In the marketing mix, what is a Product?
“Build a better mousetrap and the world will beat a path to your door.”
That was in the old days. Since the early days of the post-industrial revolution age, free enterprise and capitalism have made great strides, progressively changing the world. Today it is never going to be enough to simply invent a better mousetrap. It is infinitely more important to announce that you have built a better mousetrap. Many times, in fact, information alone about a better mousetrap can be far more valuable than the actual mousetrap.
Let us have an illustration: suppose a gold mining company strikes a mother lode. Everyone knows that the precious metal will always be valuable, and its price may rise and fall depending on the caprices of market forces such as supply and demand. And regardless of the price (around $1800 per ounce in 2021), gold will always be gold – the “gold standard” is gold. But that piece of information, that little tidbit of knowledge that Company X has struck gold – that is priceless. Should this valuable information be leaked, those who catch wind of it will undoubtedly invest all their available funds into the stocks of that company. And as soon as those few in the know start buying up the company’s stocks, others will speculate and quickly join the fray. A buying frenzy ensues, and the leaked information will likely cause the company’s stock to rise through the roof. Within a matter of days, millions, and maybe even billions of dollars will change hands and enormous fortunes will be made. Nobody knows how much the new find is really worth, if it is indeed worth anything. In all this time not a single ounce of gold has yet been extracted from the ground, but already so much money has been made and spent.
The interesting thing about this example is that this actually happened. A Canadian mining company known as Bre-X announced in 1995 that they had found a lode in their gold mine in Indonesia that could produce anywhere from 2,000 to 6,000 tons of gold. This made headlines around the world and thousands of people threw their money at it. The company’s stock was only worth pennies before the announcement and it went up to CAD $286.50 at the Toronto Stock Exchange, thereby giving the company a valuation of over CAD $6 billion. But it was all a hoax. The drilled ore samples were salted with gold dust – filings from jewelry. By 1997 Bre-X had filed for bankruptcy. Welcome to the Information Age.
More on the Product.
A popular tactic used by advertisers is, “sell the sizzle, not the steak.” However, in spite of the hyper valuation that advertising attaches to related elements but are extrinsic to the product itself, the product remains at the very heart of any and all marketing plans, programs, and activities. You can only sell the sizzle so much. Sooner or later, the customer will want to take a bite, and actually sample the steak. If you have a product that can satisfy a need, deliver on a promise, or at the bare minimum be worth the price you are asking for it, then you are in business. At the very least you have something to sell. If all you have is the product and none of the other Ps, then you can engage other people to provide them for you. For instance, you can hire a distributor to distribute your product for you. If you have no promotional capabilities, you can always hire an ad agency, a promotions agency, even a PR agency.
What about price? Surely, if you had the product you would have its price. They are inseparable. Producing a product incurs costs. A producer or manufacturer (or inventor) must have a running list of things that were consumed in the production or creation of the product: materials used up, resources allocated, time spent, manhours consumed, and so on. At the most basic level, tallying up these costs gives you an idea how much the product is worth… to you, its producer or manufacturer. How much is it worth to the prospective consumer? You will need to figure that out separately. Whatever is the difference between these two costs is your gross profit. We will tackle that subject later.
Can you have the manufacturing capability but not have a product? In other words, can you be a producer, and yet not own a product? Yes. There is such a thing as toll manufacturing. You can be an independent company whose business is providing manufacturing services and facilities for someone else who has a product but does not have the capability to manufacture it on his own. Find that guy who has a product but cannot produce it himself. He is your client. Normally, toll manufacturers invest in their facilities on such a large scale that their capabilities enable them to produce products for other companies very efficiently. These companies have taken the concept of economies of scale to a very high level. Let us have an illustration. Let us say that a certain Mrs. P started a bakeshop many years ago. She now runs a factory that makes sliced bread able to produce 10,000 packs of a day for $1 a pack. This small family-owned bakery has been so successful that they have grown their sales volume to such a level that it made sense for them to put up their own factory. Over time the city population has grown and there are now several such bakeries but not all of them have the volume to invest in their own factories. Enter the toll manufacturer. Mr. TM builds a factory that can produce 60,000 packs of sliced bread running three shifts on two production lines, with each line producing 10,000 packs per 8-hour shift. How much do you think it costs Mr. TM to produce each pack of sliced bread? A good estimate would be around $0.20 per pack. How? First, he has two production lines under the same roof, then each line is working three times as hard as the small factory of Mrs. P – three shifts vs one. Now Mr. TM offers to do toll manufacturing for all the other bakeries in the city. They agree because his costs are so much better than if they built their own factories. They are now able to compete with the pioneer and market leader bakery of Mrs. P, and even offer lower prices. In this scenario, how does Mrs. P survive?
