore, consumer acceptance
- As differentiation from other products in the market
- Protect from damage during transportation
- Allows labeling to provide critical information
- Simplify and save costs during warehousing and transportation
- Making rack systems more efficient
- Encourage impulse purchases by making them stand out
- Develop a brand image by making it distinct and easily recognizable
Research and development
Research and development generate new knowledge for companies, which may be used to create new products, processes, or technologies. In addition, it makes an important contribution because it allows companies to:
- Launch a new product
- Improve existing products
- Increase profitability
- Reduce the risk of failure
- Gain a competitive advantage
- Ensure product quality
- Build a superior image
Several factors affect spending on research and development, including:
- The nature of the business; for instance, a technology company requires a significant and sustainable budget
- Competitor research and development spending plans, which can ultimately affect competitiveness in the market
- Risk tolerance and culture in the company, wherein the innovative culture tolerates more budgets
- Government policies, such as tax exemptions for businesses investing in research and development programs
Explore More #MARKETING MANAGEMENT
- Introduction to Marketing
- Product vs. Market Orientation and Commercial vs. Social Marketing
- Marketing Objectives, Strategy, and Ethics
- Market and Its Features
- Consumer Behavior, Customer Service and Satisfaction
- Marketing Planning
- Market Targeting and Market Segmentation
- Market positioning, Target Marketing, and Product Strategy
- Sales Forecasting and Market Research
- Marketing Mix: Product
- Marketing Mix: Price
- Marketing Mix: Promotion
- Marketing Mix: Place
- Marketing Mix: People, Process, and Physical Evidence
- International Marketing
- Internet Marketing