Summary Digital Marketing Strategy
Part 3 The digital marketing mix
Chapter 8 – Products in the digital environment; customer needs & wants
Why has the P of product changed so radically in the digital channel?
The most notable change that the P of product has undergone is the possibility of
splitting the product or service, such as the separation between hardware and
software. Or, splitting products into subcategories, re-bundling, unbundling or
bundling. Combining new content and functionality, better coordination between
parties for transactions as well as more customization by segment and per user are
all changes triggered by the digital world.
8.1 Digital products
To effectively manage the P of product, knowledge of the effects of the digital
channel is highly important. This begins by understanding the nature of digital
products and services. What are they? What product levels are there? Does bundling
or unbundling provide the greatest added value for customers? What is the effect of
the Internet of Things on products and services and how should organizations deal
with it? Finally, why do customers choose to buy or not to buy digital products?
8.1.1 The digital product typology and product levels
The majority of established content providers, manufacturers and service providers
regard digitalization as a direct threat to revenue and profitability. Adjusting is not
easy and it is quite hard to let go of a business model that made them so successful.
Although companies can be turned into paupers due to poor transition of
digitalization, the management should be blamed for this and not the medium.
Because the digitalization can be beneficial in any way.
Digital products are bit-based products, distributed via the digital channel.
The term digital channel is technologically neutral. It refers to both wired and wireless
networks. Digital value is created in both cases and this can be realized on different
traditional product levels:
The core product or services; the basic need: this product level is nothing
more than the essential service that an individual is looking for.
The embodied product: this level meets the needs of the customer and is the
actual product or the actual service.
The augmented product/service: this concerns additional services and benefits
of the product, such as repair service.
Organizations need to answer several questions based on the different product levels
regarding the possibilities for digitizing products or services. Some of the most
important questions are:
Can the organization provide additional information or transaction services to
the existing customer base?
Can the organization respond to new customers groups by reshaping existing
propositions and information assets using the digital channel?
, Can the organization attract new customers to generate new revenue streams
through offering ad space or selling additional products?
Is the organization being attacked by competitors offering the same value to
customers?
The digital revolution, logically, had its greatest impact on product and services that
could be easily digitized to a certain extent. A common classification used in digital
marketing literature is ‘search goods’ versus ‘experience goods’. Search goods are
products where people feel they can estimate the quality based on digital information.
This information can be received from a friend or reviews read on the internet. In the
case of experience goods, people are only able to estimate quality by direct
experience or use of it. Consumers are therefore often quite uncertain about the
digital acquisition of experience goods.
However, the distinction between search and experience products is not the only
possible categorization for digital products. A two-dimensional classification is
another option. The two main dimensions are:
1. Testability > people can easily sample the product through a free trial or trial
period
2. Granularity > the extent to which a product can be divided into separate
products that can be purchased independently.
Based on this, there are three digital product types which will be discussed below:
Tools and utilities help users to perform specific goals or tasks. People can
sample them easily. These products are difficult to break up or unbundle. The
granularity is therefore low. (software programs)
Content based products derive their value from the content. For such products
unbundling is relatively easy. The testability is usually lower than with tools
and utilities. (electronic newspapers)
Digital services provide access to useful tools. Although this category has a lot
of tools, there is one difference: people cannot buy and own the service. They
can only pay to use it. Digital services can sometimes be split up and
sometimes tested. (Spotify)
Despite the differences between digital products, they do have a lot in common:
The developments costs are usually high
The marginal cost is usually low
Digital products can be changed by its users
Demand increases as others consume or buy more
The ease of reproduction: one product easily becomes 10 products. Or 10
million.
8.1.2 (Un)bundling products and services; the impact of the digital channel
It is clear that organizations can digitize existing products, develop new products for
the digital channel and introduce augmented digital products. However, this is not the
whole story. The digital channel also offers the opportunity to vary the number of
products offered physically and digitally.
Bundling is the combining of two or more products or services that are then sold as a
package for a fixed price.
