Product-Market Scope and Structure

Matching Needs with Product Benefits

The term product-market recognizes that markets exist only when there are buyers with needs who have the ability to purchase goods and services (products) and products are available to satisfy the needs.

Determining Product-Market Boundaries and Structure

Product-Market Structure. A company’s brands compete with other companies’ brands in generic, product-type, and product-variant product- markets. The generic product-market includes a broad group of products that satisfy a general, yet similar, need.

The product-type product-market includes all brands of a particular product type or class, such as ovens.

Guidelines for Definition. In determining the scope of the product-market, it is helpful to identify (1) the basis for identifying buyers in the product-market of interest (geographical area and buyer characteristics such as age group), (2) the market size and characteristics, and (3) the brand and /or product categories competing for the needs and wants of the buyers included in the product-market.

Forming Product-Markets

The factors that influence how product-market boundaries are determined include the purpose for analyzing the product-market, the rate of changes in market composition over time, and the extent of market complexity.

Purpose of Analysis. If management is deciding whether or not to exit from a business, primary emphasis may be on financial performance and competitive position.

Changing Composition of Markets. Product-market composition may change as new technologies become available and new competition emerges.

Extent of Market Complexity. Three characteristics of markets capture a large portion of the variation in their complexity: (1) the functions or uses of the product required by the customer, (2) the technology contained in the product to provide the desired function, and (3) the different customer segments using the product to perform a particular function.

Ø Customer function considers what the good or service does.

Ø Different technologies may satisfy the use situation of the customer.

Ø Customer segment recognizes the diversity of the needs of customers in a particular product-market such as automobiles.