The Product Development Policy (Grade 11 NSC Matric Business Studies): Revision Notes

The Product Development Policy

Understanding the product policy

The product policy forms the foundation of any business's marketing strategy. Think of it as the first and most crucial element of the marketing mix. Without a product, there simply cannot be a business!

This policy serves as a roadmap that explains how a business plans to create, design, and develop new products. It covers everything about the product itself - from its features and appearance to the benefits it will provide to customers.

Types of products businesses can offer

Products generally fall into two main categories that serve different purposes in the marketplace:

Industrial goods

These are products specifically designed for use in manufacturing processes. Businesses purchase industrial goods to help them create other products. Common examples include spare parts for machinery, manufacturing equipment, and raw materials. These goods help keep the production process running smoothly.

Consumer goods

Consumer goods are products that directly satisfy the needs and wants of everyday customers. These can be further divided into four distinct categories:

Convenience goods

• These are everyday items that customers buy without much thought or effort
• They are typically low-priced and easily available
• Customers don't spend time comparing prices or quality because the differences are minimal
• Examples include bread, milk, soft drinks, and basic toiletries
• People purchase these items regularly and frequently

Shopping goods

• These products require more consideration before purchase than convenience goods
• Customers are willing to spend time and energy comparing different options
• They typically cost more than convenience goods
• Buyers visit multiple shops to ensure they're getting the best value for their money
• Examples include televisions, motor vehicles, clothing, and appliances

Speciality goods

• These products usually carry specific, well-known brand names
• Customers know exactly what they want and are prepared to search until they find it
• Brand loyalty plays a significant role in purchasing decisions
• Examples include designer jewellery, branded luxury clothing, and high-end electronics

Unsought goods

• These are products that customers don't typically think about until a specific need arises
• Purchases often occur due to emergencies or unexpected circumstances
• Examples include funeral services, fire extinguishers, encyclopaedias, and reference materials
• Marketing these products requires creating awareness of their potential necessity

Services

Unlike physical products, services are intangible offerings that cannot be touched or held. Service providers deliver these directly to customers. Examples include garden maintenance, banking services, and professional consultations.

The importance of product development

Product development plays a vital role in business success for several key reasons:

• Meeting customer needs: Effective product design ensures that goods truly satisfy what customers are looking for
• Market relevance: Products that don't appeal to the target market will struggle to generate sales
• Staying competitive: Businesses must continuously develop new products to replace older ones when sales begin to decline
• Innovation advantage: Companies that consistently improve their products can stay ahead of competitors
• Brand differentiation: Unique product features help distinguish a business from its rivals

The product design process

Product design begins with creative thinking and innovative ideas. The journey from initial concept to final product involves careful planning and systematic evaluation. Design typically represents the first stage of a product's life cycle, though sometimes adjustments are needed later when sales start declining.

The design process aims to help businesses create high-quality products that provide maximum customer satisfaction while expanding market reach and increasing profits.

Key steps in product design

The product development journey follows a systematic cycle with several interconnected stages:

1. Generate a new idea Businesses should actively seek opportunities that competitors haven't yet explored. Fresh ideas can emerge from:

• Identifying unmet customer needs
• Conducting SWOT analysis to find market gaps
• Using creative thinking techniques and brainstorming
• Solving existing problems in innovative ways
• Researching market trends and consumer behaviour
• Studying competitor offerings
• Gathering input from staff and customers

2. Screen and evaluate the idea This critical stage involves thoroughly assessing whether the new concept has real potential. Businesses must determine if there's genuine market demand and whether the product could be profitable. The evaluation should consider suitable profit margins and whether an innovative idea could lead to a financially successful product.

3. Test and develop the concept During this phase, businesses examine whether producing the proposed product would be profitable within a reasonable timeframe. Since some products have very short life cycles, profitability must often be achieved quickly.

Market testing also occurs here, helping businesses understand how the product can best deliver necessary benefits. Companies must analyse the most cost-effective production methods while considering potential costs, revenue projections, and profit expectations. Customer reactions and feedback are carefully measured during this stage.

4. Business analysis A comprehensive business analysis should include specific metrics for evaluating product success. Key considerations include profitability calculations, breakeven point analysis, projected sales volumes, and final selling price determination.

5. Market testing The actual product sample is introduced to the market, and customer responses are carefully monitored. Feedback from market testing helps determine what adjustments might be needed before full-scale launch.

