Central to any corporate business plan are the profit-making prospects of a company’s various activities. As profits cannot be achieved without a product or range of products (or services) which satisfy the constantly changing desires and needs of customers, an effective product strategy is crucial to the success of an enterprise. The firm’s product strategy is also a fundamental component of the firm’s overall marketing mix. The promotion of an unacceptable product could lead to initial purchases but will fail to achieve the all-important repeat business.
Defining a product
Essential to the success of any product strategy is an understanding of what, in marketing terms, constitutes a product. A product can be defined as ‘the total utility or satisfaction that a buyer (the customer) receives as a result of a lease or purchase’. Thus a product is not merely viewed as a collection of materials but rather as the means whereby a company turns its resources into satisfying customer needs in order to achieve profits and growth.
According to Peter Drucker in Management: Tasks, Responsibilities, Practices:
It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or service converts economic resources into wealth and things into goods. What a business thinks it produces is not of first importance – especially not to the future of the business and to its success. What the customer thinks he is buying, what he considers value, is decisive – it determines what a business is, what it produces and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him.
Product components
A product can be broken down into four specific components:
- The tangible goods or services offered to the buyer
- The packaging, labelling, trademark, brand name and all other aspects of a product’s package
- The services that accompany the product, e.g. the instructions, warranties, delivery, installation, repair and maintenance and the availability of spare parts
- The benefit which the buyer expects to receive from the purchase
Products – satisfying needs
The primary objective of marketing is to give the customer whatever (s)he wants in a purchase. Theodore Levitt, a well-known management author, remarked that what customers want when they buy quarter-inch drills are quarter-inch holes. In other words, the drill itself is only a means to an end. The lesson here for the drill manufacturer is that if the entrepreneur really believes the business is the manufacture of drills rather than, say, the manufacture of the means of making holes in materials, (s)he is in grave danger of going out of business as soon as a better means of making holes is invented.
Needs differ, therefore products must differ
Customers’ needs and the benefits they perceive resulting from their purchases will often vary significantly according to the level of economic development of the countries in which they reside, as well as the social and cultural environments in which they operate. The adaptation of such benefits may be necessary if a product is to meet a particular culture’s needs and changes may have to be made to any one, or all, of product’s features. For example, the introduction of personal care items to a culture that prefers that body functions remain private can upset locally accepted values. Product resistance because of cultural differences has been evidenced in nearly very country in the world.
Insurance, for example, has been difficult to introduce into Muslim countries because they believe it to be associated with usury and gambling. Many people avoid pork because of their beleifs, while the Japanese tend to be averse to body jewellery. The French proved unexpectedly hostile to frozen foods when they were first introduced.
Exporters could thus find themselves selling very different products in foreign markets from those sold domestically. Alternatively, the firm may not sell a product at all and instead, could sell the rights to brands and trademarks, know-how and patents on products or processes (licensing), or could sell services such as skills in research, design, production, marketing or general management.
Factors to consider in preparing a product strategy for export markets
In preparing a product strategy of export markets, there are a number of factors that you need to consider. These include:
- Product modification – adaptation versus standardisation of your product
- New product development
- Eliminating obsolete products
- Product design and quality
- The production process
- Packaging for exports
- Labelling for exports
- Product brands and trade marks
- Product servicing
Preparing a product strategy statement for your export plan
These issues we discuss in detail in subsequent sections. Once you have worked through these various issues, you should be able to prepare a statement outling your export product strategy. This statement should address the issues outlined above, namely; whether you will be adapting your product for the export market; whether there are any mandatory design or standards you need to adhere to; what product quality levels you hope to achieve; whether you will need to redsign the product; whether you need to adapt the production process within your factory; whether you will promote a specific brand; whether will you register this brand; whether you need to make use of special packing and/or labelling; and what servicing you will provide your foreign customer.