Product

What is a Product?
Product is a need satisfying offering of a firm

Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need, include physical objects, services, persons, organizations, & ideas is called product
A product represents the promise a company makes to satisfy one or more physiological and/or psychological need of the market at a given moment

Target Market

Product

Place

Promotion

Price

Product idea

Brand

Package

Warranty

Physical good/services Features Benefits Quality level Accessories Installation Instruction Product line

Type of Brand: Individual or family Manufacturer or dealer

Protection Promotion Enhancement

None, limited full, extended

Types of Products
Goods: Physical products with form and substance Consumer Products: Those used by consumers for their own use and satisfaction.

Services: Non-physical products usually involving performance

Business Products: Those used in the running of a business or in the manufacture of products for resale.

The Good/Services Continuum

Paper Truck Production equipment

Auto repair Uniform rental Restaurant

Healthcare Haircut Accounting

Pure Goods

Pure Services

(Tangible, Storable, Separable, and Standardized in quality)

(Intangible, Perishable, Inseparable, and Variable in quality)

Differences in Goods and Services

Tangibility

When produced relative to when consumed

Differences

Where produced (storing and transporting)

Balancing supply and demand

Contact with customer by producer of product

2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Basic Marketing

Characteristics and Strategies for Services

Service Characteristic Intangible Service Strategy Associate service with something tangible

Perishable

Manage demand to utilize supply

Inseparable

Capitalize advantages of person providing service Standardize service delivery as much as possible

Variable

Consumer and Business Products

Consumer Products:

Products that are purchased by consumers for their own personal use.

Business Products:

Products purchased by a firm or organization for its own use.

Product Classifications
Staples Impulse goods Emergency goods

Consumer-Goods
Specialty goods

Convenience goods

Shopping goods

Unsought goods

Product Classifications
Materials and Parts
Manufactured materials Raw materials

Industrial-Goods
Capital Items
Installations

Supplies and business Services

Equipment

Business Product Classes Installations

Marketing Mix Considerations Usually requires skillful personal selling by producer, including technical contacts, and/or understanding of applications; leasing and specialization support services may be required Need fairly widespread distribution and numerous contacts by experienced and sometimes technically trained personnel; price competition is often intense, but quality is important Grading is important, and transportation and storing can be crucial because of seasonal production and/or perishable products; markets tend to be very competitive. Product quality and delivery reliability are usually extremely important; negotiation and technical setting typical on less-standardized items; replacement after market may require different strategies Typically require widespread distribution or fast delivery (repair items); arrangements with appropriate middlemen may be crucial Services customized to buyers need; personal selling very important; inelastic demand often supports high prices

Buying Behavior Multiple buying influence (including top management) and new-task buying are common; infrequent purchase, long decision period, and boom-or-bust demand are typical Purchasing and operating personnel typically make decisions; shorter decision period than for installations; Internet sourcing

Accessory equipment

Raw materials

Long-term contract may be required to ensure supply; online auctions

Component parts and materials

Multiple buying influence is common; online competitive bids used to encourage competitive pricing

Maintenance, repair, and operating (MRO) supplies Professional services

Often handled as straight rebuys, except important operating supplies may be treated much more seriously and involve multiple buying influence Customer may compare outside service with what internal people could provide; needs may be very specialized

Five Product Levels

Product Levels
Core Benefit (Intangible benefit)
(Rest and sleep)

Basic Product (Tangible benefit)

(Bed, bathroom, towels)

Expected Product
(Clean bed, fresh towels)

Customer-value Hierarchy

Augmented Product (Added services)

(Free Internet; free breakfast)

Potential Product
(Future augmentations)

What is Product Planning?

Product Planning: The decisions made about what features should be used in selling of a businesss products. These decisions relate to:
packaging labeling guarantees branding product mix

warranties

What is Product Planning? (cont.)

A well defined product plan allows a business to: Create sales opportunities. Design appropriate marketing programs. Develop effective advertising campaigns. Coordinate the product mix offered to customers. Add new products. Delete older products that no longer appeal to customers

What is Product Planning? (cont.)

Product Mix: All the different products that a company makes or sells. Product Line: A group of closely related products manufactured or sold by a business. Product Item: A specific model, brand, or size of a product within a product line. Product Width: The number of different product lines a business manufactures or sells. Product Depth: The number of product items in a product line.

Product Line A group of closely related products manufactured and/or sold by a business.

Product Item A specific model, brand, or size of a product within a product line.

Product Width
The number of different product lines a business manufactures or sells. Width of the Gillette Product Mix
Oral Care Blades & Razors Personal Care Batteries Appliances

NARROW = offering a limited number of product lines BROAD = many different product lines carried

Product Depth
number of products and the assortment of sizes, colors, and models offered in a product line
Oral Care Blades & Personal Batteries Razors Care Appliances

SHALLOW = limited variety within a product line DEEP = extensive variety within a product line

Product-Mix Strategies

Expansion Alteration of existing products

Contraction

Trading Up and Trading Down

Expansion / Line Extension / Product Modification

Advantages

Disadvantages

Extend product lifecycle Adding items to a product line or introducing an entire product line can capture market share and meet customers needs and wants.

Adding items to a product line or introducing an entire product line can be expensive, be difficult to manage, and not always be successful.

Contraction / Line Pruning

Advantages

Disadvantages

Cut losses Reallocate resources to more profitable products Deleting products from a product line or the entire product line can be cost effective and easier to manage while creating simplicity and consistency

Deleting products from a product line or the entire product line is conceding market share to your competitors. It may be wiser to improve the existing product or line to recapture market share.

Alteration
Advantages

Disadvantages

Improving an established product can capture new customers and meet customers unmet wants as trends change. Ex: McDonalds opening stores in India

Improving an established product is expensive and not always a success. Example: New Coke

Describe trading up / down

Trading up: Adding a higher-priced product to a line to attract a higher-income market and improve the sales of existing lower-priced products.

Trading down: Adding a lower-priced item to a line of prestige products to encourage purchases from people who cannot afford the higher-priced product, but want the status.

Trading up
Disadvantages

Advantages

Adding higher priced items to a product line will attract the higher income market and may help increase the image and sales of the lower priced items.

While sales may be generated for the new product or line, sales of established products may decline. If the business uses trading up to enhance its image, the business must be careful that present customers are not lost in the process of gaining new ones. Customers may become confused as to what the companys image is meant to be, or they may refuse to believe that better quality merchandise can be purchased from a business that had formerly sold budget goods. Adding higher priced items to a product line is expensive and may not attract new customers while hurting the image and sales of the lower priced items.

Trading down
Disadvantages

Advantages

Adding lower priced items to a product line of prestige products can capture a lower income market who cannot afford the higher priced items.

Adding lower priced items to a product line of prestige products can hurt the image and sales of the higher priced items in the line Consumers may be confused about the new product or line. Profits from the cheaper product may be eroded by reduced sales in the more expensive line. Dealers may not be willing to add the lower priced product to their offering. Competition may become stronger at the high end of the market. Gaining short-term sales at the expense of long term sales

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