The information era has introduced new ways for companies to do business. New distribution channels have opened with the expansion of E-commerce, and companies that previously sold their products through brick and mortar stores now face the challenge of selling their products online. Simply put, the world is redefining market competitiveness. A new generation of critics is able to review products ranging from food to movies and reach a wider audience. This means that businesses are forced to become more transparent with their products and reach out more directly to its users. As more businesses do this, the landscape becomes increasingly competitive and makes it difficult for them to create products that outperform their competitors. This is where product analysis comes in. Successfully conducting this analysis can give companies insight on the direction of their product. Likewise, consumers, who are on the receiving end of this communication, can use product analysis to dissect the torrent of information thrown at them through advertisements.
The World of Product Analysis
A product is traditionally thought of as a good manufactured for sale. Today, the definition of a product has expanded to include intangibles like services or even ideas. A product does not necessarily have to fall cleanly into any one category, though. Insurance, for example, is a contract that specifies a promise for service, which gives the buyer of the insurance the right to exercise that contract given specific conditions are met. Technology has also challenged the usual tangible characteristic of a good. Virtual goods exist in the form of software, which can have a variety of purposes ranging from productivity to entertainment.
Given that a product can take many forms, the way businesses analyze them must also be tailored to the product and other extrinsic variables that are indirectly related to the product.
The Markets
The definition of a market itself is very broad. A market is simply a group of people who buy products to satisfy their needs and wants. We can refer to the entire world’s consumers/businesses as a single market; however, this view isn’t very useful for anyone. A more useful representation of markets involves dividing the general market into sections that each share a characteristic, which in theory should translate to similar product needs. For instance, Dividing the general market into consumer and business segments could be a first layer of segmentation. Segmenting consumers based on demographics and businesses based on sector could be a second layer of segmentation. Suppose we have an example where we segment based on age. After analyzing the buying habits of generations, we learn that Generation Z, while rapidly growing in number, is still trying to accumulate purchasing power. These young adults are price-conscious and judge products based on their value, function, and style rather than by brand. On the other end of the spectrum, baby boomers are a declining generation, but the wealth they have accumulated allows them to account for half of the consumer spending in the US. Leisure and household products are made and marketed in a way that satisfies the preferences of the older generation. Successful products address their target markets in such a way that capitalizes on the characteristics of that market segment.
If a company has a portfolio of different products, we can organize them by using Ansoff's Strategic Opportunity Matrix:
From here, we can see the relation between product and market. A mature product in a mature market would belong on the bottom left, where a company’s primary goal with the product would be to preserve market share and increase appeal among their existing base of customers. Mature products are usually analyzed based on their existing merits and whether they uphold the brand’s reputation. New products introduced into emerging markets belong on the top right of the matrix. These new products are a high risk, high reward venture for the company and must be analyzed by their strengths and weaknesses against the competition. Brand reputation plays almost no role here.
Product positioning also matters when conducting product analysis. Products within the same category can be positioned to emphasize either value, quality, or a mix between both.
A product positioning matrix (shown below) is able to show a product’s position in relation to two variables.
Goods vs. Services
Goods and services are both products, but they are not directly comparable and cannot be analyzed in the same way. When a company is dealing with the sale of goods, they must factor the costs of goods sold into their accounting equations, so factors like ease of manufacture and quality of materials become important when analyzing the final product. Tangible goods also have to deal with supply chain and distribution logistics, which can influence a product's ability to get delivered to the end consumer. Once the product is delivered, companies have an interest to make sure the goods are robust to the stresses of everyday use and may even provide a warranty when selling more expensive goods.
Services, on the other hand, are limited by their transient nature. Not only is a service intangible, the service must also be delivered at the same time the customer receives it and cannot be stored for later. This concept is known as inseparability. Most services also involve a human aspect, so naturally a customer’s experience may vary depending on the person performing the service.
