Product Management
A product is something that delivers a need to a customer. It may be a tangible thing like device, commodity or intangible things such as a service, technology, consultation. Theodore Levitt, a professor of Harvard business school, said: “A customer does not need a quarter-inch drill but a quarter-inch hole.” In other words, a drill is a tool to accomplish the end in easy, simple way that is what a customer wants, needs. An airlines, for example, views itself not as an airlines but a transportation. This view comes from customer-centered perspective. Southeast Airlines, a budget airlines, viewed itself as a transportation. Thus, their competitors are not only Northwest Airlines, American Airlines, Delta Airlines, but also railroad, Greyhound, buses, family cars. From customer-focused perspective, Southeast Airlines broadened its boundary of competition.
We have a model of an onion as the model is kind of like an onion. The more we peel off the more layers it has. The first is a core layer that must have to compete in a given product or service category. It is kind of like a ticket to entry. The second is an expected layer that consists of a level of differentiation to compete in a given competition. The third is an augmented layer that contains a complex differentiation to stand out among product or service category.
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In Kano model, we have a degree of product attribute achievement on a horizontal axis and a level of satisfaction on a vertical axis arranging from Very dissatisfied to Very satisfied. We have three kinds of attributes. The first is Basic or Expected attributes that a company must have to compete its competitors, meet its customer’s need. Then, we have Surprise & Delight attributes that a competitor is not necessary to have and a customer is not necessary to expect. It is only you that have it to stand out in a competition. A red linear is Performance & Spoken attributes that is in between two non-linear curves. A curve Basic or Expected attributes never exceed the horizontal axis. As a customer’s need is expected, basic, you are not necessary to be rewarded if you achieve while if you do not achieve, you are penalized clearly. It is asystematic. In the upper part, it is true for a curve Surprise & Delight attributes. You are rewarded clearly if you achieve as it is what a competitor does not have, a customer does not expect. Whereas, if you do not achieve, you are not necessary to be penalized.
In the left hand side, a black arrow indicates time and goes downward. Over time, attributes that were once Surprise & Delight become Expected & Basic attributes because of the imitation of a competition. This model implies the innovation and a product includes three kinks of attributes that would be changed over time.
In the left hand side, a black arrow indicates time and goes downward. Over time, attributes that were once Surprise & Delight become Expected & Basic attributes because of the imitation of a competition. This model implies the innovation and a product includes three kinks of attributes that would be changed over time.
Immutable law of products
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The immutable law of products includes five elements:
The first is a product is not a thing. It is not tangible thing. Back to the example of Theodore Levitt, a drill is a tangible thing, but a customer wants the other end, a hole. A drill accomplishes the end in easy, simple, convenient way that is what a customer wants.
The second is benefits that a product offers to a customer. For instance, Kodak is a camera company. Back in 1975, a digital camera was invented by Steve Sasson. That was a revolutionary invention at that time. However, Kodak took this lightly. They wanted to indulge in digital film and did not think of benefits. A digital film business was out of business that hurt them. Another case is American Railroad that did not view it as transportation but framed in a railroad system.
The third is solution. A product helps a customer resolve their problem. It’s more about spirit. For example, Aleve provides a solution to a patient who is hard to keep track of taking pills or not to remember when it is the last time to take a medicine. The solution is a patient takes one tablet after waking up and one pill before going to bed. Head and Shoulder gives a solution to a customer who has dandruff.
The fourth is experience. A product brings to a customer a moment they pay to spend time enjoying it. Silver car is an example that represents an experience. A customer wants to get in line, update paperwork after a long air trip, he just uses mobile app to rent a Silver car, use a mobile app to open a car at parking. A client enjoys experiences in non-human interacting service. A table below depicts different experiences of different products:
The first is a product is not a thing. It is not tangible thing. Back to the example of Theodore Levitt, a drill is a tangible thing, but a customer wants the other end, a hole. A drill accomplishes the end in easy, simple, convenient way that is what a customer wants.
The second is benefits that a product offers to a customer. For instance, Kodak is a camera company. Back in 1975, a digital camera was invented by Steve Sasson. That was a revolutionary invention at that time. However, Kodak took this lightly. They wanted to indulge in digital film and did not think of benefits. A digital film business was out of business that hurt them. Another case is American Railroad that did not view it as transportation but framed in a railroad system.
The third is solution. A product helps a customer resolve their problem. It’s more about spirit. For example, Aleve provides a solution to a patient who is hard to keep track of taking pills or not to remember when it is the last time to take a medicine. The solution is a patient takes one tablet after waking up and one pill before going to bed. Head and Shoulder gives a solution to a customer who has dandruff.
The fourth is experience. A product brings to a customer a moment they pay to spend time enjoying it. Silver car is an example that represents an experience. A customer wants to get in line, update paperwork after a long air trip, he just uses mobile app to rent a Silver car, use a mobile app to open a car at parking. A client enjoys experiences in non-human interacting service. A table below depicts different experiences of different products:
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The fifth is meaning. The emphasis is on touching a soul. A product that falls under this category is cultural product.
