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Principles of Marketing Unit 6: Product, Brands and the Product Life Cycle

The product is the foundation of the marketing mix: if it does not deliver value, no price or ad can save it. This unit covers how marketers design products, build brands, develop new offerings and manage them over their life cycle.

Covers: Levels of product and product classifications, Product lines and the product mix, Brand equity and brand strategy, Packaging and labeling, New-product development, The product life cycle, Services marketing

Study guide

A product is anything offered to a market for attention, acquisition, use or consumption that might satisfy a want or need, including physical goods, services, events, places, ideas and experiences. Products have three levels. The core customer value is the basic problem-solving benefit, such as staying connected for a phone. The actual product includes features, design, quality level, brand name and packaging. The augmented product adds services and benefits like warranties, delivery, installation and support. Consumer products are classified by how people buy them: convenience products (bought often with little effort), shopping products (compared on quality and price), specialty products (strong brand preference, special effort) and unsought products (not known or not normally considered, like life insurance).

A product line is a group of closely related products, and the product mix is all the lines and items a company offers. The mix has four dimensions. Width is the number of different product lines. Length is the total number of items across all lines. Depth is the number of versions offered of each product in a line, such as sizes and flavors. Consistency is how closely related the lines are in use, production or distribution. Firms can stretch a line downward, upward or both ways, or fill it in by adding items within the current range. Each move carries risks, such as cannibalization, where a new item takes sales from the firm's own products.

A brand is a name, term, sign, symbol or design that identifies a seller's products and sets them apart. Brand equity is the differential effect that knowing the brand name has on customer response to the product; strong equity lets a firm charge more and launch new products more easily. Firms choose among four brand development strategies: line extensions (existing brand, new forms or flavors in the same category), brand extensions (existing brand in a new category), multibrands (new brands in the same category) and new brands (new brand in a new category). Sponsorship options include manufacturer brands, private (store) brands, licensing and co-branding. Packaging protects, promotes and informs, and labels identify, describe and meet legal requirements.

New-product development follows eight stages: idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, test marketing and commercialization. Screening drops poor ideas early, because costs climb sharply at each later stage. After launch, products move through the product life cycle (PLC). Introduction has slow sales growth, high costs and often losses. Growth brings rapidly rising sales, new competitors and rising profits. Maturity is the longest stage, with slowing sales and heavy competition; firms modify the market, product or marketing mix to extend it. Decline brings falling sales, and firms maintain, harvest or drop the product.

Services are activities or benefits that are essentially intangible and do not result in ownership. They have four special traits. Intangibility means services cannot be seen, tasted or felt before purchase, so firms add tangible cues such as clean offices and uniforms. Inseparability means services are produced and consumed at the same time, so the provider is part of the product. Variability means quality depends on who provides the service and when, so firms train staff and standardize processes. Perishability means services cannot be stored, so an empty airline seat or hotel room is lost revenue forever, which is why firms use off-peak pricing and reservations to match supply and demand.

Key ideas

• Products have three levels: core customer value, actual product and augmented product.
• Consumer products are convenience, shopping, specialty or unsought, depending on how people buy them.
• Product mix width, length, depth and consistency describe the breadth and range of a company's offerings.
• Brand equity is the extra customer response a brand name creates, and it supports higher prices and extensions.
• Line extensions stay in the same category, while brand extensions move the brand into a new category.
• The PLC runs introduction, growth, maturity and decline, and each stage needs different strategies.
• Services are intangible, inseparable, variable and perishable.

Formulas and rules

Common mistakes

• Confusing line extensions (same category) with brand extensions (new category).
• Calling the warranty or delivery part of the actual product instead of the augmented product.
• Mixing up shopping products (compared on price and quality) with specialty products (strong preference, little comparison).
• Thinking profits peak in introduction; profits usually peak in late growth or early maturity.
• Confusing product mix length (total items) with depth (versions of one product).

Before the test, make sure you can

• Identify the core, actual and augmented levels of a product.
• Classify a product as convenience, shopping, specialty or unsought.
• Calculate the width, length and average depth of a product mix.
• Distinguish line extensions, brand extensions, multibrands and new brands.
• List the stages of new-product development in order.
• Describe sales, profits, competition and strategy at each PLC stage.
• Explain the four characteristics of services and how firms respond to each.

Words to know

Product

Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need.

Core customer value

The basic problem-solving benefits that consumers are really buying when they obtain a product.

Augmented product

Additional consumer services and benefits built around the core and actual products, such as warranties and support.

Convenience product

A consumer product that customers usually buy frequently, immediately and with minimal comparison and buying effort.

Shopping product

A less frequently purchased consumer product that customers compare carefully on suitability, quality, price and style.

Specialty product

A consumer product with unique characteristics or brand identification for which buyers are willing to make a special effort.

Unsought product

A consumer product that the consumer either does not know about or knows about but does not normally consider buying.

Product line

A group of products that are closely related because they function similarly, are sold to the same groups or through the same outlets, or fall within given price ranges.

Product mix

The set of all product lines and items that a particular seller offers for sale.

Brand equity

The differential effect that knowing the brand name has on customer response to the product or its marketing.

Line extension

Extending an existing brand name to new forms, colors, sizes, ingredients or flavors of an existing product category.

Brand extension

Extending an existing brand name to new product categories.

Private brand

A brand created and owned by a reseller of a product or service, also called a store brand.

Co-branding

The practice of using the established brand names of two different companies on the same product.

Idea screening

Screening new-product ideas to spot good ones and drop poor ones as soon as possible.

Test marketing

The stage of new-product development in which the product and its marketing program are tested in realistic market settings.

Product life cycle

The course of a product's sales and profits over its lifetime: introduction, growth, maturity and decline.

Service perishability

The idea that services cannot be stored for later sale or use.

Service variability

The idea that the quality of services may vary greatly depending on who provides them and when, where and how.

Sample practice questions

30 more questions like these, from level 1 to 5, are in the practice set.