Chapter 8: What is a Product? PDF

Chapter 8 What is a product? Product  Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. Broadly defined, products also include services, events, persons, places, organisations an...

Chapter 8 What is a product? Product  Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. Broadly defined, products also include services, events, persons, places, organisations and ideas or a mixture of these. Products, services and experiences Products are a key element in the overall market offering. Marketing mix planning begins with building an offering that brings value to target customers. At one extreme, the market offer may consist of a pure tangible good, such as soap, toothpaste or salt; no services accompany the product. At the other extreme are pure services, for which the market offer consists primarily of a service. Examples include a doctorʼs examination and financial services. Service  An activity, benefit, or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything. Levels of product and services Figure. Three levels of product At the most basic level, the company asks, ‘What is the customer really buying?ʼ Product and service classifications Consumer products Consumer product  A product bought by final consumers for personal consumption. Convenience product  A consumer product that customers usually buy frequently, immediately, and with minimal comparison and buying effort. Chapter 8 1  Shopping product - A consumer product that the customer, in the process of selecting and purchasing, usually compares on such attributes as suitability, quality, price, and style. Speciality product  A consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Unsought product  A consumer product that the consumer either does not know about or knows about but does not normally consider buying. Table. Marketing considerations for consumer products. Industrial products Industrial product  A product bought by individuals and organisations for further processing or for use in conducting a business. The three groups of industrial products and services are materials and parts, capital items, and supplies and services. Materials and parts include raw materials as well as manufactured materials and parts. Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and natural products (fish, lumber, crude petroleum, iron ore). Manufactured materials and parts consist of component materials (iron, yarn, cement, wires) and component parts (small motors, tyres, castings). Capital items are industrial products that aid in the buyerʼs production or operations, including installations and accessory equipment. Installations consist of major purchases such as buildings (factories, offices) and fixed equipment (generators, drill presses, large computer systems, elevators). The final group of industrial products is supplies and services. Supplies include operating supplies (lubricants, coal, paper, pencils) and repair and maintenance items (paint, nails, brooms). Organisations, persons, places and ideas Organisation marketing consists of activities undertaken to create, maintain or change the attitudes and behaviour of target consumers toward an organisation. Person marketing consists of activities undertaken to create, maintain, or change attitudes or behaviour toward particular people. Place marketing involves activities undertaken to create, maintain or change attitudes or behaviour toward particular places. Chapter 8 2  Social marketing - The use of traditional business marketing concepts and tools to encourage behaviours that will create individual and societal well-being. Product and service decisions Individual product and service decisions Product and service attributes Product quality The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. Total quality management (TQM) is an approach in which all of the companyʼs people are involved in constantly improving the quality of products, services and business processes. Today, companies are taking a return-on-quality approach, viewing quality as an investment and holding quality efforts accountable for bottom-line results. Product features A product can be offered with varying features. A stripped-down model, one without any extras, is the starting point. The company can then assess each featureʼs value to customers versus its cost to the company. Features that customers value highly in relation to costs should be added. Product style and design Design is a larger concept than style. Style simply describes the appearance of a product. Styles can be eye catching or yawn producing. Branding Brand  A name, term, sign, symbol or design, or a combination of these that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors. Branding helps buyers in many ways. Brand names help consumers identify products that might benefit them. Brands also say something about product quality and consistency – buyers who always buy the same brand know that they will get the same features, benefits and quality each time they buy. Packaging Packaging  The activities of designing and producing the container or wrapper for a product. In this highly competitive environment, the package may be the sellerʼs best and last chance to influence buyers. So the package itself becomes an important promotional medium. Chapter 8 3  Poorly designed packages can cause headaches for consumers and lost sales for the company. In recent years, product safety has also become a major packaging concern. In making packaging decisions, the company also must heed growing environmental concerns. Labelling and logos At the very least, the label identifies the product or brand. The label might also describe several things about the product – who made it, where it was made, when it was made, its contents, how it is to be used and how to use it safely. Finally, the label might help to promote the brand and engage customers. For many companies, labels have become an important element in broader marketing campaigns. Labels and brand logos can support the brandʼs positioning and add personality to the brand. However, companies must take care when changing such important brand symbols. Customers often form strong connections to the visual representations of their brands and may react strongly to changes. Labelling has been affected in recent times by unit pricing (stating the price per unit of standard measure), open dating (stating the expected shelf life of a product) and nutritional labelling (stating the nutritional values in a product). Product support services Support services are an important part of the customerʼs overall brand experience. Keeping customers happy after the sale is the key to building lasting relationships. Product line decisions Product line  A group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. The major product line decision involves product line length – the number of items in the product line. The line is too short if the manager can increase profits by adding items; the line is too long if the manager can increase profits