An organisation is created to deliver a product or service to the customer. But, the important question still remains
- “What product would be liked and purchased by the customer?”
- “Why certain products are instant success?”
- “What are different product segments?”
The organisation would not get sufficient margin unless liked or accepted by the customer,.
Similarly, product design (i.e. look and feel of the product) also contributes in customer making a buy decision. Some products are visually appealing prompting the customer to purchase.
The benefits of product acceptability are enormous. Some of them are:
- Increasing the turnover → each sale results in profit, which supports the organisation in running the organisation;
- Referrals to others by customers → more turnover;
- Organisation becoming a brand → charging premium in pricing from customers → other organisations following success mantras.
Reverse of above happens when the products are rejected.
Product Segments for Product Strategy & Design
Identification of product segment important
- Each segment has its own characteristics in terms of
- Investment needs (e.g. minerals, infrastructure, machineries, etc. have huge investment requirements);
- Gestation period (i.e. time taken by a product to stabilise and become profitable);
- Exclusivity (i.e. something different from others).
- Relevant both at the time of set-up of business OR expanding the same.
- Vacuum of Market (discussed in separate article):
- Gaps in the market where product or services needed but either the same not available or with demand > supply;
- E.g. in wired telephony market, there was a need to be connected anywhere in the world at any time → birth of mobile technologies;
- To check → “How big the customer needs are?” → the bigger the need; the higher the margin ; the bigger the chances of instant success of product.
- Essential products / services
- Basic products required by the customers (e.g. food, cloth & shelter) → products required for survival;
- Presence of large number of players → less margin;
- Sometimes shortage conditions develop
- Natural shortage – floods, famines, pest attack, etc. → supply constraint → more price;
- Spread of new virus causing health problems → immediate need for resolving health problems → more demand → more margins;
- Artificial shortage / scarcity → hoarding of goods (e.g. vegetables, fruits, cereals, etc.) → supply constraint → more price.
- Somewhat essential products / services
- Not survival products → but essential products since large number of people using the same (e.g. education, skill training, vehicles, coolers, air-conditioners, pizzas, burgers, cold drinks, etc.);
- Strategy same as essential products.
- Branded goods / services
- Cater to upper middle and upper strata of the society;
- Users with high disposable income and their basic needs (e.g. food, cloth, shelter, vehicle, education, etc.) already satisfied;
- Brand consciousness (i.e. branded products bring consistency in quality, etc.) → price not important criterion for securing these products / services;
- E.g. products from GAP, Nike, Hindustan Lever, Nestle, etc. are known for their quality.
- Luxury products / services
- Cater to upper strata of the society with high disposable of income;
- E.g. gold, diamonds, luxury watches, paintings (Picasso , M F Hussain, etc.), premium spa, luxury travels;
- These products bring pride and feeling of getting noticed in the crowd, different from others, exclusivity, etc. prompting the purchase decisions;
- Price not important criterion for securing these products / services.
- Government as consumer
- Govt. requires large number of goods / services for citizens of the country;
- E.g. defence, electricity, water, infrastructure (roads, dams, airports, etc.), irrigation, satellites, extraction of minerals, oil, etc.);
- Requires huge investment for infrastructure sector → long gestation period;
- Price regulated through tender process.
- Organisations as consumers
- Organisations require raw material / services for converting the same into finished goods / services and delivering to final consumer who consumes the goods / services.
Considerations for Product Design
- Product Look
- Shape of the product matters a lot;
- Shape needs to be creative, pleasing and different from others;
- Product needs to stand out from others.
- Must cater to the need where no product / service are available or available in less quantity.
- Redesigning the existing product
- Available existing products with less features requiring products to be redesigned;
- E.g. mobile was traditionally used for talking → redesigned into smart phones → single mobile can be camera or navigator or e-book reader or internet provider or bar-code scanners, etc. → android technology changed the way the mobile phones were used → reduced the need for cameras, camcorders, etc.
- Costing of the product & ‘Price to the Customer’
- Product designed keeping the final price to the customer under consideration;
- E.g. Nano car from Tata Motors with objective of INR 1 lac (INR 0.1 million) was designed & re-designed several times to match the price to customer → several resulting innovations in shape, engine, etc. in the process of manufacturing Nano car (i.e. final product).
- Sale as a single product vs. in CKD
- Whether product is to be sold as a single product or in CKD (completely knocked down condition) before final assembly at the customer-end?
- CKD products require better planning and customer education → customer must be able to assemble himself /herself after reading the instruction → product measurements must be accurate and that too consistently → requires investment in error detection devices.
- Durability vs. costing
- Durability of the product becoming less important since durability as an objective doesn’t give more business to the organisation → customer also started believing in ‘use and throw’ concept;
- Price war prompting the organisations to choose raw materials with better finish, features, price, etc.;
- Steel giving way to plastics (many industries switching from heavier bodies to lighter bodies to save energy, cost);
- It’s worth reading debate on steel vs. plastics in processingmagazine.com