Contents
What’s it: A product is anything we use to satisfy a need or want. Marketing experts divide it into two: goods and services. Goods represent tangible products. Meanwhile, services represent intangible products. As proposed by Kotler, products satisfy our needs on five levels, from core benefits to potential benefits.
Where do consumers get the product from? Businesses present. They produce and sell products to satisfy needs and wants. They do it to make money. They then use the money to buy inputs such as raw materials and labor. The difference between the revenue they earn and the costs they incur results in a profit.
Which products do consumers buy? There are several alternative strategies to attract consumers. The two most basic are cost leadership and differentiation. The business then embodies the strategy in the marketing area with a focus on the marketing mix: product, price, promotion, and place.
For example, cost leadership promotes standard products and prices lower than the industry average. Because margins per unit are low, companies seek to generate high sales volume and, therefore, rely on promotion and mass distribution to reach as many consumers as possible.
Are consumers satisfied? It depends on their expectations and the price they are willing to buy. If the value provided by the product equals or exceeds their expectations, they are satisfied. And their expectations are reflected in the price they are willing to buy.
What are the types of products?
There are several ways to categorize products. For example, we group them into two based on whether they have physical substance or not:
- Goods
- Service
Goods represent tangible products. They have physical substance, so we can see and feel them. Examples of goods are clothing, cell phones, bicycles, food, and drinks. Then, marketers categorize them into two based on their useful lives:
- Durable goods. They have a long service life, three years or more. Cars and furniture are examples.
- Nondurable goods. They have a short useful life and should be consumed immediately after purchase. Vegetables, fruits, and beverages are good examples.
Meanwhile, services do not have physical substance. Because they are intangible, we can only feel the benefits but cannot see or touch them. What barbers, banking, financial advisors, and insurance provide are examples of services.
Then, we can also categorize products based on who buys them. They are:
- Consumer products
- Industrial products
Businesses sell consumer products to individuals for end use. We don’t need to process them further into other products to get their benefits. Food, beverages, and bicycles are examples of consumer products.
Meanwhile, industrial products are sold to other businesses. They may be raw materials or intermediate goods. Examples of raw materials are iron ore, bauxite, corn, wheat, and logs.
Manufacturers process raw materials into finished or intermediate products, which require further processing. Meanwhile, examples of intermediate products are steel plates, aluminum plates, and wheat flour. Other manufacturers in the downstream business then process intermediate products into finished products such as wheat flour into bread and aluminum plates into car frames.
In addition to intermediate products, a business may purchase products from other businesses, such as machinery and manufacturing equipment, to assist in the production process. Or, they purchase finished products to support operations, such as laptops and other office equipment. Or, they sell products for resale as retailers do.
Why is the product important?
Products are essential to our lives. For example, we consume them to survive and make our lives easier. Imagine if there were no food and beverage products? We may have to grow our own vegetables, grains, and fruits.
In addition, products also improve our standard of living. For example, computers help our work. We can also use it to make money. Then, mobile phones make it easier for us to communicate with our families. Without cell phones, we may have to take long trips, on foot or horseback, to meet our family. Furthermore, we can also travel long distances more quickly by taking flights and train trips.
Why is the product important? Broadly speaking, it can be seen from two points of view:
- Consumer
- Business
As consumers, we can satisfy our needs and wants by consuming products. Therefore, they are not only essential for us to survive but also make our lives easier, as the example mentioned earlier.
Then, businesses earn money by selling goods and providing services. They use the money for various purposes, including paying employee salaries and distributing it to owners. We may work as employees. Or, we are business owners. Without a product, we don’t get any money, whatever role we play.
Why do businesses sell products?
Businesses earn money by producing products. They sell products to collect revenue. And after deducting the associated costs, they make a profit.
Competition forces businesses to be competitive. They have to offer something better than competitors to entice consumers to buy. By fulfilling it, they hope to generate more revenue.