Because of these differences between services and goods, we evaluate service quality using a different concept called the five dimensions of service.
Reliability - Consistent service in accordance to established standards.
Responsiveness - Promptness and efficiency; this is one dimension that can be measured and compared quantitatively.
Assurance - Trust and professionalism.
Empathy - Attention to customers’ wellbeing.
Tangibles - Includes equipment used to perform the service and evidence that the service has been done.
Technology and Software
Software, while technically intangible, exhibits much of the same characteristics as a good in a virtual manner. Software can be sold as a one-time transaction(e.g. Microsoft Office), provide services through a subscription program (e.g. Netflix), or have a tiered pricing model that allows customers to unlock additional features (e.g. cloud storage). No matter the delivery method, most software can be evaluated in a similar way. Ease of use, performance, and features are important aspects of any software. Features certainly depend on the type of software in question, but ease of use and performance are universal for the software to be successful across a diverse user base of people running different hardware configurations.
Virtual services like internet providers also exist and provide for the user as long as a contract is active.
Trends
Trends matter when assessing a product's potential for success. Trends are ever changing, and markets morph based on trends. If a company wants to see where the markets headed in the future, they would be wise to identify relevant trends that affect their product offerings. Product quality hardly matters when there's no market for it anymore. The failure to create a product that addresses these emerging markets has led to the bankruptcy of many companies when the emerging market eventually replaces the traditional one. Kodak is a well known example of this. Once a leader in selling high quality film and cameras, Kodak mismanaged the transition to digital cameras when its initial offerings were too expensive for any nonprofessional to buy. Soon, phone cameras replaced lower end digital cameras, which was damaging for Kodak’s business. However, the final nail in the coffin for Kodak wasn’t the introduction of smartphones per se-- it was a new trend among consumers that started the age of social media. People no longer need to print pictures when they want to share them with others. They simply post the picture as their status on Facebook. Kodak's business model was centered around providing a printing service for the pictures captured by digital cameras, so their revenue stream dried up and they had no answer.
Companies sometimes have to evaluate their entire existing product stack, new product pipeline, and business model in order to have product offerings that successfully compete in the market of tomorrow. Amazon may have started out as a bookstore, but their ability to recognize trends made them into a tech behemoth with seamless integration between their goods, services, and software.
Design: Products as Art
Perhaps the most critical concept in product analysis is design, a word that encompasses many disciplines. There is no such thing as a product without design. Even the most simple products such as paper have elements of design and have undergone some sort of design process. Of course, the specific design of a product is unique to itself, but for most products, design leads to structure, and structure leads to functionality. Design gives a product its utility, without which a product would be useless. We can then say that reviewing a product's user experience is synonymous with reviewing its design.
Often, people see value in a product that goes beyond simple functionality.
There’s another aspect of design that’s much more open to interpretation. Some products incorporate design aesthetics or make the product’s design a creative medium of expression. This type of design has little bearing on a product's functionality, but it allows creators to express their individualism as a form of “art”. The art can be simple like the contours on a piece of furniture, or it can carry a much deeper meaning, such as the story of a movie or the lyrics of a song. These aforementioned pieces of media are unlike most other products since most of their design is artistic rather than utilitarian. Because there’s no straightforward way to analyze art, the success of such a product is up to public reception.
Business vs. Consumer
Consumers usually view products in isolation. Conducting product analysis from the perspective of the consumer essentially means a review of the product’s usability, value, quality, etc. When companies analyze their products, they factor in the consumer perspective into their business considerations, so analysis from a business perspective tends to be more nuanced and complicated.
Sometimes, a business fails to deliver a product that lives up to the customer’s expectations because they did not consider the consumer perspective. Sometimes, a business may deliver a technically sound product that flops when it hits the market because there isn’t much of a market in the first place. In this case, they did not focus on the business side enough. In the end, it is everyone’s job, both as buyers and sellers, to ensure that product analysis addresses the needs of both businesses and consumers.
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