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Product Decisions

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Product Decisions

As with all areas of business, decision-making in marketing is crucial. Marketing managers have to make countless decisions when it comes to the product or service that they are trying to sell. What are these key decisions and how can we ensure that the appropriate decisions will be made?

Product attribute decisions

Product decisions are decisions to be made about the product or service a company wants to sell. These decisions are vital to creating a successful marketing mix to meet the company’s objectives.

While making product decisions, marketers should consider:

The core benefit of the product

  • Mineral water quenches your thirst.
  • Buses take you from point A to B.
  • The supermarket allows you to shop for daily groceries.
  • Facebook is the platform that keeps you in touch with friends and family.
  • StudySmarter helps you ace the exams.

While the core benefit stays more or less the same, the ways of satisfying it can change over time, and thus the business must be prepared to adapt accordingly.

The nature of the product and service

The nature of Starbucks coffee is its ingredients, type of coffee, and cup size.

  • The main ingredients are roasted coffee beans, sugar, milk, or cream.

  • Types of coffee include blonde roast, medium roast, and dark roast.

  • The cup size can be short, tall, or grande.

The nature of the product is what constitutes the product and should be developed according to the customer’s needs and wants.

The augmented features

These are extra services that come with the product such as guarantee, installation, customer support, and maintenance. Besides product quality, augmented features play an important role in turning a new customer into a regular one.

Product differentiation and USP

A product's unique selling points are features that differentiate it from its competitors. In other words, it is what one business can offer that the other can’t. Let’s say your product can be cheaper, safer, faster, chicer, more friendly, or visually appealing.

  • Apple doesn’t just sell iPhones, they sell Lifestyle. Owning an Apple product is like having a friend who gives you hopes, dreams, and aspirations.
  • Adidas is a renowned manufacturer of shoes, sporting clothes, and goods that appeal to a wide demographic.
  • Starbucks sells high-quality roasted coffee and provides a cosy space for friends and family to gather.

Product life cycle and its uses

The product life cycle is the amount of time that a product exists on the market, from the moment is introduced to the end of life. There are four stages of a product life cycle: Introduction, Growth, Maturity, and Decline. (The research and development stage comes before introduction.)

Stages of the product life cycle

1. Research and development stage - In this stage, prototypes and new recipes are developed and tested. The research and development (R&D) phase can be very expensive and risky for the business without bringing in any income. The length of this stage varies widely from industry to industry. For example, the invention of a new app can take a few months whereas the development of a cure for a rare disease can take years or decades.

2. Introduction stage - The phase where the product is first launched. Sales are low and the growth is unnoticeable. The profit is small as customers are unaware of the new product or unwilling to switch from their existing service providers. There are also no economies of scale that can benefit production. At this stage, marketers will concentrate on increasing brand awareness and customer base. Two pricing strategies often employed in the introduction stage are:

  • Price skimming: starting with a high price to create an impression of a high-end product, then lowering the price as the demand dies down.

  • Price penetration: starting with a low price to attract as many customers as possible, then increasing the price over time to recoup the profit.

3. Growth stage - The growth stage is where the product thrives and generates profits for the company. Sales will grow exponentially and the business will benefit from economies of scale. More competitors will enter the market to take advantage of the supernormal profits. However, as the number of customers also grows, companies can still make a tangible profit without cutting their prices.

4. Maturity stage - In this stage, the product popularity isn’t out yet, though sales growth has declined. Companies will invest heavily in promotion and practice price-cutting to capture as much market share as possible. The fierce competition may also drive weaker competitors out of the business, leaving the market only a few dominant players. The main goal of the business in the maturity stage is to keep the product profitable for as long as possible. Developing customer loyalty is the key strategy to achieve this. With a large customer base and continuous innovation, the company can stay in the maturity stage for a long time. Coca-Cola and Pepsi are prime examples of such businesses.

5. Decline stage - Sales begin to fall in the decline stage due to newcomers and available alternatives. Since growth is no longer possible, marketers should invest less in marketing strategies to drive customer attention. Instead, they should focus on maximising the use of the product through 'milking'. The company should also reduce the number of distribution channels and withdraw the product from low-performing markets to make room for introducing new products.

