Where does the product end?
How to identify and manage product boundaries.
The product is what the company sells. Many traps are hidden in this seemingly simple definition.
What is a supermarket product? Many retailers would say that they sell goods.
Ask the car dealer what he sells. Most likely he will say “cars.”
Ask the same question the owner of the hair salon or the head of the taxi service. With a great deal of confidence, they might say: “hairstyling” and “moving.” And yes, these are all wrong answers.
It is quite straightforward to determine what the product is. Just ask yourself: “what am I responsible for?” and “what can I control?”. Can a supermarket be responsible for the suddenly deteriorating quality of, for example, milk? No. Diary producer is responsible for this. Can the store manage the taste of milk and change it at will? Of course not. But if the consumer bought an expired milk, the store is to blame here. Supermarket goods are the product of the manufacturer. Retailer’s product is an assortment, selection process, the comfort of the purchasing process and freshness of the products.
When there is a security breach in a car batch, who calls it back for service and pays for repairs? Manufacturer. A car is a product of an automobile concern, not the dealer. The product of the dealer is the competence of managers, selection processes, test drives and maintenance, as well as service, interior, and coffee. Therefore, the dealer’s product is a service of selling cars. What is peculiar for this business model is that this service is provided to both the end customer and the car manufacturer.
When the hairdresser does excellent haircuts, the taxi driver perfectly drives the car, but at the same time they both annoy the customer with questions, complain about politics and their life, swear at them and smells of cigarettes — these are good haircuts and driving, but a terrible product.
So, a product is an aggregate of all goods, services and information that have value for the consumer. Sometimes business owners split their product into goods and services. This is not a good idea, because then comes a great temptation to justify bad service with great goods. Or even forget about the service. For example, when the hotel owner says: “Our administrators are rude, but we have clean rooms and breakfast is delicious.” This is a weak position. The way staff treats guests is an essential part of the product of any hotel. And if the service is inadequate, then this is a bad product and bad hotel.
Total Product Concept
How to manage the product? How is it possible to remember about all these nuances? I suggest using an excellent marketing tool developed by Theodore Levitt — Total Product Concept. According to this concept, any product on the market needs to be considered on four levels:
- Basic product. This is a set of basic characteristics of the product required to enter the market. For example, the car should drive, the pen should write, the store must have the goods. Without these characteristics, the product loses its meaning.
- Expected product. This is a set of characteristics which are already accepted by the market and have become de facto standards. Consumers expect to see them in the product. For example, we expect cars to be equipped with air conditioning and stereo system, and stores to have shopping carts.
- Advanced product. These features only some products on the market have. Consumers perceive them as differences: curved TV screens, hybrid engines in cars, self-service pay points in the supermarket. Over time, these values become basic.
- The potential product consists of opportunities for product development. This is the future “extended product.”
Usually, it is possible to create the Total Product Map after the competitive analysis, when all the major market players are researched. Product characteristics that everyone has on the market are placed in the base product; those that the majority should be placed in the expected product, and so forth.
Summary
1. The product is a set of goods, services, and information that is of value to the consumer. In the pursuit of finding its products boundaries, the company should answer the question: “What am I able to change and what am I responsible for?”.
2. Companies do not always see the boundaries of their product and therefore do not develop characteristics important to the consumer. This is how so-called “invisible” products emerge. They damage the company.
3. It is important to define correctly the boundaries of each of the four levels of the product concept to understand which product properties are basic, which are expected and which are unique and how they change over time. Working with different levels of market values makes it possible to create “blue oceans” and open up new markets.
Inspired by @rdnk