by dropping items. A company can expand its product line in two ways: by line filling or line stretching. Product line filling involves adding more items within the present range of the line. However, line filling is overdone if it results in cannibalisation (eating up sales of the companyʼs own existing products) and customer confusion. The company should ensure that new items are noticeably different from existing ones. Product line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line downward, upward or both ways. Companies located at the upper end of the market can stretch their lines downward. Companies can also stretch their product lines upward. Sometimes, companies stretch upward to add prestige to their current products or to reap higher margins. Chapter 8 4  Product mix decisions Product mix (or product portfolio)  The set of all product lines and items that a particular seller offers for sale. A companyʼs product mix has four important dimensions: width, length, depth and consistency. Product mix width refers to the number of different product lines the company carries. Product mix length refers to the total number of items a company carries within its product line. Product line depth refers to the number of versions offered of each product in the line. Finally, the consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. Services marketing Governments offer services through courts, employment services, hospitals, military services, police and fire services and schools. Private not-for-profit organisations offer services through museums, charities etc.; business organisations offer services – airlines, banks, hotels. The nature and characteristics of a service Figure 8.3 Four service characteristics Marketing strategies for service firms However, because services differ from tangible products, they often require additional marketing approaches. The service profit chain Service profit chain  The chain that links service firm profits with employee and customer satisfaction. This chain consists of five links:  Internal service quality. Superior employee selection and training, a quality work environment and strong support for those dealing with customers.  Satisfied and productive service employees. More satisfied, loyal and hardworking employees. Chapter 8 5   Greater service value. More effective and efficient customer value creation, engagement and service delivery.  Satisfied and loyal customers. Satisfied customers who remain loyal, make repeat purchases and refer other customers.  Healthy service profits and growth. Superior service firm performance. Figure 8.4 Three types of services marketing Internal marketing  Orienting and motivating customer-contact employees and supporting service employees to work as a team to provide customer satisfaction. For retailers in this kind of business, improving the way staff interacts with customers has a positive link to sales. Interactive marketing  Training service employees in the fine art of interacting with customers to satisfy their needs. Service companies face three major marketing tasks: They want to increase their service differentiation, service quality and service productivity. Managing service differentiation The solution to price competition is to develop a differentiated offer, delivery and image. The offer can include innovative features that set one companyʼs offer apart from competitorsʼ offers. Service companies can differentiate their service delivery by having more able and reliable customer- contact people, developing a superior physical environment in which the service product is delivered, or designing a superior delivery process. Finally, service companies also can work on differentiating their images through symbols and branding. Managing service quality A service firm can differentiate itself by delivering consistently higher quality than its competitors provide. Like manufacturers before them, most service industries have now joined the customer-driven quality movement. And like product marketers, service providers need to identify what target customers expect in regard to service quality. Chapter 8 6  Unfortunately, service quality is harder to define and judge than product quality. For instance, it is harder to agree on the quality of a haircut than on the quality of a hairdryer. Managing service productivity Thus, in attempting to improve service productivity, companies must be mindful of how they create and deliver customer value. They should be careful not to take service out of the service. Branding strategy: building strong brands Thus, brands are powerful assets that must be carefully developed and managed. Brand equity and brand value ‘Products are created in the factory, but brands are created in the mind.ʼ Brand equity  The differential effect that knowing the brand name has on customer response to the product or its marketing. Brand value  The total financial value of a brand. A powerful brand forms the basis for building strong and profitable customer engagement and relationships. Companies need to think of themselves not as portfolios of brands but as portfolios of customers. Building strong brands Figure 8.5 Major brand strategy decisions Brand positioning Competitors can easily copy attributes. More important, customers are not interested in attributes as such – they are interested in what the attributes will do for them. Some successful brands positioned on benefits are FedEx (guaranteed on-time delivery), Asda (why pay more?, and Instagram (capturing and sharing moments): engaging customers on a deep, emotional level. Customers donʼt just like these brands; they have strong emotional connections with them and love them unconditionally. Brand name selection A brand name cannot be registered if it infringes on existing brand names. Brand sponsorship Chapter 8 7  The product may be launched as a national brand (or manufacturerʼs brand): the Samsung Galaxy tablet or Kelloggʼs Frosties. Manufacturersʼ brands versus store brands Store brand (or private brand)  A brand created and owned by a reseller of a product or service. In the so-called battle of the brands between manufacturer and private brands, retailers have many advantages. They control what products they stock, where they go on the shelf, what prices they charge and which ones they will feature in local promotions. Licensing And currently, numerous top-selling retail toys are products based on television shows and movies. Name and character licensing have grown rapidly in recent years. Co-branding Co-branding  The practice of using the established brand names of two different companies on the same product. Brand development https://www.youtube.com/watch?v=Tz-47sIAYM On April 23, 1985, Coca-Cola Company introduced a product it was sure would be a hit: new Coke. The soda was intended to stave off rival Pepsi, which had been gaining on Coke's market share. The new Coke flopped in such a titanic way that it stirred nationwide campaigns aimed at bringing the old Coke back. Powerpoint Chapter 8 8