Product

 A product is really anything that fulfills a customer's need or want. Product can also be a service, or even an idea. In most categories, there are multiple firms competing for the same customers. Thus, in order to be successful, a product must have a distinctive selling proposition. In marketing, we refer to this, typically, as a product's positioning. This positioning can be functional, based on actual product differences, or symbolic based on a consumer need. For example, Coke. This product fulfills our need for thirst as well as our desire for belonging, as it it's positioned as being an original; an iconic cola. Let's talk about a few key concepts in terms of the product side of the marketing mix. There are lots of concepts dealing with product including things such as product quality, managing a firm's product line, and product service support. However, in this module we'll focus on two fundamental concepts. First of all, product development, and second of all, brand management. 

Innovation is viewed as a critical element in the success of any product. Firms that are more innovative typically enjoy much greater market success. Good examples of this are firms such as Apple, Google, and Netflix. These firms create both new products, but also new business models. Marketers typically refer to these types of firms as engaging in what's known as disruptive innovation and radically changing traditional business practices. Since these types of disruptive innovation are quite unusual, most firms engage in what's known as incremental innovation. This type of innovation focuses more on improving existing products rather than creating entirely new ones. For example, over the past 50 years, Coke has been very successful in introducing a number of extensions to its cola line through such products as Diet Coke, or Coke Lite, Coke Zero, and Cherry These types of line extensions can be quite helpful in terms of having products that appeal to different target segments. For example, Diet Coke is targeted towards women, where Coke Zero was designed to be targeted towards men. 

To develop these new products, most firms employ a cross-functional team comprised of managers from across different parts of its business units including marketing, sales, operations and R&D, among others. Typically, these team members follow a very carefully scripted product development process such as the Stage-Gate method, in which product development moves systematically from conceptualization to launch in various stages- usually 5 to 7 stages. 

At each stage point, data is collected, progress is monitored, and approval from higher authority is sought. This process is usually quite secretive in nature, and those outside the firm have little direct involvement. For example, during the Stage-Gate process, consumer insights are solicited at only two points in the chain: The beginning and the end. 

Moreover, because this process is meant to be confidential in nature, only a few, select amount of consumers are asked to provide input to these activities. Although these types of development processes are well-established and carefully managed, most new products still fail. Let's move on to the second concept: Brand management. People usually think of a brand as a name, a symbol, or a design that differentiates one firm's products from its competitors. This differentiation can either be tangible differences such as better taste, or intangible differences such as a particular color. For example, the Coke brand is differentiated not only by its name, but also by the script- the font- that it uses, and also the color red. It owns that color in the cola category. These types of strong brands help consumers decide what to buy, and provide them not only with greater confidence, but also with a sense of identity. Brands help tell us who we are. They're also beneficial to firms, as strong brand usually can charge higher prices, enjoy greater loyalty, and experience higher profits. This results in what marketers term "brand equity", which is the value of a brand over a generic product in the same category. 

Brand equity is a substantial and tangible asset for many firms. For example, Coke's brand equity is estimated to be worth over $80 billion. That's billion with a B. And this represents nearly 40 percent of its total market value just for the brand alone. Given this high value placed on brand equity, most firms place considerable emphasis on building strong brands by carefully choosing brand elements such as the name, the color, and the brand's symbols. Firms also focus on building strong associations to their brands through advertising campaigns, and also protecting these investments through trademarks and other forms of intellectual property protection. Usually, all of these brand functions are closely managed by a brand management team whose sole job is to manage the health of a brand. This brings us to what's changing today as a result of digital marketing. What we're finding is both product development and branding decisions are typically made by a firm's brand managers with relatively little input from customers or external entities in general. 

For example, in the typical new product development process, consumer input is solicited in only concept testing stage, and the test market stage. Even then, typically only a small amount of customers are asked to provide input. So, what's changing now through digital marketing, is that this firm-centered approach is starting to break down due to the rise of these new digital tools. For example, the Chicago-based T-shirt manufacturer Threadless and this company has no design staff at all. All of its T-shirts are designed and selected by its customers using a web-based platform in which designs are submitted, viewed, and voted upon all by its users. Thus, in this new digital marketing environment, we're now moving from firm-created products and brands to co-created products and brands.