When developing your product or service strategy, you will need a clear understanding of two things:
Total Product Concept
A product sells well if it satisfies the needs of consumers. For example, when purchasing a food processor, the consumer is not buying a motor equipped with a variety of bowls, knives and other accessories. The consumer is buying a tool that will help save time in the kitchen.
Product-service relationship is a set of expectations that a company creates to satisfy its customers’ needs and desires.
In the retail environment, total product includes many things, such as:
Product Life Cycle
People’s needs and wants are constantly changing. Products, like people, have a life cycle. For example, computers which were considered state-of-the-art five years ago, may be obsolete today.
Any product or service moves through identifiable and predictable stages from the time it’s first conceived and introduced to the market.
Table 2 outlines the five stages in a product’s life cycle.
Table 2: Five Stages in a Product’s Life Cycle
- Product makes first appearance on the market
- Sales usually low and rise slowly
- If product catches on, may enter period of rapid growth lasting several months or even years
- Very few customers buy the product; those that do, are seen as innovators
- Profits usually non-existent or very low due to high start up costs and low sales volume that doesn’t cover initial expenses
- Product generally priced high to minimize losses
- Advertising and promotion expenses also steep since public must be made aware of product
- Price drops
- Sales rise quickly as product becomes available to larger number o customers
- Number of competitors may arrive on scene
- Entry of rival firms, with their promotional efforts, may actually enlarge the market
- Profits often high, as production costs fall due to an increase in sales volume
- Brand preference develops
- Level of market acceptance and sales volume reaches a peak
- Sales revenue may continue to rise but rate of increase falls off, resulting in decline in rate of profit
- Intense competition
- Expenses for promotion become heavy
- Price-cutting may occur
- Customers pressured to be “brand loyal”
- Firms that can’t keep pace, drop out of market or are acquired by other companies
- Large firms begin to dominate industry
- Have to fight to keep share of market
- Product loyalty and brand preference becomes noticeable
- Need to improve product to keep loyalty
- Generally longest stage
- Product already being bought by customers who can or will use it
- Marginal firms have left market
- Promotional strategies concentrate on taking customers away from other firms rather than enlarging market
- Sales decline steadily
- Profits drop
- Number of competitors decrease
- Tough fight to preserve market share
- Promotion costs generally decline
- Must begin to develop new products
- Sales drop to lowest level as everyone either already owns product or has replaced it with a better, cheaper or more attractive one
Click on Worksheet 4.2 (Word Document) to develop your product description and strategy.