Using the product life cycle

By determining which stage in the life cycle a product is in, marketers can develop and adjust their marketing mix accordingly.

  • In the introduction stage, the price can be set high to create a high-end brand image, then lowered over time to capture more market share for the business.
  • Promotion can change from raising customer awareness in the introduction stage to emphasising the product’s USP against the competitors.
  • The distribution of the new product may prove difficult in the beginning but get easier as time goes on.

To maximise sales during the product life cycle, the extension method can be used. An extension strategy is a change in marketing activities to avoid decreasing sales.

Some examples of extension methods:

  • Increase the number of uses for the product.

  • Decrease the price.

  • Upgrade the product.

  • Provide sales promotion.

  • Reinvent the product image.

Uses of Product Life Cycle in Marketing Uses of Product Life Cycle in Marketing

Product portfolio analysis (PPA)

A product portfolio is the range of products and services provided by a company. Product portfolio analysis is the evaluation of the position of these products in the market.

A popular tool to conduct the product portfolio analysis is the Boston Matrix, developed by the consultants at Boston Consulting Group.

Type of product in Boston Matrix

The Boston Matrix considers the position of a product in terms of its market share and growth potential. There are four categories of products in the matrix:

1. Stars - These are highly successful products of the company that also enjoy substantial growth and a large market share. However, they also require a lot of marketing efforts to maintain customer awareness. For example, a large sum of advertising is spent by Coca-Cola each year to promote its star product (Coke) and retain a leading soft drink position.

2. Questions marks - These products have a small market share in a fast-growing market. They have the potential to go big but can also fail miserably. Most products in an introduction stage are 'question marks' as their future is uncertain.

3. Cash cows - These products have a high market share in a slow-growing market. Cash cows products have had a lot of funds invested on promotion before and tend to be the market leaders.

4. Dogs - These are the underperforming products that have a low market share but growth potential. Companies may want to get rid of these products if they no longer generate sales.

Product Decisions, Boston Matrix, StudySmarterThe Boston Matrix, StudySmarter

The value of the Boston Matrix

Whereas the product life cycle provides data on only one product, the Boston matrix gives the complete picture of all products sold by a company. Thanks to this, marketers can create a balanced portfolio that accelerates company growth.

  • Having too many questions can put the company at a lot of risks as the future of the products are uncertain; also, question mark products can use up a lot of the company’s resources for promotion and maintaining their growth on the market, resulting in a depletion of business funds.

  • Having too many dogs indicate a failing business that can be driven out at any time, requiring the firm to adopt new products.

  • Having too many cash cows means that the company has an established position in the market since cash cows tend to be market leaders. However, as innovation develops and customer behaviour changes, the company can face a lot of risks. Thus, it should invest in developing some star products.

Improving business marketing strategies with the product portfolio analysis:

  • 'Stars' should be developed to main market position.

  • "Dog" should be sold off when sales run out.

  • 'Cash cows' can be milked to provide funds.

  • 'Question marks' should be protected.

Product Decisions - Key takeaways

  • Product decisions are decisions made about a company’s product or service to meet customer demand and ensure business success.

  • Three layers of product and Product Unique Selling Points (USP) are some of the most important product decisions.

  • The product life cycle - Introduction, Growth, Maturity, Decline can be used to create and apply the right marketing mix at the right time.

  • The Boston Matrix can provide a snapshot of a company’s product portfolio and its position in the market, which helps to design an effective marketing strategy.

Frequently Asked Questions about Product Decisions

Product decisions are vital to creating a successful marketing mix to meet the company’s objectives.  

There are four key product decisions as follows:

1. Product attributes decisions

2. Product differentiation and USP

3. Product lifecycle and its uses

4. Product portfolio analysis

Key product decisions are:

1. Product attributes decisions

2. Product differentiation and USP

3. Product lifecycle and its uses

4. Product portfolio analysis


Two pricing strategies often employed in the introduction stage of the product life cycle are: 


  • Price skimming: starting with a high price to create an impression of a high-end product, then lowering the price as the demand dies down. 

