Seòrsachadh Bathair & Sgaoileadh

• Unit 3 focuses on product classification, including definitions, levels, and types of consumer and industrial products.
• Unit 4 covers channels of distribution, their functions, types, importance, and selection.

What is a Product?

• A product encompasses goods, services, ideas, people, places, and organizations offered for exchange.
• It is defined as anything offered or sold to satisfy a need or want on both sides of the exchange process.
• Stanton (1981) defines a product as a set of tangible and intangible attributes including packaging, color, price, manufacturer's prestige, retailer's prestige, and manufacturer's and retailer's services, which the buyer may accept as offering want-satisfaction.

Product Levels

• There are five levels of a product: core product, basic product, expected product, augmented product, and potential product.
• Core benefit: The fundamental service or benefit the customer is really buying (e.g., rest and sleep in a hotel).
• Basic product: Marketers turn the core benefit into a basic product (e.g., a bed, table, chair in a hotel).
• Expected product: Attributes and conditions buyers normally expect when purchasing (e.g., a clean bed, and fresh towels in a hotel).
• Augmented product: Exceeds customer expectations (e.g., a hotel with a remote-controlled TV).
• Potential product: Possible augmentations and transformations the product might undergo in the future.

Classification of Products

• Products are generally classified into consumer products and industrial products.

Consumer Products

• Consumer goods are used by ultimate consumers or households and can be used without further commercial processing.
• Consumer goods are divided into convenience goods, shopping goods, specialty goods, and unsought goods.
• Convenience goods: Standardized products of low unit value that consumers buy immediately with little effort (e.g., soaps, newspapers). These are often spontaneously bought.
• Shopping goods: Purchased after comparing alternatives from different manufacturers/retailers, durable items with differentiated attributes (e.g., clothing, household appliances). Emphasis is on quality, price, fashion.
• Specialty goods: Products consumers insist on having, willing to wait for the right product (e.g., cars, jewelry). These are often specific branded items.
• Unsought goods: Products consumers do not seek, either because they didn't plan to buy or didn't know about them (e.g., life insurance, encyclopedia). These require aggressive promotion.

Industrial Products

• Industrial products are used by producers for conversion into consumables or for use in conducting a business.
• The classification of industrial goods is based on how they are used by industries, classified into Installation, Equipment, Tools and Accessories, Raw Materials, Semi-Processed Components and Parts, and Consumables and Operating Supplies.
• Installation: Major capital items forming the main assets of production firms, costly items needing major decisions (e.g., buildings, heavy manufacturing machines).
• Equipment, Tools, and Accessories: Standardized items used by a wide range of industrial users (e.g., typewriters, hand tools, filing cabinets).
• Raw materials: Major parts of finished items, including agricultural, mining, forestry, sea, and water products.
• Semi-processed components and parts: Industrial goods forming parts of the finished items (e.g., buttons for shirts, batteries for cars).
• Consumables and operating supplies: Convenience items for industrial use, aiding in the running and maintenance of the organization's equipment (e.g., stationery, fuel, water).

Characteristics of Industrial Products

• Demand is derived from the demand for final goods; higher demand for final item means higher demand for industrial goods.
• Demand is mostly inelastic; the amount bought remains the same regardless of price.
• Most industrial goods have joint demands with other industrial items.
• Industrial goods markets are usually concentrated and fewer in number than consumer goods markets.
• The industrial buying process is more rational and economically based than the consumer buying process.

Marketing Strategies for Consumer and Industrial Products

• Industrial products are generally subject to greater standardization, while consumer products require frequent changes in fashion and style.
• Advertising is important for consumer products but may not be so for industrial products. Personal selling and after-sales service are more important for industrial products.
• Industrial products generally involve high-value purchases and competitive bidding based on price.
• Selling is based on quality or tangible attributes for industrial products, versus psychological satisfaction for consumer products.
• Consumer products require elaborate distribution channels, but industrial products are sold through fewer outlets and often directly by the organization itself.

Channels of Distribution

• Channels of distribution refer to the various intermediaries who help in moving products from the producer to consumers.
• Stanton defines a channel of distribution as 'the route taken by the title to the ultimate consumer or industrial users'.
• Armstrong and Kotler define distribution channel as 'a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or industrial user'.
• Channels of distribution create place utility and time utility and bring goods to the consumer in a convenient shape, unit, and size while creating convenient value.

Distribution Channel Functions

• Information: Gathering and distributing marketing research about actors/forces in the marketing environment.
• Promotion: Developing and spreading persuasive communications about an offer.
• Contact: Finding and communicating with prospective buyers and suppliers.
• Matching: Shaping and fitting the offer to the buyer's needs.
• Negotiation: Reaching an agreement on price and other terms of the offer.
• Physical distribution: Transferring and storing goods.
• Financing: Acquiring and using funds to cover the costs of the channel work.
• Risk-taking: Assuming the risks of carrying out the channel work.

Types of Marketing Channels

• Marketing channels are described by the number of channel levels involved.
• Channel for consumer goods: Producer to consumers; producer to retailer to consumer; producer to wholesaler to retailer to consumer; producer to wholesaler to jobber to retailer to consumer.
• Channel for industrial goods: Manufacturer to industrial customer; manufacturer to industrial distributor to industrial customer.

Importance of Channels of Distribution

• Channels of distribution are the most powerful element among marketing mix elements.
• Channels take care of the transaction aspects of marketing.
• They perform the logical function of moving products from the point of production to the point of purchase.
• They help producers promote goods and services.

Selecting an Appropriate Channel

• Channel decisions are important because the costs involved in the use of a channel entail the price that the consumer has to pay.
• Channel choice should ensure maximum geographical coverage of the markets.
• Channel choice should ensure maximum promotional efforts.
• Channel choice should ensure minimum cost.

Factors Governing Channel Selection

• Type of Product: Perishable products need short channels, while products needing after-sale service limit middlemen's choice.
• Nature and Extent of the Market: Small number of consumers allow the manufacturer to approach the customer directly.
• Competitive Characteristics: Study competitors' channels.
• Costs Involved in Distribution: Manufacturers look for ways to keep down the cost, preferring middlemen with established sales force.

Physical Distribution Tasks

• Producers/manufacturers must decide on the best way to store, handle and move their goods and services so that they are available to customers at the right time and place.
• Armstrong and Kotler observed that physical distribution involves planning, implementing, and controlling the physical flow of materials and final goods.
• Tasks in physical distribution: Location of manufacturing facilities, location of warehouses, mode and method of transportation, inventory decisions, using external distribution agencies.