If you don’t have the product but you have the capability to place it into store shelves, then you are in the business of distribution. Place, or placement, a.k.a. distribution, is an important and a major part of marketing, but by itself, it is not marketing. Find that somebody who has a product but does not have the capability to distribute it. He is your client. If you have the promotions capability, but you do not have the product, then you are in the business of advertising and/or promotions. Perhaps you run an ad agency, or a merchandising company, but you are not a marketer. Find a marketer – he’s the one who has a product. He is your client. If you only have the price but not the product, then you have nothing. One does not exist without the other.
In the grand scheme of things marketing, notice that it is the guy with the product who is the central figure. In this industry, he is known as the client. He goes by different titles – brand manager, product manager, marketing manager, marketing director, etc., but his most important title is Client. He is the one who approves all the plans and proposals for how to market the product coming from everybody else.
Needless to say, any product worth marketing should be worth marketing well. A product that will not deliver on its promise will die a natural death, and any marketing or promotional effort put into selling it can only hasten its demise that much faster. The worst thing that can happen to an inferior product is for it to have great advertising. And there have been many such cases where the advertising was better than the product, and as soon as consumers discover this, they stop buying the product. Slick snake oil marketers can probably get away with fooling the consumer once or twice, but they certainly cannot expect to make a living out of it. Not in today’s world anyway. As one marketing director once put it, “The consumer is not stupid. I know that because I am married to her!”
But what exactly is a product? It is any object (and these days, it is more likely to be a service or a process) that fulfills a particular function. Examples of this function include the service that a babysitter provides, everything in fact that serves a function: from removing dirt from your clothes (detergent) to quenching your thirst (beverage), to bringing you from your location to a desired destination (transportation), to being given a pleasurable experience such as being entertained by a movie, a television program, or a Broadway play. Whatever it is, it is something that you as its prospective consumer finds valuable. The range of values is infinite. As a consumer, you may be willing to only pay up to a certain small amount for a simple item such as a safety pin that will help hold up your skirt. Or it may be as priceless as an engagement ring, or an Impressionist painting. Anything that a prospective consumer attaches a value to is a product.
Do all products need to be marketed? Not really. Obviously, there are far too many different kinds of products to be covered in one book. Suffice it to say that marketing comes into play only when there is a need to inform and/or educate the consumer about the product, or when there is competition for the consumer’s patronage between similar or alternative products. Competition created marketing. Need is the mother of invention, and the need to be more desirable than your competitor gave birth to marketing. Do products only compete among their equals under the category of “similar products”? In other words, does Coke only compete with Pepsi and other soft drinks? No. In many instances, a product will have direct and indirect competitors. In our Coke example, soda actually competes with all other beverages for the same consumers. This includes coffee, tea, fruit juices, and water. Any liquid that goes into a consumer’s throat to quench his thirst is a competitor. Back in the 1980’s, after Coca-Cola dethroned Pepsi as the number one selling soft drink in the Philippines, their advertising agency McCann-Erickson did not only keep track of their market share versus Pepsi and the other sodas under the heading Share of Market, they also kept track of all the other beverages under the heading Share of Throat. Any beverage that a consumer reaches for to quench his thirst was a competitor.
