If you walk into a shoe store, you'll notice that there are many different types of shoes. There are formal shoes, beach shoes, athletic shoes, casual shoes, and the list goes on. Then, within each category of shoe type, you can find a wide assortment of products. Just within athletic shoes, you'll be able to find shoes meant for soccer, basketball, track, football, and so on.
But offering that kind of variety comes with challenges. So how do companies organize their inventory into these categories? This is the second video in Unit 21, Product Service Management. Take a look at this breakdown, which shows you how often this unit comes up on District, state, and international exams for each of the different clusters.
Hello and welcome. This is Lesson 21.2, Product Planning. Now let's get to work, team. In this video, there are a couple topics that we'll be covering. First, we'll give a brief overview of product strategy.
Then we'll talk about the product mix and compare consumer products with business products. Finally, we'll discuss product service management. Let's start off by talking about product strategy.
which refers to all decisions made about a particular product. This is one of the most important steps in a business's life, since you don't have a business without a product to offer. Product planning is the process of deciding which products to include based on what will appeal to the target market. This process helps you make decisions about your products that will distinguish them from the competitors. Now, sometimes a business only offers one specific good or service, but more frequently they offer a variety of goods and services.
But instead of thinking about all the products individually, we can imagine something called the product mix. For example,... Everything at Staples is related to office supplies and stationery, so they offer a product mix of paper, pens, highlighters, binders, and printing services. Products within a product mix are usually organized into product lines, which is a group of closely related products.
For example, a shoe store may have different lines of shoes, such as athletic, dress, and casual shoes. A product line is made up of product items, which have specific models, colors, or sizes of product. For example, at a pretend shoe store, product items would include the different styles, colors, and sizes of shoes within a particular line, such as the athletic shoe line. A size 8 blue women's basketball shoe is a product item.
If the store carries 5 boxes of size 8 blue women's basketball shoes, these would not be 5 separate product items. That would be a quantity of 5 of this particular product item. We've got a few more technical terms, and these show up a lot on DECA exams.
There's product width, which is the number of product lines a company offers, and product depth, which is the number of product items within a line. Now we're going to compare and contrast two types of products, consumer products and business products. Consumer products are sold to consumers for their personal use.
Businesses that sell consumer products are called B2C or business-to-consumer businesses. Within consumer products, there are three main categories—convenience goods, shopping goods, and specialty goods. Convenience goods are goods bought with little effort and for immediate use. Examples include most grocery items and gasoline. These kinds of products have a broad target market, but are limited by location.
Consumers in San Francisco aren't going to pick up a soda from a 7-Eleven in San Jose—unless they're driving through San Jose. Shopping goods are goods purchased after a consumer compares price, quality, and style in more than one store. They're usually more expensive, durable items like appliances or furniture. The target markets for shopping goods are a little narrower since they're constrained by demographics and price preference. But unlike convenience goods, they aren't purchased frequently.
The last type of consumer goods are specialty goods, which are unique items that consumers are willing to pay a lot of money for, like sports cars or antiques. Specialty goods have the smallest target markets because not as many people have the time, money or desire to purchase these goods. Now let's talk about business products. These are items sold to businesses to keep them operating. These are sold by B2B businesses, which stands for business-to-business.
Take a look at this graphic. There are six main categories of business products. Raw materials, processed materials, component parts, major equipment, office equipment and supplies, and business services. Let's start with raw materials.
These are natural or man-made materials that ultimately become part of a manufactured product. These are things like wood, plastic, or metal. Processed materials are used in product manufacturing, but you can't identify them in the final product itself.
things like food preservatives or industrial glue. Component parts are part of the finished product, but unlike raw materials, they're already assembled from raw materials. Examples include computer chips, tires, or switches. Major equipment refers to large machines and other equipment used for production purposes, like furnaces, cranes, or conveyors. Office equipment and supplies are products you need for use in the office.
Examples include computers, calculators, pens, and, especially at Dunder Mifflin, paper. Finally, business services are tasks that need to be done to keep a business running. Examples include building maintenance, equipment repair, or accounting.
While everything else has been a physical good, business services can be a valuable product to provide. As you can see, the needs of businesses are very different from those of consumers. Our last topic for today is product service management. This is the organizational structure that manages everything from development to the marketing and sale of a product. It also includes constant review of product mixes to make sure that the products are meeting the demands of the market.
Since the market is always changing, companies constantly revise, add to, and remove product items from the product mix. Usually, this is overseen by a product manager. They play a big role in selecting products and leading the marketing and sales of that product.
At the same time, a category manager does something similar, but they're in charge of an entire category of products rather than just a line of them. Product managers work closely with many parts of the company to ensure that the profit goals are being achieved. Like, they need to work with accounting to learn about the profits and losses of the products, they need to work with the sales team to help sell these products to different markets, and finally, they'll work closely with the advertising department or an outside advertising agency in order to help drive successful promotions of their products. Now that we've gone over all the content, it's time to test your knowledge with a real-decker question. Pause the video and try to answer.
The answer is B, shallow depth. As we talked about earlier, depth is the number of product items within a product line. For example, if you're a shoe company, a shallow depth would mean you have a smaller assortment of different styles, colors, and sizes.
A company with a shallow depth has less money tied up in inventory than a business with a million different selections for each product line. If you don't remember inventory costs, go back and visit Lesson 19.2, Inventory Management. And here are the sources we used for this video.
Feel free to check them out if you still have any questions. Alright, that pretty much sums up Lesson 21.2, Product Planning. Great work to you and we'll see you in the next video.