ABSTRACT

Decisions regarding the product, price, promotion and distribution channels are decisions on the elements of the "marketing mix". It can be argued that product decisions are probably the most crucial as the product is the very epitome of marketing planning. Errors in product decisions are legion. These can include the imposition of a global standardised product where it is inapplicable, for example large horsepower tractors may be totally unsuitable for areas where small scale farming exists and where incomes are low; devolving decisions to affiliated countries which may let quality slip; and the attempt to sell products into a country without cognisance of cultural adaptation needs. The decision whether to sell globally standardised or adapted products is too simplistic for today's market place. Many product decisions lie between these two extremes. Cognisance has also to be taken of the stage in the international life cycle, the organisation's own product portfolio, its strengths and weaknesses and its global objectives. Unfortunately, most developing countries are in no position to compete on the world stage with many manufactured value-added products. Quality, or lack of it, is often the major letdown. As indicated earlier, most developing countries are likely to be exporting raw materials or basic and high value agricultural produce for some time to come.

1. INTRODUCTION
Marketing starts with the product since it is what an organization has to offer its target market. As weve stressed many times in this tutorial, organizations attempt to provide solutions to a target markets problems. These solutions include tangible or intangible (or both) product offerings marketed by an organization. In addition to satisfying the target markets needs, the product is important because it is how organizations generate revenue. It is the thing that for-profit companies sell in order to realize profits and satisfy stakeholders and what non-profit organizations use to generate funds needed to sustain itself. Without a well-developed product strategy that includes input from the target market, a marketing organization will not have long-term success. In this part of the Principles of Marketing Tutorials we take a close look at the key concepts all marketers should consider when faced with product decisions. In the Managing Products tutorial we will extend the discussion to look at the key issues in managing product decisions.

1.1 PRODUCT
In marketing, the term product is often used as a catch-all word to identify solutions a marketer provides to its target market. We will follow this approach and permit the term product to cover offerings that fall into one of the following categories:

Goods Something is considered a good if it is a tangible item. That is, it is something that is felt, tasted, heard, smelled or seen. For example, bicycles, cellphones, and donuts are all examples of tangible goods. In some cases there is a fine line between items that affect the senses and whether these are considered tangible or intangible. We often see this with digital goods accessed via the Internet, such as listening to music online or visiting an information website. In these cases there does not appear to be anything that is tangible or real since it is essentially computer code that is proving the solution. However, for our purposes, we distinguish these as goods since these products are built
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(albeit using computer code), are stored (e.g., on a computer hard drive), and generally offer the same benefits each time (e.g., quality of the download song is always the same).

Services Something is considered a service if it is an offering a customer obtains through the work or labor of someone else. Services can result in the creation of tangible goods (e.g., a publisher of business magazines hires a freelance writer to write an article) but the main solution being purchased is the service. Unlike goods, services are not stored, they are only available at the time of use (e.g., hair salon) and the consistency of the benefit offered can vary from one purchaser to another (e.g., not exactly the same hair styling each time).

Ideas Something falls into the category of an idea if the marketer attempts to convince the customer to alter their behavior or their perception in some way. Marketing ideas is often a solution put forth by non-profit groups or governments in order to get targeted groups to avoid or change certain behavior. This is seen with public service announcements directed toward such activity as youth smoking, automobile safety, and illegal drug use.

While in some cases a marketer offers solutions that provide both tangible and intangible attributes, for most organizations their primary offering -- the thing that is the main focus of the marketing effort -- is concentrated in one area. So while a manufacturer may offer intangible services or a service firm provides certain tangible equipment, these are often used as add-ons that augment the organizations main product.

2. CATEGORIES
2.1 CATEGORIES OF CONSUMER PRODUCTS
In addition to categorizing by type of offering, most products intended for consumer use can be further categorized by how frequently and where they are purchased.

Convenience Products These are products that appeal to a very large market segment. They are generally consumed regularly and purchased frequently. Examples include most household items such as food, cleaning products, and personal care products. Because of the high purchase volume, pricing per item tends to be relatively low and consumers often see little value in shopping around since additional effort yields minimal savings. From the marketers perspective the low price of convenience products means that profit per unit sold is very low. In order to make high profits marketers must sell in large volume. Consequently, marketers attempt to distribute these products in mass through as many retail outlets as possible.

Shopping Products These are products consumers purchase and consume on a less frequent schedule compared to convenience products. Consumers are willing to spend more time locating these products since they are relatively more expensive than convenience products and because these may possess additional psychological benefits for the purchaser, such as raising their perceived status level within their social group. Examples include many clothing products, personal services, electronic products, and household furnishings. Because consumers are purchasing less frequently and are willing to shop to locate these products, the target market is much smaller than that of convenience goods. Consequently, marketers often are more selective when choosing distribution outlets to sell their products.