  • Price penetration: starting with a low price to attract as many customers as possible, then increasing the price over time to recoup the profit. 

Objectives of product decisions are:

1. Decide the core benefit and nature of the product

2. Decide augmented features

3. Create USP

4. Use product life cycle to increase sales

5. Create more 'Star' products as per Boston matrix

Final Product Decisions Quiz

Question

What are product decisions?

Show answer

Answer

Product decisions are decisions to be made about the product or service a company wants to sell.

Show question

Question

Name three product attribute decisions

Show answer

Answer

  1. Core benefit of product
  2. Nature of product
  3. Augmented features

Show question

Question

What is a product life cycle?

Show answer

Answer

Product life cycle is the length of time between when the product is first introduced and when it is removed from the market. 

Show question

Question

What are 4 stages of product life cycle? 


Show answer

Answer

Introduction, Growth, Maturity, Decline

Show question

Question

Augmented features are extra services that come with the core product. 

Show answer

Answer

True

Show question

Question

Name two common pricing strategies used in the introduction stage of the product life cycle. 

Show answer

Answer

  1. Price skimming
  2. Price penetration

Show question

Question

In the introduction stage of a product, sales are high and growth is noticeable. 

Show answer

Answer

True

Show question

Question

In the growth stage of a product, sales will grow...

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Answer

exponentially 

Show question

Question

In the maturity stage of a product, sales growth is...

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Answer

declining

Show question

Question

Sales begin to fall in the decline stage of the product life cycle due to...

Show answer

Answer

new comers and available alternatives. 

Show question

Question

What strategy is used to extend the product life cycle?

Show answer

Answer

The extension strategy such as: 

  • Increasing the number of uses for the product.

  • Decreasing the price.

  • Upgrading the product.

  • Providing sales promotion.

  • Reinventing the product image.

Show question

Question

What is product portfolio and product portfolio analysis?

Show answer

Answer

A product portfolio is the range of products and services provided by a company. 


Product portfolio analysis is the evaluation of the position of these products in the market. 

Show question

Question

What is product portfolio and product portfolio analysis?

Show answer

Answer

A product portfolio is the range of products and services provided by a company. 


Product portfolio analysis is the evaluation of the position of these products in the market.

Show question

Question

There are ... types of product in Boston Matrix.

Show answer

Answer

five

Show question

Question

Star products are ... products of the company. 

Show answer

Answer

Highly successful

Show question

Question

Question mark products have a large market share in a fast-growing market. 

Show answer

Answer

True

Show question

Question

Dog products are underperforming products that have a low market share. 

Show answer

Answer

True

Show question

Question

Cash cow products have a ... market share in a ... market. 

Show answer

Answer

high market share, slow-growing

Show question

Question

What happens when there are too many 'question' products in a company's product portfolio?

Show answer

Answer

Having too many questions can put the company at a lot of risk as the future of the products are uncertain. 


Question mark products also use up a lot of the company’s resources for promotion and maintaining their growth on the market, resulting in a depletion of business funds. 

Show question

Question

What happens when there are too many 'dog' products in a company's product portfolio?

Show answer

Answer

Having too many dogs indicate a failing business that can be driven out at any time, requiring the firm to adopt new products. 

Show question

Question

How to improve business marketing strategies with product portfolio analysis?

Show answer

Answer

  • 'Stars' should be developed to the main market position.

  • 'Dog' should be sold off when sales run out. 

  • 'Cash cows' can be milked to provide funds.

  • 'Question marks' should be protected. 

Show question

Question

Guarantee, installation, customer support, and maintenance are examples of...

Show answer

Answer

Core products

Show question

Question

What is the nature of a product or service?

Show answer

Answer

The nature of a product is what constitutes the product and should be developed according to the customer’s needs and wants.

Show question

Question

Prototypes and new recipes are developed and tested in the...


Show answer

Answer

Research and development stage

Show question

Question

Give examples of a company you know that has stayed in the maturity stage for a long time. 

Show answer

Answer

Coca-Cola, Pepsi

Show question

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