Marketing Mix: Product (Cambridge (CIE) A Level Business): Revision Note

Goods and services

• Goods are physical, tangible items that can be touched, stored and owned

  • They are usually produced, then sold, and can be taken home or delivered

    • Examples include a loaf of bread, a car or a pair of shoes

• Services are non-physical, intangible activities provided by people or businesses

  • They are usually performed at the time of purchase, and cannot be touched or stored

    • Examples include a haircut, a taxi ride or legal advice

• In many situations, when a customer buys a product, they are also receiving a service as part of the overall experience

  • This is because businesses want to provide value beyond the physical item and improve customer satisfaction and loyalty

Tangible and intangible product attributes

• When a customer buys a product, they are influenced by both tangible and intangible attributes

  • These are the features that affect how the product looks, feels, performs or is experienced

Tangible and intangible attributes of a pair of trainers

Tangible attributes

• These are the physical features of a product that can be touched, seen, or measured

• They include things like size, colour, design, packaging, materials, and weight

• Customers can compare tangible features before buying

  • E.g. When buying a pair of running shoes, the tangible attributes include the shape, colour, sole type, weight and material used

  • The customer can try them on and feel the comfort and fit

Intangible attributes

• These are non-physical features that relate to the experience or perception of the product

• They include things like brand reputation, warranty, customer service, image and emotional value

• These features are often the reason a customer chooses one brand over another, even if the tangible features are similar

  • E.g. The same running shoes may come with a trusted brand name, a 12-month warranty, and a ‘satisfaction guarantee’

  • The buyer may also feel a sense of pride or motivation wearing a well-known performance brand

The importance of product development

• Product development is the process of creating and launching new goods or services

  • It can help a business grow, stay competitive and meet changing customer needs

  • Without developing new products, a business risks becoming outdated or losing its market share

Why product development is important

• Responding to changing customer needs

  • Customers’ tastes, preferences, and lifestyles change over time

  • Developing new products helps businesses stay relevant and meet these new demands

• Staying ahead of competitors

  • By launching innovative or improved products, businesses can attract new customers and keep existing ones from switching to rivals

    • E.g. A tech company that releases a new smartphone with unique features may gain an advantage over competitors

• Increasing sales and market share

  • New products can generate excitement, attract more attention, and increase overall sales

  • They may also open up opportunities to reach new market segments

• Extending the product life cycle

  • As older products reach the end of their life cycle, new products can replace them and keep the brand fresh and active in the market

• Taking advantage of new technology

  • Businesses can use advances in technology to improve performance, design, or sustainability, which can make their products more attractive

    • E.g. A home appliance company might develop smart, energy-efficient models to appeal to eco-conscious consumers

Costs of new product development

Product differentiation

• Differentiation is where a business distinguishes its products from those of competitors

  • This involves creating functions or features of the product (or firm) which help it to stand out from its competitors

  • Strong product differentiation helps the firm to develop its competitive advantage

Methods of differentiation

•  Successful business or product differentiation helps the business to increase demand for its products, increase brand loyalty, and allow the business to charge higher prices

Differentiation methods

Unique selling points

• A unique selling point (USP) is a distinguishing factor or characteristic of a product, service or brand that sets it apart from its competitors

  • The USP helps a business to differentiate itself and give customers a reason to choose one product or service over others because it offers something distinct and valuable

• There are a range of reasons why businesses develop a USP which can include

  • Developing a brand identity

  • Achieving a competitive advantage over rivals

  • Effective communication with customers

  • The attraction and retention of customers

  • Achieving power over pricing

  • Encouraging innovation and adaption

Reasons for developing a USP

• Competitive advantage

  • A strong USP gives a business a competitive edge by creating a barrier to entry for other businesses in the market

    • If a business can offer something that is difficult to imitate, it becomes more difficult for competitors to gain customers

• Brand identity

  • A unique selling point helps to shape the perception of the business in the minds of consumers

    • It becomes an essential part of the brand's story and message, which allows customers to associate specific qualities or benefits with the brand

• Communication

  • A well-defined USP provides a clear message that highlights the unique benefits and advantages offered by the product, making it more memorable

    • E.g. Emirates' USP is a high-quality service and luxurious amenities supported by extensive marketing efforts such as sponsorship deals with sports teams and events

• Retention and attraction of customers

  • A unique selling point can help attract new customers by appealing to their needs and desires, making customers more likely to choose and remain loyal to the brand

• Pricing power

  • A strong USP can often justify the firms decision to charge higher prices for products, as customers are willing to pay more

    • This pricing power can improve a business's profitability and financial performance

    • E.g. Volvo has a reputation for safety, reliability and comfort, which means that customers are willing to pay premium prices for its vehicles

• Innovation and adaptation

  • Developing and maintaining a unique selling point encourages businesses to continuously improve their products, explore new ideas and adapt to changing customer needs and preferences

    • E.g. Apple customers expect to be able to upgrade their technology devices frequently and value the ability to buy complementary goods, which add value