Specialty Products These are products that tend to carry a high price tag relative to convenience and shopping products. Consumption may occur at about the same rate as shopping products but consumers are much more selective. In fact, in many cases consumers know in advance which product they prefer and will not shop to compare products. But they may shop at retailers that provide the best value. Examples include high-end luxury automobiles, expensive champagne, and celebrity hair care experts. The
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target markets are generally very small and outlets selling the products are very limited to the point of being exclusive. In addition to the three main categories above, products are classified in at least two additional ways:

Emergency Products These are products a customer seeks due to sudden events and for which pre-purchase planning is not considered. Often the decision is one of convenience (e.g., whatever works to fix a problem) or personal fulfillment (e.g., perceived to improve purchasers image).

Unsought Products These are products whose purchase is unplanned by the consumer but occur as a result of marketers actions. Such purchase decisions are made when the customer is exposed to promotional activity, such as a salespersons persuasion or purchase incentives like special discounts offered to certain online shoppers. These promotional activities often lead customers to engage in Impulse Purchasing.

2.2 CATEGORIES OF BUSINESS PRODUCTS

As discussed in the Business Buying Behavior tutorial, the amount spent on business purchasing far exceeds consumer purchasing. Products sold within the b-to-b market fall into one of the following categories:

Raw Materials These are products obtained through mining, harvesting, fishing, etc., that are key ingredients in the production of higher-order products. Processed Materials These are products created through the processing of basic raw materials. In some cases the processing refines original raw materials while in other cases the process combines different raw materials to create something new. For instance, several crops including corn and sugar cane can be processed to create ethanol which has many uses including as a fuel to power car and truck engines.

Equipment These are products used to help with production or operations activities. Examples range from conveyor belts used on an assembly line to large buildings used to house the headquarters staff of a multi-national company.

Basic Components These are products used within more advanced components. These are often built with raw material or processed material. Electrical wire is an example. Advanced Components These are products that use basic components to produce products that offer a significant function needed within a larger product. Yet by itself an advanced component does not stand alone as a final product. In computers the motherboard would be an example since it contains many basic components but without the inclusion of other products (e.g., memory chips, microprocessor, etc.) would have little value.

Product Component These are products used in the assembly of a final product though these could also function as stand alone products. Dice included as part of a childrens board game would be an example.

MRO (Maintenance, Repair and Operating) Products These are products used to assist with the operation of the organization but are not directly used in producing goods or services. Office supplies, parts for a truck fleet and natural gas to heat a factory would fall into this category.

3. COMPONENTS OF A PRODUCT
On the surface it seems a product is simply a marketing offering, whether tangible or intangible, that someone wants to purchase and consume. In which case one might believe product decisions are focused exclusively on designing and building the consumable elements of goods, services or ideas. For instance, one might think the key product decision for a manufacturer of floor cleaners is to focus on creating a formula that cleans more effectively. In actuality, while decisions related to the consumable parts of the product are extremely important, the Total Product consists of more than what is consumed. The total product offering and the decisions facing the marketer can be broken down into three key parts: 1. Core Benefits 2. Actual Product 3. Augmented Product

3.1 PRODUCT COMPONENTS: CORE BENEFITS

Consider what we have talked about many times in this tutorial; people make buying decisions that satisfy their needs. While many needs are addressed by the consumption of a product or service, some needs are not. For instance, customers may need to be perceived highly by other members of their group or need a product that is easy to use or need a risk-free purchase. In each of these cases, and many more, the core product itself is the benefit the customer receives from using the product. In some cases these core benefits are offered by the product itself (e.g., floor cleaner) while in other cases the benefit is offered by other aspects of the product (e.g., the can containing the floor cleaner that makes it easier to spread the product). Consequently, at the very heart of all product decisions is determining the key or core benefits a product will provide. From this decision, the rest of the product offering can be developed.

3.2 PRODUCT COMPONENTS: ACTUAL PRODUCT

The core benefits are offered through the components that make up the actual product the customer purchases. For instance, when a consumer returns home from shopping at the grocery store and takes a purchased item out of her shopping bag, the actual product is the item she holds in her hand. Within the actual product is the consumable product, which can be viewed as the main good, service or idea the customer is buying. For example, while toothpaste may come in a package that makes dispensing it easy, the Consumable Product is the paste that is placed on a toothbrush. But marketers must understand that while the consumable product is, in most cases, the most critical of all product decisions, the actual product includes many separate product decisions including product features, branding, packaging, labeling, and more. Full coverage of several of these important areas is provided later in this tutorial.

3.3 PRODUCT COMPONENTS: AUGMENTED PRODUCT

Marketers often surround their actual products with goods and services that provide additional value to the customers purchase. While these factors may not be key reasons leading customers to purchase (i.e., not core benefits), for some the inclusion of these items strengthens the purchase decision while for others failure to include these may cause the customer not to buy. Items considered part of the augmented product include:

Guarantee This provides a level of assurance that the product will perform up to expectations and if not the company marketing the product will support the customers decision to replace, have it repaired or return for a refund.