Product versus brand
Some people think there is a similarity between a product and brand. On the contrary, a brand differentiates from a product. A product is tangible thing that a competitor can copy while a brand is intangible that is unique, hard to be copycat. A product will be outdated, die out in a day while a brand’s life is timeless, may last longer than a person’s life expectancy. This represents a brand culture through brand stories that are diffused on social media platforms.
The brand has 4 actors that creates an influence on it. The first is a firm. Obviously, a firm wants to create stories around its products to diffuse on the media tools
The brand has 4 actors that creates an influence on it. The first is a firm. Obviously, a firm wants to create stories around its products to diffuse on the media tools
Next is the popular culture. The media would be a tool to formulate a trend setting, to create buzzes about a product. All would lead to the popular culture. The third is a customer who uses a product and transfers the brand through words of mouth, social media. The fourth is influencers who are pioneers in the initial stage. They write their ideas about a product on their blog.
The brand has 5 levels of meaning. The first is attributes that are a basic level to compete in a given product category. The second is benefits that satisfy a customer’s need. Next are values, culture and personality. From top to bottom, it is from more concrete to more abstract. The point is being more abstract is hard to compete.
The brand has 5 levels of meaning. The first is attributes that are a basic level to compete in a given product category. The second is benefits that satisfy a customer’s need. Next are values, culture and personality. From top to bottom, it is from more concrete to more abstract. The point is being more abstract is hard to compete.
Objective versus Psychological Benefit Perspective
A customer adopts a new product when objective net benefit is greater than zero. The objective net benefit means the difference between benefit and cost is greater than zero. That is incentive, motivation for a customer to adopt a new product. It is from a rational economic perspective. However, the research has shown that it is not necessary how they think when to adopt a new product. A customer engages in an irrational manner from psychological benefit perspective. There are three scenarios of a new product. The net benefit holds constant across three scenario.
In the scenario 1, the cost goes down, a new product does not provide additional benefit. In the scenario 2, the cost does not change, a new product gives benefit. The scenario 3 gives more benefit that existent product at the same time it entails more cost. Among 3 scenarios, scenario 3 is best as in a theory, a new product is supposed to provide more benefit. A customer may not perceive it from psychological perspective as they are irrational. We use the prospect theory to have deeper level of understanding. In a graph below, there is where is status quo or a point of reference. On the right is a domain of gain and on the left is a domain of loss. $600 provides V $600 of joyfulness, happiness, satisfaction, so to speak. Whereas, negative 200 gives me the dissatisfaction of V $200. The length of v plus 600 is similar to the one of V negative 200. The length of plus 600 is as three times as the one of negative 200.
The points of prospect theory are loss aversion or losses loom larger than gains
We have an equation that includes Bn (benefit of new product), Bo (benefit of old product), Cn (cost of new product) and Co (cost of old product). The new product is online shopping and the old product is traditional shopping. When you do online shopping, you do not need to get in line, avoid hassle, save time, thus, it is benefit or Bn. When you go to brick and mortar stores to buy port, beef, you find the one you like. So you go online shop that means these benefit of traditional shopping will be losses.
When you do shopping, they deliver it to you. You have to stay to receive it because beef or pork should be refrigerated. Cn is considered a loss. When doing online shopping, you save your time, avoid hassle. Thus Co is gain. Cn, a loss, is overweighed while Co, a gain, is undervalued. So an equation Cn minus Co is greater.
The equation of Bn minus Bo is smaller which works against the adoption of a new product. The bottom line of the adoption of a new product is Benefit of a new product Bn substantially is greater than benefit of an old product and loss of a new product Cn is lower than gain of an old product Co.
When you do shopping, they deliver it to you. You have to stay to receive it because beef or pork should be refrigerated. Cn is considered a loss. When doing online shopping, you save your time, avoid hassle. Thus Co is gain. Cn, a loss, is overweighed while Co, a gain, is undervalued. So an equation Cn minus Co is greater.
The equation of Bn minus Bo is smaller which works against the adoption of a new product. The bottom line of the adoption of a new product is Benefit of a new product Bn substantially is greater than benefit of an old product and loss of a new product Cn is lower than gain of an old product Co.
Country of origin effect
People purchase a product or service based on the country of origin. That means where a product or service comes from. They do not consider attributes or features. It is not objective or does not reflect a reality. In other words, the preference towards a product may be affected by the perception where a product comes from. For instance, consumers think of Japanese electronics is of high quality or Germany well known for a car, France for wine. In a reversal situation, a product on an objective manner, from a feature, quality perspective, is of high quality, it may not have credit, it comes or it may be penalized as it comes from an emerging country or a developing country. So they have negative country of origin effect. We call these countries as provenance paradox. For instance, Mexico is well-known for tequila, Corona. They did not brand it as Corona as it would be provenance paradox. They repositioned it as a lifestyle drink, a beer of fun, sun and beach.
Looking at a two by two matrix below, Germany is well-known for automotive industry, strong product category image and also has famous cars like BMW, Volkswagen, brand image while Turkey produces a good carpet. People are hard to identify Turkey carpet, product category image and Turkey does not have a strong brand on a carpet. Austria does not have a strong product category image of energy drink but it has product a strong brand of Red Bull.