Product Terminology
There are a few ways to classify a product of a company and what it offers to its consumers.
Product Item: Product item is a specific version of a product, a product item is very precise and specific. E.g. McDonalds Sausage McMuffin
Product Line: Product line is a collection of similar or related products, differentiation can be achieved through size, color and features. E.g. (McDonald's Burgers)
Product line is often classified by depth (how much variation of the same product the company offers)
E.g. Depth/Product Line of Ipod
Shuffle
Nano
Classic
Touch
Product Mix: Product mix is a variety of different products, product mix is classified by breadth (how many types of products the company offers) E.g. Breadth/Product Mix of Apple Products
Macbook Ipod Itunes
Product Range: Product range is when everything comes together and measures the company's breadth and depth
* For a diagram of McDonalds product range, visit my blog post of "McDonalds Product Range" to consult a diagram I constructed
Product Item: Product item is a specific version of a product, a product item is very precise and specific. E.g. McDonalds Sausage McMuffin
Product Line: Product line is a collection of similar or related products, differentiation can be achieved through size, color and features. E.g. (McDonald's Burgers)
Product line is often classified by depth (how much variation of the same product the company offers)
E.g. Depth/Product Line of Ipod
Shuffle
Nano
Classic
Touch
Product Mix: Product mix is a variety of different products, product mix is classified by breadth (how many types of products the company offers) E.g. Breadth/Product Mix of Apple Products
Macbook Ipod Itunes
Product Range: Product range is when everything comes together and measures the company's breadth and depth
* For a diagram of McDonalds product range, visit my blog post of "McDonalds Product Range" to consult a diagram I constructed
Product Life Cycle (PLC)
The "Product Life Cycle" or "PLC" refers to the fact that any new product, once commercialized (first launched on market) progresses through a series of stages called introduction, growth, maturity and decline.
In the introduction stage, the firm seeks to build product awareness develop a market for the product.
In this stage, companies might use the "low price penetration" strategy where they try to attract customers to the product by setting the price low, or, if their product is extremely innovative, they may use "high skim pricing" strategy where they set a high price for the early adopters.
In the growth stage, the firm is aiming to build market share and build brand preference. They might add additional features and support services to make their product more appealing. Distribution channels will be increased as demand rises for the product, and promotion will be aimed at a wider audience.
In the maturity stage, competitors will start coming out with similiar products, and the firm will need to start adding to their product to beat their competitors. The price of the product might be lowered in order to compete. And the firm will try to utilize promotion strategies as best as they can to differentiate their product.
In the decline stage, sales are decreasing and firms might try different techniques to increase the product's life cycle. They may choose to
- Repackage the product
- Redesign the product
Or the firm might choose not to produce the product anymore
In the introduction stage, the firm seeks to build product awareness develop a market for the product.
In this stage, companies might use the "low price penetration" strategy where they try to attract customers to the product by setting the price low, or, if their product is extremely innovative, they may use "high skim pricing" strategy where they set a high price for the early adopters.
In the growth stage, the firm is aiming to build market share and build brand preference. They might add additional features and support services to make their product more appealing. Distribution channels will be increased as demand rises for the product, and promotion will be aimed at a wider audience.
In the maturity stage, competitors will start coming out with similiar products, and the firm will need to start adding to their product to beat their competitors. The price of the product might be lowered in order to compete. And the firm will try to utilize promotion strategies as best as they can to differentiate their product.
In the decline stage, sales are decreasing and firms might try different techniques to increase the product's life cycle. They may choose to
- Repackage the product
- Redesign the product
Or the firm might choose not to produce the product anymore
The Boston Matrix
The Boston Matrix also known as the BCG Matrix is a useful way of screening useful opportunities and an a excellent way to analyze a portfolio of products. The matrix works by categorizing products into one of four different areas, based on:
- Stars are products that have high market share and high market growth, these are classified as stars as they are products that have lots of potential and are definitely products to keep. Usually stars are products that are strong compared to competition and require heavy investment to sustain growth
- Cash Cows are products in a low growth market with a high market share, usually successful and mature products that require little investment for the product to be sustained. Usually these products generate strong cash flow for the company
- Question Marks are products with low market share but high market growth, this suggests the product has potential, but require large investment to grow market share and contend with competitors. Usually management has to make a decision on question mark products to see whether they are worth the investment
- Dogs are products with low market share in unappealing markets that do not grow. Also referred to as "little players". These products generate enough profit to break-even but are never worth investing in
- Market share – does the product being sold have a low or high market share?
- Market growth – are the numbers of potential customers in the market growing or not
- Stars are products that have high market share and high market growth, these are classified as stars as they are products that have lots of potential and are definitely products to keep. Usually stars are products that are strong compared to competition and require heavy investment to sustain growth
- Cash Cows are products in a low growth market with a high market share, usually successful and mature products that require little investment for the product to be sustained. Usually these products generate strong cash flow for the company
- Question Marks are products with low market share but high market growth, this suggests the product has potential, but require large investment to grow market share and contend with competitors. Usually management has to make a decision on question mark products to see whether they are worth the investment
- Dogs are products with low market share in unappealing markets that do not grow. Also referred to as "little players". These products generate enough profit to break-even but are never worth investing in