Part 3 The digital marketing mix
Chapter 8 – Products in the digital environment; customer needs & wants
Why has the P of product changed so radically in the digital channel?
The most notable change that the P of product has undergone is the possibility of
splitting the product or service, such as the separation between hardware and
software. Or, splitting products into subcategories, re-bundling, unbundling or
bundling. Combining new content and functionality, better coordination between
parties for transactions as well as more customization by segment and per user are
all changes triggered by the digital world.
8.1 Digital products
To effectively manage the P of product, knowledge of the effects of the digital
channel is highly important. This begins by understanding the nature of digital
products and services. What are they? What product levels are there? Does bundling
or unbundling provide the greatest added value for customers? What is the effect of
the Internet of Things on products and services and how should organizations deal
with it? Finally, why do customers choose to buy or not to buy digital products?
8.1.1 The digital product typology and product levels
The majority of established content providers, manufacturers and service providers
regard digitalization as a direct threat to revenue and profitability. Adjusting is not
easy and it is quite hard to let go of a business model that made them so successful.
Although companies can be turned into paupers due to poor transition of
digitalization, the management should be blamed for this and not the medium.
Because the digitalization can be beneficial in any way.
Digital products are bit-based products, distributed via the digital channel.
The term digital channel is technologically neutral. It refers to both wired and wireless
networks. Digital value is created in both cases and this can be realized on different
traditional product levels:
The core product or services; the basic need: this product level is nothing
more than the essential service that an individual is looking for.
The embodied product: this level meets the needs of the customer and is the
actual product or the actual service.
The augmented product/service: this concerns additional services and benefits
of the product, such as repair service.
Organizations need to answer several questions based on the different product levels
regarding the possibilities for digitizing products or services. Some of the most
important questions are:
Can the organization provide additional information or transaction services to
the existing customer base?
Can the organization respond to new customers groups by reshaping existing
propositions and information assets using the digital channel?
, Can the organization attract new customers to generate new revenue streams
through offering ad space or selling additional products?
Is the organization being attacked by competitors offering the same value to
customers?
The digital revolution, logically, had its greatest impact on product and services that
could be easily digitized to a certain extent. A common classification used in digital
marketing literature is ‘search goods’ versus ‘experience goods’. Search goods are
products where people feel they can estimate the quality based on digital information.
This information can be received from a friend or reviews read on the internet. In the
case of experience goods, people are only able to estimate quality by direct
experience or use of it. Consumers are therefore often quite uncertain about the
digital acquisition of experience goods.
However, the distinction between search and experience products is not the only
possible categorization for digital products. A two-dimensional classification is
another option. The two main dimensions are:
1. Testability > people can easily sample the product through a free trial or trial
period
2. Granularity > the extent to which a product can be divided into separate
products that can be purchased independently.
Based on this, there are three digital product types which will be discussed below:
Tools and utilities help users to perform specific goals or tasks. People can
sample them easily. These products are difficult to break up or unbundle. The
granularity is therefore low. (software programs)
Content based products derive their value from the content. For such products
unbundling is relatively easy. The testability is usually lower than with tools
and utilities. (electronic newspapers)
Digital services provide access to useful tools. Although this category has a lot
of tools, there is one difference: people cannot buy and own the service. They
can only pay to use it. Digital services can sometimes be split up and
sometimes tested. (Spotify)
Despite the differences between digital products, they do have a lot in common:
The developments costs are usually high
The marginal cost is usually low
Digital products can be changed by its users
Demand increases as others consume or buy more
The ease of reproduction: one product easily becomes 10 products. Or 10
million.
8.1.2 (Un)bundling products and services; the impact of the digital channel
It is clear that organizations can digitize existing products, develop new products for
the digital channel and introduce augmented digital products. However, this is not the
whole story. The digital channel also offers the opportunity to vary the number of
products offered physically and digitally.
Bundling is the combining of two or more products or services that are then sold as a
package for a fixed price.
