the importance of product development
3.3 The Marketing Mix – Product
Objective
To understand the role of product within the marketing mix, why product development is essential, and how product decisions interact with price, promotion and place.
Link‑in to the 4 Ps
Product decisions shape the other elements of the mix:
- Price: Premium products need high‑quality features or strong brand equity; low‑cost products require cost‑efficient design.
- Promotion: Unique product attributes dictate the key messages and media used (e.g., “water‑resistant case” in advertising).
- Place (distribution): Luxury goods often use selective channels, while convenience items use intensive distribution.
Product – definition and key concepts
In the marketing mix, product is anything that can be offered to a market to satisfy a need or want.
| Concept | Explanation | Example |
|---|---|---|
| Goods vs. Services | Goods are tangible, can be stored; services are intangible activities or benefits. | Smartphone (good) – mobile‑network subscription (service) |
| Hybrid offering | Combination of a tangible good with a service component. | Apple Watch – hardware + health‑tracking subscription |
| Tangible attributes | Physical characteristics – size, colour, material, packaging. | Aluminium body, 6‑inch display, recyclable bottle |
| Intangible attributes | Non‑physical elements – brand reputation, warranty, after‑sales service. | Two‑year warranty, 24/7 customer support, premium brand image |
| Branding & packaging | Brand equity creates perceived value; packaging protects, informs and influences purchase. | Virgin’s distinctive red‑white logo; eco‑friendly packaging with clear labelling |
| Product differentiation | Creating perceived differences that give a competitive edge. | Fast‑charging technology that no rival offers |
| Unique Selling Proposition (USP) | A concise statement of the single benefit that makes the product superior. | “Water‑resistant case – survive a dive to 30 m” |
Why product development matters
- Market growth: New products open fresh market segments and enlarge the overall market.
- Competitive advantage: Innovation differentiates a firm and can create barriers to entry.
- Revenue diversification: A wider product portfolio reduces reliance on a single line.
- Customer loyalty: Regular updates keep existing customers engaged and lower churn.
- Adaptation to change: Responds to technological advances, regulatory shifts, and evolving consumer preferences.
Key stages of the product‑development process
- Idea generation – sources: customers, competitors, R&D, internal brainstorming.
- Idea screening – assess feasibility, market potential, strategic fit.
- Concept development & testing – create detailed concepts; test with target consumers.
- Business analysis – estimate costs, sales, profit margins, break‑even points.
- Product development – design prototypes, conduct technical trials, refine.
- Market testing – limited launch to gather real‑world feedback.
- Commercialisation – full‑scale production, distribution and promotional launch.
Product development vs. product improvement
| Aspect | Product development | Product improvement |
|---|---|---|
| Definition | Creation of a completely new product or entry into a new market. | Enhancement of an existing product (features, quality, packaging). |
| Risk level | High – unknown market response, larger investment. | Moderate – builds on known brand equity. |
| Typical cost | Significant R&D, tooling, and marketing spend. | Lower – often limited to redesign or minor upgrades. |
| Time to market | Longer – multiple development phases. | Shorter – quicker adjustments. |
| Strategic purpose | Enter new markets, create new revenue streams. | Maintain market share, extend product life‑cycle. |
Product portfolio analysis
Boston Matrix (Growth‑Share Matrix)
- Stars: High growth, high market share – invest to maintain leadership.
- Cash Cows: Low growth, high market share – “milk” for profit, limited investment.
- Question Marks: High growth, low market share – decide whether to invest or divest.
- Dogs: Low growth, low market share – consider withdrawal or repositioning.
Product‑life‑cycle (PLC)
| Stage | Characteristics | Strategic actions |
|---|---|---|
| Introduction | Low sales, high costs, limited awareness. | Intensive promotion, selective distribution, premium pricing to recover R&D. |
| Growth | Rapid sales increase, economies of scale. | Broaden distribution, competitive pricing, line extensions. |
| Maturity | Peak sales, market saturation, intense competition. | Product differentiation, price adjustments, promotional incentives. |
| Decline | Sales fall, market contracts. | Harvest (reduce costs), discontinue, or replace with a new product. |
Product‑line and product‑mix decisions (width & depth)
Width = number of distinct product lines a company offers.
Depth = variety of items within each line (sizes, flavours, models, etc.).
- Line extensions: Adding new models or flavours to an existing line (e.g., new citrus flavours in a soft‑drink range).
- Brand extensions: Using an established brand in a different category (e.g., a fashion label launching a perfume).
- Pruning: Removing under‑performing lines or variants to focus resources.
Pricing methods (3.3.4)
Pricing must reflect the product’s positioning and the overall marketing‑mix strategy.
- Cost‑plus pricing: Add a standard markup to the unit cost (e.g., cost £20 + 30 % = £26).
- Competitive‑oriented pricing: Set price relative to rivals (price‑matching, price‑leadership).
- Value‑based pricing: Price according to perceived customer value (premium smartphones).
- Psychological pricing: Use price points that influence perception (e.g., £9.99 instead of £10).
- Dynamic / price‑skimming: High initial price for early adopters, then lower over time.
- Penetration pricing: Low introductory price to gain market share quickly.
Strategic approaches to product development
- Innovation strategy: Heavy R&D for breakthrough products (e.g., Apple iPhone).
- Line extension: New variants within an existing line (new flavours of a snack).
- Brand extension: Using an established brand in a different category (clothing brand launching perfume).
- Co‑creation: Involving customers in design (crowdsourced features).
- Strategic alliances: Partnering to share technology or market access (automaker + tech firm for electric‑vehicle platform).
Potential pitfalls
- Misreading market needs → low demand.
- Over‑investment → budget overruns without proportional returns.
- Time‑to‑market delays → competitors capture the opportunity.
- Neglecting core products → erosion of profitable existing lines.
Key take‑aways
- Product development is essential for growth, differentiation and long‑term profitability.
- A structured development process reduces risk and aligns the offering with market needs.
- Balancing new‑product creation with improvements to existing products manages risk while sustaining relevance.
- Understanding the PLC and portfolio tools (Boston Matrix, width/depth of product‑mix) enables strategic timing of launches and resource allocation.
- Pricing methods must reflect the product’s positioning and support the overall marketing‑mix strategy.
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