Your Business' Market Offering
A market offering is the scope of products that an organisation offers to customers. A product can be a tangible good, a performed service, an experience, an event, a place, information, innovative ideas, industries or even companies and people themselves (or a combination of a few).
Quite often, a product offering is a combination of a few. There are pure good, such as oil or computer components, and there are pure services such as surgery or investment advice. A combination can be based on Fast Moving Consumer Goods (FMCG), where, for example, bread is baked; luxury goods, such as wine or perfume where the bottle is a tangible good but there was a focus on the service of creating it; and even familiar services such as fast food, where the good is the food but the speed is a service.
Understanding the market is vital to all successful marketing strategies as it allows a tailored and efficient product portfolio.
Categories of Consumer Products
There are four types of products:
(1) Convenience products- which are frequently purchased items, usually immediately or on a whim, that require little buyer decision and effort, such as a candy bar or chewing gum.
(2) Shopping products- slightly more expensive and have a long life. A customer usually takes a moderate amount of time in research to find the best match for their needs, such as white goods or a car.
(3) Specialty products- customers make an extra-special effort for these products as they are not common or have unique qualities, and are therefore willing to spend more on buying efforts. For example, jewellery or antiques.
(4) Unsought products- these are products that the consumer either doesn’t know about or a product that the consumer doesn’t really intend purposely on purchasing, such as taxes, or donating blood.
Naturally, these can vary depending on the individual, but the classifications hold true. However, the motivation behind the purchase could be positive (excited to go out and buy) or negative (reluctantly buying due to a need).
Services are an intangible product that are an action for the benefit of the buyer, but after competition, the buyer doesn’t own anything. Services are a rapidly increasing area of the economy, with approximately 70% of Australia’s Gross Domestic Product (GDP) comes from the service industry.
Services have the following characteristics:
(2) Inseparability (the provider and service cannot be separated and therefore consumption must be planned at a convenient time for both parties. However technology has begun to overcome this).
(3) Variability (the service is performed, so it can be slightly different every time depending on the provider, when, where and how).
(4) Perishability (Services cannot be consumed at a later date)
(5) Related tangibles (a service usually involves related tangibles such as a builder’s tools or the suit and office of a lawyer. Consumers will judge a service on the related tangibles.
Consequences of Service Characteristics
Services have a unique set of characteristics due to their nature.
(1) Evaluation: it’s hard to evaluate before and even after purchase
(2) Exposure to a service before purchase can only be through word-of-mouth and related tangibles.
(3) The product revolves around imperfect people: it’s very hard to keep the service consistent every time.
(4) Often, consumers are part of the service delivery (such as education), and they cannot be easily controlled or managed.
The Three Levels Of A Product
A product of any type has three levels.
(1) The core customer value: what is the consumer actually buying? What is the final benefit they receive from the product?
For example, with an airline, the core value may be time-critical transport.
(2) The actual product: brand name, features, design, packaging, etc.
With the airline example, this would be the plane, the safety record, the seat allocation, the meals, and so on.
(3) The augmented product: the external and packaged benefits such as support, warranty, after-sale service, etc.
With the airline example, this is the frequent flyer schemes, tour packages, priority check-in, etc.
The Product Life Cycle
A product goes through several different stages in its overall life. The scope and time frame differs depending on the product and industry, but all products experience this inevitable cycle.
(1) Product development: losses and investment costs are high and sales are at zero, as the product is being designed, developed and tested.
(2) Introduction: the product is first released into the market. Sales are low but begin to climb with time as communication and education start to filter into the mark. Investment costs still may be high as tweaks are made and losses are usually still incurred here.
(3) Growth: the product is growing rapidly as the market begins to notice. Sales climb quickly and profits begin to be made.
(4) Maturity: Sales are at a peak high and start to plateau out as the market becomes saturated. The product is no longer new but is well known with a solid reputation. Many companies with a good product or brand will aim to initiate ways to keep it at this phase, such as Coca-Cola soft drink.
(5) Decline: sales start to drop as the market demands new and better products to replace the current one, causing it to fall out of interest.
The Need For New
From the product life cycle, it is easy to see how it’s very important for organisations to continually focus on refreshing their current product offering and continuing to innovate with new products in order to remain successful. An organisation cannot continue to only focus on one brand forever, especially if that product is in the later stages of the product life cycle.
Market changes, whatever they may be, cause an eventual decline for a product, whereas new products are fun and intriguing, as spur growth for an organisation. A new product can be:
(1) Entirely new to the world, creating a new market
(2) New for the organisation, entering into a new segment previously untouched by that organisation
(3) Additional lines to the current product, such as spin offs, new flavours, and supplement products
(4) Product improvements through new features and designs
(5) Repositioning the image and target customer of a current product, causing a whole new segment to gain interest in it
(6) Cost reductions- reducing the cost increases the appeal of a product
Unfortunately, it’s always not as easy as just creating a new product. New also implies untested and entering into uncharted territory, meaning that things can go wrong and new products can fail. The main reasons why new products fail could be because:
(1) the organisation over-estimated the potential demand, and the small sales cannot sustain it
(2) a bad or poor product design
(3) The product is badly positioned, priced or communicated to the market causing backlash
(4) Research findings were incorrect, causing bad judgements to be made
(5) The costs of research and development become too high or cannot be justified
(6) Competitors create obstacles and barriers to entry
(7) The brand becomes ‘stretched’ too far, ruining its reputation with the market
New Product Adoption
When a new product is released, there are five major factors that contribute to the rate of how quickly the target market notices and views the product with value.
(1) Communicability- which is, how well it was advertised and promoted
(2) Relative advantage- what the product offers better than others currently in the market
(3) Compatibility- how much does the market have to change their behaviour to utilise the product
(4) Complexity- or ease of use
(5) Divisibility, or trialability- can the market give it a trial before committing to buy
New Product Development Stages
An organisation develops a new product in a series of stages. Due to the rapid product life cycles of current products and times, the whole new product development stages need to quicker than ever. Some organisations like to wait for a worthy product to go through the entire set of stages, whereas others will engage in innovative churn (where they put almost every product through and see how the market responds) to gain an innovative image.
Each stage is pretty self-explanatory from its name:
(1) Idea generation
(2) Idea screening
(3) Concept development and testing
(4) Develop marketing strategy
(5) Business analysis
(6) Product development
(7) Test marketing
In developing a new product, an organisation must consider the following attributes:
(1) The threshold attribute: these are the basic functions that a customer would expect first and foremost when looking at the product to satisfy a need. For example, a dishwasher is expected to clean dishes.
(2) The performance attribute: these are the features that add a little more satisfaction to the product offering, above the threshold expectation. For example, a dishwasher with specifically programed cycles and times to save time and money. Or an internal rack that can change shape to fit different dishes.
(3) The excitement attribute: these are the ‘wow’ factor features, well above the previous two attributes that really impress the customer way beyond their expectations. Innovative products lie here as the offer features never seen before that, presumably, really meet the customer’s needs. For example, the dishwasher that, for some technological breakthrough, never needs washing powder and still delivers clean dishes every time.
As always, these attributes can differ by consumer groups, product type and industry, not to mention that the excitement attributes downgrade to performance and finally threshold attributes as time and technology move onward.
A strong marketing strategy is to invest in improving performance or wow factors rather than improve the threshold attributes.