Each product type
has its own characteristics for the cost-price-value model. See Fig.
Electricity, grain, milk, iron, copper, PVC, etc. are called commodity products. The are
primarilybought on the bases of the lowest price. For a certain grade, or quality standard, of such a commodity there is not such things like service quality or image. That is the reason that for such products the margins between the cost, the price and the value are very low. These products suffer from extensive trading and speculation, resulting in volatile prices. The business strategy for these products are characterised with high volume, low margin.
Top Quality products and services (like jewels, perfumes, sports cars, diners in restaurants) are characterised by a high quality level of services and a top level image. They are bought on the basis of the perceived value. Not easy to copy, and with a niche market strategy with low volume, high margin.
Most consumer products
have characteristics which are in between these extremes.
Each technical innovation has its own product life. See Fig. 3.2b . According to Rogers, it takes time for people to get interested:
- Firstly the so called "innovators" will buy the product. It is a small percentage of the total market, so the total sales volume is low and costs of production and distribution are high. Innovators are prepared to pay a high prices for new innovations, driven by the image of the product.
- Then the "early adapters" will follow soon when the quality of the product is proven. Sales volume will grow, which enables the start of mass marketing. Quality, service and image are extremely important in this stage of break through.
- The "early majority" will follow when the price gets lower. A higher volume enables to lower the price, but the product sales is still "quality driven".
- Finally the "late majority" comes in at a combination of high volumes, low margin, and hence low prices. The product sales is now "costs driven".
- The "laggards" step in extremely late: for marketing they play an unimportant role.
Literature: see under tab data, reference 1.0