[MUSIC] Welcome back. The focus of this lesson Is to learn how to classify products and the concept of product mix so you can apply it later on the module when launching your new product or defining your product pipeline. Throughout the lecture, I will explain why these concepts are important to develop and implement our marketing plan. We are here at the center of beautiful Madrid. And we just enter a well-known brand in Spain called Fnac. This is a place where you can get all your entertainment, your culture, and your technology. We'll use this as a base for today's lecture. I will begin by sharing some of the criteria commonly used to categorize products. Please know that this is only a small list, but I will provide you with the reason why we need to learn this topic. [MUSIC] For example, products can be categorized by the way clients purchase them. Convenience products are bought normally, without being given much thought, and are typically available in many channels. So and if not we might find playing cards. Then we have need products, they require more planning and there's much more product comparison before the purchase is done. For example like a dining room at Fnac we might find a mobile phone and then we have specialty products. Their demand is more in elastic and depending on the category there's less comparison before the purchase because they're sold through specific channels. Consumers instead choose specialty goods primarily based on quality or in style or scarcity or personal preference. Sellers of specialty good do not need to be conveniently located because buyers will seek them out even if involves considerable effort. For example a car at Fnac, we can find drones. Some goods may be considered need goods by some buyers and specialty goods by other buyers. The key is to understand your target customer. So let's discuss another criteria commonly used to categorize products. By the level of involvement in their purchase. Low involvement means that they'd require little discussion from the potential client. For example, hamburgers or fast food and if not, we can find toner for our printing needs. Or high-involvement products, they require time and effort from customer during the purchase process. For example, your first home at Fnac, I think a TV or a smartwatch requires high involvement. Before I continue sharing other criteria, I want to see if you can begin to understand the implications of why we need to understand this categorization. Think about it what kind of marketing and sales support do you think that is needed to sell a convenience versus a need versus a specialty product? What about a low involvement versus a high involvement. I hope that you came to the conclusion that it's completely different because consumers will require much more informations, hand holding, and product credibility in the ladder of each of the mentioned criteria. It translates into human and financial resources to support your product. Let's look at another criteria commonly used, by the benefits they provide consumers. It could be functional benefits paired up with rational and logical benefits. For example, at Fnac we can find paper clips. But it could be also emotional benefits, products that satisfy the ego expression needs of consumers. For example, a diamond ring. We could also classify them by their physical state, tangible products consumers can touch, or intangible, services, events, ideas. They don't necessarily result in the possession of an end product like lodging, legal services, consulting, etc. At Fnac, you could buy, for example, online remote assistance for your PC. But in order to draw conclusions that will impact how you market them, you should look at products in the categorization using more than one dimension. For example, functional, and tangible, like a cup of coffee. Here at Fnac, we could find example of a laptop or functional and intangible, like your telecom service, which they also sell here, by the way. Or emotional and tangible, like a purse or a watch. Or emotional and intangible, like a vacation. Another important element to consider, is our products can offer more than one benefit. We'll use this later on when we talk about the products life-cycle. The essential product is what customers are really buying their direct benefit. The coffee at Starbucks or the camera at Fnac. The augmented product are these additional or secondary benefits. The WiFi, or the app, at Starbucks. The insurance that might come with our camera, or the photography class that is included when you purchase it. In summary, when launching new products, you should think of having clarification of which consumer need you're trying to satisfy and what type it is. Secondly, verifying that your essential product is capable of satisfying that consumer-specific need. Otherwise, redesign your product's main benefit. If you have an online product you can also prototype and test and learn, so you can adapt your product by listening to customers. Third, understand how to recommend your essential product to create the consumer's experience more gratifying and protect your competition down the line. Now let's talk about the concept of product mix. The product mix includes all product lines. The amplitude of the product mix refers to the quantity of the product lines within the categories that the organization place in. For example, here at Fnac, we can see that Sony is present in consoles, in watches, in cameras, in TVs, in phones, etc, etc. Therefore, a product line is a group of products that fulfil the same function. Each product line can be described in terms of their longitud, the total number of elements of product line. We can see here at the TVs that we are under the same name brand. We have UHD 4K or LED or Smart TVs. Then we have the def, the number of version and variants of each product within the same line. For example, within Sony UHD 4K and 49 inches we have once that may have a higher resolution or they have 4K reality pro with MHL or they have more USB ports or they have a 1000 Hertz and then we have. Another ones which have different resolutions, and they have different ports, and they have what's called SCART with 200 Hertz, among others. As you can see, understanding your product mix is also crucial, because it needs to be differentiated enough to address distinctive needs from the customer's point of view. And I want to clarify that not from RND's point of view. Why else are we continue talking about this? Because the main challenges that you will encounter in managing your product mix are that your organization must determine the optimal number of product lines as well as the longitude and the depth of each one. And you should consider the consistency of a product mix. Understand which characteristics are shared by product lines. For example, do they have the same technology that we can leverage, or are the products addressed at the same market segment? Are they commercialized through the same channels, etc.? All of these questions will impact the development of your new product and your marketing and sales approach. That is why I'm encouraged you think about them from the get-go. I hope you've enjoyed your visit to Fnac. It is now time to discuss the product life stages. Yes, like humans, they're born, they mature and they die. That is the topic of our next lecture. See you there. [MUSIC]
