Slide 2.

Chapter 2

The product in theory

and practice

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.2

Marketing is about the creation and

maintenance of mutually satisfying
exchange relationships.

(Baker, 1973)

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.3

WHAT IS A PRODUCT ?
• The product is the object of the exchange
process, the thing which the producer or
supplier offers to a potential customer in
exchange for something else which the
supplier perceives as of equivalent or
greater value

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.4

• Demand
– For an exchange to occur someone must
have a demand for the object
– Category
• Effective
• Potential
• Latent
– Demand schedule
– Preference and substitutability

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.5

The traditional demand curve

Price

Quantity

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.6

• General demand influencers

– Demographics
– Buyer behavior
– Availability (supply and channels of
distribution)

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.7

Melvin Copeland’s (1923) classification

of goods/products:

• Convenience goods

• Shopping goods

• Specialty goods

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.8

Convenience goods are those with which the

consumer is familiar and ‘as soon as he recognises
the want, the demand becomes clearly defined in
his mind. Furthermore, he usually desires the
prompt satisfaction of the want’.

Convenience goods tend to be of low unit price

and are purchased frequently. They are sometimes
referred to as ‘low involvement’. The widest possible
distribution is necessary to maximize sales
opportunities.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.9

‘Shopping goods are those for which the consumer desires

to compare prices, quality and style at the time of purchase’.

Shopping goods differ from convenience goods in several ways:

1. The exact nature of the want may not be defined clearly in
advance, i.e. you may know the product category but need to
establish what is on offer before making a decision.

2. Therefore : A special shopping trip may be organised and

several outlets visited before reaching a decision. Alternatively,
customers collect information in the course of other shopping
trips (window shopping) until they have enough
background information to make a shopping trip.

3. Except in the case of distress purchases (where an immediate

replacement is required) the decision can be delayed.

4. There is low frequency of purchase.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.10

‘Specialty goods are those which have some particular

attraction for the consumer, other than price,
which induces him to put forth special effort to visit
the store in which they are sold and to make
the purchase without shopping’.

What distinguishes specialty goods is that the

consumers have pre-determined what it is they want
to buy and will make a special effort to source the
product. Such products are sometimes called
‘high involvement’ products.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.11

Different categories of goods call for different

marketing strategies:

Convenience = Undifferentiated (Cost leadership)

Shopping = Differentiated

Specialty = Concentrated (Focus)

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.12

Copeland’s classification of goods

Price Specialty

Differentiated

Convenience

Quantity

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.13

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.14

OBJECTIVE VERSUS SUBJECTIVE

SELECTION CRITERIA
• Objective factors may or may not be
tangible, but they must be quantifiable and
measurable
• Subjective factors are intangible and are
influenced by attitudes, belief, experience
and associations
• Economic theory and behavioral science

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.15

ARE SERVICES DIFFERENT ?

• Three schools of thought

– Principles and practices of marketing are
equally applicable to both
– Different marketing approach for both
– Basic principles are same for both but
services calls for extended marketing mix
• Process, physical evidence and people in
addition to 4P’s

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.16

Palmer (1994) defines services as:

‘The production of an essentially intangible benefit,

either in its own right or as a significant element of
a tangible product, which through some form of
exchange satisfies an identified consumer need’.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.17

‘Pure’ services are seen as having a number of

characteristics that distinguish them from physical
products, namely:

• Intangibility

• Inseparability

• Variability / heterogeneity

• Perishability

• Fluctuating demand

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.18

Three levels of product

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.19

BRANDING
• To differentiate between the offerings of
competing suppliers
• JND or USP is usually associated with the
brand
• Buyers will ‘Pull’ the pre-packed product
with distinctive name backed by
advertising and promotion

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.20

The growth of branding may be attributed,

to factors:
• Mass production and consumption
• Improved transportation and communication
• Advances in packaging
• Increased literacy and growth of advertising
• New retail formats
• Improved standards of living
• Development of trademark laws

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.21

In an increasingly competitive environment, brand

building, especially of companies, is seen as the
only sure road to survival and success. Only
through brand building is it possible to:

• Build stable, long-term demand

• Add value looked for by customers
• Develop a sound basis for future growth and expansion
• Maintain the interest of intermediaries
• Create a reputation as an organization that people will
want to develop relationships with.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.22

‘A successful brand is a name , symbol, design,

or some combination which identifies the “product”
or a particular organization as having a sustainable
differential advantage’.
[Peter Doyle]

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.23

Key points in Doyle’s definition:

• Successful brands are positive (and vice versa)

• Brands can take many forms – not just names
• The ‘product’ may just as easily be a service, an
organization, or an aspiration
• Brands are owned by organizations/people
• Successful brands confer a sustainable differential
advantage – an advantage that is not easily copied
and so represents a barrier to entry in the market
segment in which the brand competes.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.24

Successful brands have 4 key attributes:

1. Quality
2. Superior service
3. First to market :
– new technology
– new positioning concept
– new distribution channel
– new market segment
– exploitation of a new gap
4. Differentiation

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.25

While a brand may be represented by a logo or

icon it invariably has a name.

A name ‘symbolizes the sum of the attributes that

make up the brand and quickly becomes
synonymous with the satisfactions that the brand
delivers’.
(Blackett 1989)

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.26

A brand name is:

• A form of identification or badge of origin
• A promise of a certain level of consistency in performance
• Reassurance as to the authenticity and performance of
the product
• An indicator of the essential properties or attributes of
the product.

As a result buyers can develop attitudes towards a

brand’s performance and quality even when it is difficult
to assess this objectively.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.27

• Basic decision : seperate name or

‘umbrella’ branding

The advantages of using a different name

for each product include:
• Owning a diversified portfolio with a limited connection
between the individual items.
• Less risk that a failure of one brand will hurt the reputation
of the others.
• The opportunity to offer variants of the same product at
different price points appealing to different market
segments and so enabling the firm to secure more space
in the retail outlet.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.28

The disadvantages of using a different name

for each product include:

• Loss of scale economies.

• Inability to draw on the reputation of other
established products in the portfolio.
• The need to build a new identity and reputation for
every new addition to the portfolio.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.29

CLASSIFYING NEW PRODUCTS

• Objective benefits : emphasis on innovation and
NPD
• Risks : not sufficiently different and radically
different
• Characteristics of new product by Rogers (1983)
1. Relative advantage
2. Compatibility
3. Complexity
4. Divisibility
5. Communicability

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.30

Booz Allen and Hamilton (1982) identified

six kinds of new products:

1. New to the world

2. New product lines
3. Additions to existing product lines
4. Improvements and revisions to existing products
5. Repositionings
6. Cost reductions.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.31

THE BUYGRID ANALYTIC FRAMEWORK

  Buy classes
New Modified  Straight
task rebuy rebuy
Buy phases
1. Anticipation or recognition of a problem
(need) and a general solution

2. Determination of characteristics and

quantity of needed items

3. Description of characteristics and quantity

of needed items
4. Search for and qualification of potential
sources
5. Acquisition and analysis of proposals
6. Evaluation of proposals and selection
of supplier(s)

7. Selection of an order routine

8. Performance feedback and evaluation

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.32

NEW SERVICE DEVELOPMENT

• New service offering require limited new
investment leading to the development of a
proliferation of variants
• This leads to confusion and that is why NSDs
are unsuccessful
• Interaction is the distinguishing feature of
service offerings
• Intangibility, heterogeneity and simultaneity are
main basis of differentiation

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.33

• Six key themes linked to the NSD process

1. The corporate environment
2. The process itself
3. The people involved
• The development staff, the customer-contact
staff and the customers
4. Analysis of opportunities
5. Development
6. Implementation
• Training

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.34

• Supporting activities for effective and

efficient project development
– Opportunity analysis
– Project development
– Offer formulation

• Lack of control of three dimensions in NSD

– The initial purpose of the NSD
– The context within which it was attempted
– The precise criteria used to assess results

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.35

QUESTIONS ??

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.36

THANK YOU

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007