There are also generic or commodity-type products that are bought, sold and consumed with little regard for any differentiation among them. Good examples would be food items such as produce – vegetables are rarely branded. Wet market items such as seafood and meat are also usually unbranded. When you are buying kale, okra, bananas, or potatoes, you don’t really care if they carried a brand name or not, such as Del Monte, Chiquita, or Dole. Even if there might be real distinctions between the choices, consumers rarely pay attention. For instance, there are several varieties of potatoes, and where they come from can make a difference between them, but the brand they carry, if they have one stamped on them means nothing to most consumers. The same is true of other produce items – avocadoes, tomatoes, celery. Most consumers simply don’t care.
What they might care about instead could be what class of commodity is being offered to them. The best illustration of this would be organic produce vs ordinary produce. Or avocadoes from Mexico vs avocadoes from Florida. California wine vs wines from Chile or Australia, or from France. There are of course instances where the origins of a product can and does make a difference – a huge difference. Case in point: champagne vs sparkling wine. Legally, only grapes grown in the Champagne region of France may be called champagne. A parallel situation exists for cognac vs brandy, and there are also similar such situations among cheese and other deli products. You can buy countless varieties of ham at any supermarket. But does anybody know why hams from Spain cost so much more than all other hams?
The opposite is true in some other products that have no real differentiation and yet their brand names can be so strong that their consumers are so brand loyal you could mistake them for a cult. This is illustrated in the product we know as gasoline and what other countries call petrol. This product is essentially the same wherever or whomever you buy it from. And yet, thanks to fierce advertising and marketing campaigns by the big oil companies, some people will only put Shell into their cars, while others will only buy from Mobil or Exxon.
An even more fierce brand differentiation exists among fashion brands. People will pay double or triple for a pair of jeans that carries a strong brand label – Levi’s, Guess, Wrangler, Lucky, and so on. Are there true differentiations between them? Not really. They are all made from the same raw materials – denim fabric sewn together with the same threads, with similar styles and shapes. And yet their loyal consumers will swear that they are not the same. For some reason, a certain brand gives them a “better fit” more than the others. That “fit” is of course as much a function of their body shapes as the design or style of the brand.
This discussion can go on and on ad nauseam. We can talk about so many other product categories where there is little if any distinction existing between the competitors and yet consumer perception sets them miles apart from each other. Coke vs Pepsi – research studies have proven time and again that most consumers cannot tell them apart in blind taste tests. This applies to most beverages, alcoholic or otherwise. When offered several brands of whiskey, an experienced drinker would savor the best, or the most expensive among them first. Because after his palate is already numbed by the first few rounds of alcohol, he may have trouble differentiating between the tastes of subsequent sips and gulps. There are many other product categories where product differentiation is negligible at best, and yet brand differentiation can be quite fierce – laundry detergent, dishwasher pods, toothpaste, most household cleaning products. Paper products – toilet tissue, paper towels, table napkins, and other paper products used at home and in the office, such as copy paper, envelopes, and other stationery. Apparel – socks, sneakers, underwear; other products made from fabrics, bedsheets, pillowcases, towels; etc., etc., etc.
Product Parity
If this is inevitable, how can one brand effectively compete? How does one brand rise above the rest? Marketing guru, inventor of the concept of positioning, and best-selling author Jack Trout gives the best answer: Differentiate or Die.
There are countless examples of this being played out in every market even today. If you take a glass of Coke and a similar glass of Pepsi, for example, there is no way you can distinguish one from the other with just the naked eye. But even if you place them both under a microscope, you may not be able to differentiate one from the other. In fact, most people cannot tell them apart in blind taste tests. This research finding was exploited to the hilt by Pepsi when they launched their “Pepsi Challenge” campaign. The challenge was premised on the fact that in blind tests, “loyal” Coke drinkers will drink a Pepsi if they did not know it was a Pepsi (and presumably, vice versa). And yet brand loyalists from each side will swear they cannot be “tricked” into drinking their brand’s competitor. Obviously, both brands have done such a great job of differentiating themselves from the enemy that their respective consumer bases will blindly follow their brand into battle with the other side.