At the same time, businesses must also think about how to generate revenue at a more efficient cost. If they were more efficient, any revenue they recorded from sales consumed less cost.
If it succeeds in generating revenue at less cost, the business can earn higher profits than competitors. And if their profitability is higher than the average competitor’s, they gain a competitive advantage.
Building competitive advantage
How much money a business can make from each product depends on its competitive strategy. For example, a company adopts a differentiation strategy by offering uniqueness at a high price. As a result, they earn high margins per unit. So, they can reach their profit target by selling fewer products.
In contrast, other firms may adopt a cost leadership strategy. They rely on selling prices lower than the industry average while offering standard features. As a result, they get a low margin per unit. Thus, to achieve the total targeted profit, they must sell the product at a higher volume than the differentiation strategy.
Indeed, customers like cheap but high-quality products. In other words, it combines differentiation strategy and cost leadership together. However, for companies, it may be difficult to do. I mean, companies often can’t offer both at the same time. Therefore, companies usually choose between a differentiation strategy or cost leadership in developing competitiveness.
How do businesses attract consumers to buy products?
A company sells products to satisfy consumer needs and wants. In other words, a product is attractive if it provides a solution for consumers. However, many other companies are doing it too. They compete with each other. Thus, to attract consumers to buy, products must also satisfy consumers better than their competitors.
Finally, the company must offer a unique selling proposition to entice consumers to buy. It represents the benefits and solutions provided by the product to satisfy consumer needs and differentiate it from competing products.
Designing a unique selling proposition requires companies to think about the marketing mix:
- Product
- Price
- Promotion
- Place
For example, a product has a selling point because it provides advanced features, allowing the company to charge a high price. Meanwhile, competitors’ products may have standard features, relatively similar to competitors, but the company offers them at lower prices.
Then, companies usually have different ways of promoting and selling products. For example, they promote high-priced products in a more intimate or individualized approach. Thus, they must focus on specific market segments, such as rich families. In certain cases, they may sell products door-to-door instead of relying on bulk channels such as distributors and retailers.
Meanwhile, low-priced products are usually promoted through mass advertising to reach as many customers as possible. In addition, the company also relies on retail channels to cover a wide area. Thus, the high sales volume compensates for the low margin per unit.
Meet consumer expectations
As I mentioned, companies aim to satisfy consumers through their products. And a product is superior if it can meet or exceed customer expectations. In other words, the value customers get from the product is equal to or higher than the price they are willing to pay.
This concept is important when developing a unique selling proposition. Consumer expectations are an important aspect to be measured and embedded in the product when designing a selling proposition. Thus, the product’s uniqueness not only fulfills the needs but also satisfies the customers because it meets their expectations.
Develop around five product levels
Philip Kotler, a marketing management expert, proposes five product levels. These five levels help businesses to market their products effectively. They are:
- Core benefit
- Generic product
- Expected product
- Augmented product
- Potential product
Core benefit. It represents what the product can do to the consumer. Take smartphones, for example. The core benefit is communication. So, for example, by using it, we can contact our colleagues, even though they are abroad.
Generic product. It is a physical or tangible element. These extra elements we can see, touch, or feel. For smartphones, it can include screen size, design, and camera. For example, a unique design can be attractive the first time consumers see it.
Expected product. A series of product attributes consumers expect to obtain. Operating systems and basic applications, such as browsers and phone memory, are examples.
Augmented product. These elements can be tangible such as product materials and operating system features. Or, it can be intangible, like after-sales service and brands.
Augmented elements are highly strategic because they differentiate the product from competitors’ products. In addition, they also distinguish between successful and unsuccessful products. Finally, they also determine the customer’s purchasing decisions. Because of this, many successful businesses focus on improving this element.
Potential product. It relates to changes or improvements in the future and has the potential to surprise customers and make them love the product even more. For example, smartphone manufacturers embed high-resolution cameras, which are difficult to obtain at their first launch.