6. Technical implementation This stage involves putting all the systems and processes in place for production planning and quality control. Technical implementation includes:

• Detailed research and development of product ideas
• Converting concepts into technical drawings and designs using computer-aided design
• Establishing quality control procedures
• Setting up production planning, scheduling, and monitoring systems

7. Commercialisation During commercialisation, the product officially launches with full marketing and advertising campaigns. Initially, marketing efforts focus on informing consumers about the new product since it's still in its introductory phase. As the product becomes better known, marketing may become more aggressive to persuade customers to continue purchasing.

This stage requires significant capital investment and includes:

• Full-scale production
• Professional packaging design
• Distribution to retail stores

8. Product review and price adjustment The final stage involves reviewing the entire product development cycle for efficiency improvements. Businesses should identify areas for enhancement and review pricing strategies and sales forecasts as necessary.

Product packaging essentials

The purpose of packaging

Most products require some form of packaging, which can range from simple labels to elaborate containers. The type of product determines the most appropriate packaging approach.

Packaging serves multiple important functions. It must protect products from contamination, damage, moisture, and breakage during handling and storage. For example, eggs require specially designed containers to prevent breakage during transport.

Beyond protection, packaging acts as a powerful marketing tool that can attract customer attention. It should display product information, including any safety warnings or usage instructions. In South Africa, food products must legally list all ingredients on their packaging.

For luxury items like designer clothing, perfume, and jewellery, packaging becomes part of the marketing strategy itself. Sometimes smaller products are packaged in larger containers to create the impression of greater value - like SIM cards for mobile phones being sold in much larger packages.

Packaging design must consider the transportation needs of fragile items, making shipping and handling safer and more efficient.

Types of packaging strategies

Packaging for immediate use (Unit packaging)

• Designed to be disposable after the product is consumed
• Must be cost-effective since it's thrown away immediately
• Examples: crisp packets, chocolate bar wrappers

Packaging for double use

• Can be reused for purposes other than storing the original product
• Provides ongoing brand reminders even after the original contents are finished
• Containers can serve new functions once emptied
• Examples: ice-cream containers that become storage tubs

Packaging for resale

• Retailers purchase products in bulk quantities from wholesalers
• Products are then unpacked and sold individually in smaller amounts
• Examples: large wholesale boxes of washing powder that are divided into smaller retail packages

Kaleidoscopic or frequently changing packaging

• Packaging details change regularly to advertise special events or competitions
• Containers and wrappers are continuously updated
• Examples: sports event advertising on product packaging

Speciality packaging

• Packaging design must match the premium nature of the product
• Examples: elegant packaging for expensive mobile phones

Combination packaging

• Various complementary products are packaged together
• Used for products typically purchased as sets
• Examples: soap, face cloth, shower gel, and sponge packaged together; matching perfume and hand cream sets

Understanding trademarks

A trademark represents the unique name, logo, or symbol that a manufacturer or business uses to distinguish its products from competitors. This registered mark provides legal protection against unauthorised use and can only be used by the business that registered it.

Why trademarks matter for businesses

Trademarks provide several significant advantages for businesses:

• Brand identity: Establishes a recognisable reputation for products
• Legal protection: Registered trademarks protect against competitors selling similar products
• Instant recognition: Well-known trademarks make brands immediately identifiable
• Quality assurance: Branded products can be traced back to their original manufacturer
• Marketing tool: Businesses can use trademarks in advertising and promotional activities

Benefits for customers

Trademarks also provide important advantages for consumers:

• Security and consistency: Creates confidence in product quality and reliability
• Brand loyalty: Promotes loyalty towards specific trademarks and ensures consistent customer experience
• Quality standards: Represents certain quality and pricing standards that customers can rely on
• Purchase confidence: Consumers are more likely to try new products marketed under familiar, trusted trademarks

Requirements for effective trademarks

A successful trademark should meet several important criteria:

• Attractive design: Must appeal to the target consumer market
• Product suitability: Should appropriately represent the product it identifies
• Target market appeal: Must be designed with the specific customer base in mind
• Unique identity: Should be distinctly different from competitor trademarks
• Brand image: Must promote a positive image of the business
• Display friendly: Should be suitable for use on packaging and promotional materials
• Marketing integration: Must link effectively with the product's overall promotional strategy
• Clear identification: Should clearly indicate the manufacturer's name and contact information