Warranty This offers customers a level of protection that often extends past the guarantee period to cover repair or replacement of certain product components. Customer Service This consists of additional services that support the customers needs including offering training and assistance via telephone or online. Complementary Products The value of some product purchases can be enhanced with add-on products, such as items that make the main product easier to use (e.g., laptop

carrybag), enhance styling (e.g., cellphone face plates) or extend functionality (e.g., portable keyboard for PDAs).

Accessibility How customers obtain the product can affect its perceived value depending on such considerations as how easy it is to obtain (e.g., stocked at nearby store, delivered directly to office), the speed at which it can be obtained, and the likelihood it will be available when needed.

4. DECISIONS AND FEATURES

4.1 KEY PRODUCT DECISIONS
The actual product is designed to provide the core benefits sought by the target market. The marketer offers these benefits through a combination of factors that make up the actual product. Below we discuss in detail four key factors that together help shape the actual product. These factors include:

Consumable Product Features Branding Packaging Labeling

4.2 CONSUMABLE PRODUCT FEATURES

Features are characteristics of a product that offer benefits to the customer. In most cases, the most important features are those associated with the consumable product since they are the main reason a customer makes a purchase. For this tutorial we separate the benefits of consumable product features into two groups: 1. Functional Benefits 2. Psychological Benefits

4.3 PRODUCT FEATURES AND FUNCTIONAL BENEFITS

Customers derive functional benefits from features that are part the consumable product. For instance, a plasma television includes such features and benefits as:

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Feature screen

Functional Benefit size offers greater detail and allows for more distant viewing

screen

resolution viewing

provides

clear,

more

realistic

picture

surround

sound immerses

all

senses

in

the

viewing

experience

remote control

allows for greater comfort while viewing

These features are called functional because they result in a benefit the user directly associates with the consumable product. For marketers functional benefits are often the result of materials, design and production decisions. How the product is built can lead to benefits such as effectiveness, durability, speed, ease-of-use, and cost savings to name just few.

4.4 PRODUCT FEATURES AND PSYCHOLOGICAL BENEFITS

For customers psychological benefits represent certain benefits they perceive to receive when using the product though these may be difficult to measure and may vary by customer. These benefits address needs such as status within a group, risk reduction, sense of independence, and happiness. Such benefits are developed through promotional efforts that target customers internal makeup (see discussion in Part 4: Consumer Buying Behavior). In addition to determining the type of features to include in a product, the marketer faces several other decisions related to features:

Quantity & Quality vs. Cost - For the marketers an important decision focuses on the quantity and quality of features to include in a product. In most cases the more features included or the higher the quality level for a particular feature, the more expensive the product is to produce and market.

Is More Better? Even if added cost is not a major concern, the marketer must determine if more features help or hurt the target markets perception of the product. A product with
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too many features could be viewed as too difficult to use. This was often the case when video cassette recorders (VCR) were the principle device for taping television programs and watching rented movies. Many of the higher-level features introduced in the 1990s as the product matured, such as advanced television recording, proved too difficult for the average consumer to master.

Who Should Choose the Features? Historically marketers determined what features to include in a product. However, as we discussed in the Targeting Markets Tutorial, technology, and especially the Internet, offer customers the opportunity to choose their own features to custom build a product. For instance, companies offering website hosting services allow website owners to choose from a list of service options that best suits their needs. Also, for traditional products, such as clothing, companies allow customers to stylize their purchases with logos and other personalized options.

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CONCLUSION
The marketing mix, which is the means by which an organisation reaches its target market, is made up of product, pricing, distribution, promotion and people decisions. These are usually shortened to the anacronym "5P's". Product decisions revolve around decisions regarding the physical product (size, style, specification, etc.) and product line management. Product decisions are based on how much the organisation has to adjust the product on the standardisation - adaptation continuum to differing market conditions. This results in the evolution of five basic strategic alternatives - extension; extension, adaptation; adaptation, extension; adaptation and invention. Extension is the nearest to a standardised product, communications strategy and Invention at the other end of the continuum, that is, an adaptation strategy. The more adaptive the policy the more costly it will be for the organisation.

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BIBLIOGRAPHY
BOOKS AND JOURNALS 1. Nagashima A., A comparative "Made - In Product Image Survey Among Japanese Dimension Sound of Marketing", July 1977 pp. 95-100. 2. Maritim H., "Post Harvest Handling Produce in Eastern and Southern Africa" in S. Carter (Ed) "Horticultural Marketing. Proceedings of the Sound Regional Workshop on Horticultural Marketing" 1991, pp. 187-127. 3. Bischofberger, J., "What Spinners Want. In Training Manual on Cotton Trading Operations", International Trade Centre UNCTAD/GATT, Geneva, 1989, pp 31-53. 4. Jaffee S. (1993) "Exporting High Value Added Commodities". "World Bank Discussion Paper" 198, the World Bank, Washington

INTERNET RESOURCES 1. http://www.knowthis.com/principles-of-marketing-tutorials/product-decisions/branding/ 2. http://www.fao.org/docrep/W5973E/w5973e0c.htm

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