Branded vs Generic and “House Brands”
Most consumer products are available under more than one brand, and in many cases – particularly among pharmaceutical products – are also available as a “generic product”. What does that mean? The pharmaceutical industry enjoys the privilege of exclusivity for any new drug that they develop. The new drug is normally granted a patent that is good for a limited number of years, typically 15- 25 years. Why? The justification lies in the enormous cost and resources needed to invest in research and development before any new drug can be registered and released to the market. Many times this effort takes years before it bears any fruit, if at all. All of these investments into R&D will need to be recovered (and then some) for any drug company to even bother with doing the research in the first place. The patent protects the pharma company and encourages their industry to continue developing new drugs. The patent also practically guarantees profits because the new drug will enjoy a monopoly until the patent expires. This explains why most new drugs are so expensive. The drug companies that manufacture them need to make as much profit from it within the lifetime of the patent – before competitors come in and start offering generic versions of the drug at lower prices. Competitors can price their generic versions much lower because they do not have to recover any sunken costs that went into the research and development of the new drug. Generic versions of most drugs are distinguished from each other by identifying their manufacturers, they are not allowed to place their own brands on the product.
Sometimes a new drug is “discovered” by accident, as opposed to being intentionally developed. A good example is the case of Viagra. Its generic name is sildenafil. Viagra was actually discovered by accident in 1996 when Pfizer was working on a treatment for high blood pressure and angina pectoris, a symptom of heart disease. The idea behind the drug was to increase blood flow around the heart muscles to help it perform better at pumping blood. Clinical trials showed that it was not so effective. However, the patients were reporting an interesting, if not surprising, side effect: the men were experiencing penile erections after taking the drug. It appears that the drug was indeed doing what it was originally designed to do: increase blood flow to the muscles, except that it was going to a different set of muscles than intended. Pfizer had stumbled on a cure for an ailment that, up to that time, nobody even recognized as an ailment or what to call it. Today everybody knows what the words “erectile dysfunction” mean. And Viagra is an outstanding success story.
What about non-pharmaceutical products? These products usually do not have patents, and that means any manufacturer can produce their own versions of them anytime. Hence the bewildering array of competing brands for most popular consumer products: potato chips, hotdogs, soaps, pasta, shampoos, toothpaste, cleaning aids, detergents, breakfast cereals, ice cream, cosmetics, beverages – alcoholic and otherwise – candy, chocolates, toys, T-shirts, underwear, and other forms of apparel, including footwear, ad infinitum. Or, just about everything that you can find in a grocery, supermarket or department store. The popular technique employed by some marketers of generic household/consumer products is to use what is called a “house brand” – creating a new brand that is available exclusively only at a particular chain of stores. In the US, the more popular/successful brands include Kirkland from Costco and Up&Up from Target. Drugstore chains like CVS and Walgreens use their own name as the brand for such products, validating the use of the moniker “house brand” for these products. In the Philippines, the most visible house brand is “Bonus”, from the SM family of supermarkets, department stores, and malls.
Are generic and/or house brands any good? How do they compare with the top brands? Generally speaking, generic versions of pharmaceutical products are almost identical to the branded originals. That is because pharmaceutical products have to follow strict government guidelines in their manufacture and specific ingredients have to be identified and indicated in their labels. A generic drug must have equal efficacy as its branded equivalent. This rule does not apply to regular consumer products. A roll of toilet paper can have varying specifications in terms of thickness, width, length, and so on. They used to come in different colors, too, but in the last few decades, people began having health and environmental concerns about the dyes used in coloring them. In 2004 they became singularly white. But the point was, for as long as the product performs its stated function, then it is fine. A roll of Kirkland toilet paper is cheaper than a roll of Charmin, and they will both do the job. But consumers might feel a little better shelling out more money for something that feels softer against the skin in their bottoms.
Differentiation need not be found in the product itself. It need not be a physical difference between a brand and its competitor. In most cases, as demonstrated by the Coke vs Pepsi example, it can be almost impossible to tell them apart. As the concept of The 5th P puts it: it is the perception of a difference that matters. What the consumer believes is what counts.
How strong a motivator is belief? The best example to illustrate this point is religion. No need to elaborate.
Understanding Marketing 