3 Objectives Understand the concept of a product Explain how to classify productsExamine concepts of product: item, line, and mix and how they are connectedUnderstand product life cycle and impact on marketing strategiesDescribe product adoption processUnderstand why products fail/succeed
4 What Is A Product?A product is a good, a service, or an idea received in an exchange.Good- Tangible physical entityService- Intangible result of the application of human and mechanical efforts to people or objectsIdea- Concept, philosophy, image, or issueThe product may have any combination of the above aspects
5 The Total ProductThe total product offering has a combination of three interdependent elements (product characteristics):Core product: consists of a product’s fundamental utility or main benefit.Supplemental features: provide added value or attributes in addition to its core utility or benefit.Supplemental features provide installation, delivery, training, and financing.These supplemental attributes are not required to make the core product function effectively, but they help differentiate one product brand from another.Symbolic and experimental benefits: benefits based on customers’ experiences with the product. Many products have symbolic meaning for buyers.When we buy a product, we really buy benefits that the product will deliver.
7 Classifying consumer products Consumer products are classified into four categories according to how buyers generally behave when buying these products:Convenience ProductsShopping ProductsSpecialty ProductsUnsought Products
8 1. Convenience ProductsRelatively inexpensive, frequently purchased items for which buyers exert only minimal purchasing effort
9 Convenience Product: Marketing Implications Buyers spend little planning and shopping time to buyMarketed through many retail outletsHigh inventory turnoverLow per-unit gross marginsLittle promotion effort.Packaging is important because they are sold on self-service basis at the retail level
10 Many convenience items are available on a self-service basis at retail, so producers depend on packaging and promotionReprinted with permission of Procter & Gamble
11 2. Shopping ProductsItems for which buyers are willing to expend considerable efforts in planning and making purchases
12 Shopping Product: Marketing Implications Buyers compare between alternatives (prices, quality, services, other features)Purchased less frequentlyNo brand loyaltyFewer retail outlets than convenienceLower inventory turnoverHigher gross marginsFocus on personal sellingChannel members expect cooperation (i.e. repair, parts, promotion, … etc.)
13 3. Specialty ProductsItems with unique characteristics that buyers are willing to expend considerable effort to obtain.
14 When purchasing specialty products buyers know exactly what they need and go directly to a source providing the desired productReprinted with permission of Pilatus Business Aircraft, Ltd.
15 Specialty Product: Marketing Implications High brand loyalty (no substitutes)Willingness to spend much time and effortsLimited retail outletsLower inventory turnoverHigh gross margins
16 4. Unsought Products They include: Products purchased to solve a sudden problem (such as emergency medical services, car repairs, umbrella on a day of heavy rains), orproducts of which customers are unaware (such as new product which does multiple functions), orproducts that people do no necessarily think of buying (i.e. life insurance).
17 Unsought Products Marketing Implications Marketers must build trust with consumers through:Recognizable brandSuperior product performanceMore effective informative promotion
18 Classifying Business Products Installations: facilities such as buildings, factories, major equipments and large machines (non-portable equipment).Accessory equipment: not part of final product, such as computers, telephone and fax equipments (Compared with major equipments, accessory items are usually standard, much cheaper, purchased routinely with less negotiation, and treated as expense items rather than as capital items because they are not expected to last as long).Raw materials: natural materials that become part of the finished product (i.e. wood, minerals, chemicals).Component parts: finished (processed) items ready for assembly or need little processing. They become part of the finished product
19 Classifying Business Products (continued) 5. Process materials: used in production but not identifiable, and become part of the finished product (smoke detector, grease)MRO: consumable supplies-maintenance, repair, and operating items not part of final product. They are usually standard items (i.e. office supplies)Business services: intangible products used in operations. They may be provided internally, or obtained externally (outsourcing). (i.e. financial, legal, marketing research, information technology, and catering services).
20 Product Line And Product Mix Main concepts:Product Item: specific version of product among organization's productsProduct Line: closely related product items viewed as a unit because of marketing, technical, or end-use considerations.Product Mix: total group of products that an organization makes available to customersWidth of product mix: number of product lines in an organization.Depth of product mix: average number of different products offered in each product line (product mix / width of product mix)Depth of product line: number of different products in the product line
21 Example: Product Width/Depth Of Proctor & Gamble
22 Product Life CycleThe progression of a product through four stages: introduction, growth, maturity, and decline.
23 Stage Of The Product Life Cycle Stage Of The Product Life Cycle
24 Introduction StageThe initial stage of a product’s life cycle; its first appearance in the marketplace when sales start at zero and profits are negative.During this stage, potential buyers must be made aware of the new product’s features, uses, and advantages.Most new products start off slowly and seldom generate enough sales to break even or make immediate profits.Risk of failure is high
25 Growth StageDuring this stage, sales rise rapidly and profits reach a peak, then start to decline.Main characteristics:Sales rise rapidlyProfits peak, then starts to decline as more competitors enter the market, driving prices down and creating a need for heavy promotionCompetitors react to the product’s success
26 Growth Stage Marketing Strategy At this stage, the marketer should:Encourage brand loyalty- stress brand benefitsStrengthen market shareEmphasize product’s benefitsUse aggressive pricing (lower prices)Analyze production positionUse efficient distribution systemEnsure that Promotion costs drop as % of sales
27 Maturity StageDuring this stage, the sales curve peaks and starts to decline, and profits continue to fall.Main characteristics:Intense competition as many brands enter the market as well as improved cost efficiencyCompetitors emphasize improvements and differences in their products.Weaker competitors are squeezed out or lose interest.Marketer usually adjusts marketing strategy in response to tough competition.Persuasive promotion is particularly emphasized
28 Maturity stage: Marketer’s objectives Three objectives may be pursued at this stage:Generate Cash FlowMaintain Share of MarketIncrease Share of Customer
29 Example: product modifications at the Maturity Stage
30 Decline StageThe stage of a product’s life cycle when sales fall rapidly.Main characteristics:Retail outlets with strong sales volumes are maintained, while unprofitable outlets are dropped out.Spending on promotion is usually reduced.Many firms lack the resources to revitalize the product’s demand and thus leave the market.
31 Decline Stage Marketing Strategy Eliminate/reposition itemsCut promotionEliminate marginal distributorsPlan for phase out, through either Harvesting or Divesting:Harvesting: gradual reduction in marketing expenditures and a less resource-intensive marketing mix.Divesting: immediate withdrawal of the product from the market; the firm may sell the product to another firm.
32 Product Adoption Process The five-stage process of buyer acceptance of a product: awareness, interest, evaluation, trial, and adoption.Note:Entering the adoption process does not mean the person will eventually adopt the product—rejection can occur at any stage.
33 The five stages Of Product Adoption Process Awareness is when a buyer becomes aware of the product’s existence.Interest is when the buyer seeks information and is receptive to learning about the product.Evaluation is when the buyer considers the product’s benefits and decides whether to try it.Trial is when the buyer examines, tests, or tries the product to determine if it meets his or her needs.Adoption is when the buyer purchases the product and expects to use it again whenever the need for this product arises.
34 Adopter CategoriesPeople do not begin the adoption process at the same time, nor do they move through it at the same speed. They are viewed to have the following pattern:Innovators: are the first adopters of new products. They enjoy trying new things and tend to be venturesome.Early adopters: are careful choosers of new products. They influence the behaviour of people in the remaining categories. (They may act as opinion leaders)Early majority: those who adopt new products just before the average person. They are deliberate and cautious in trying new products.Late majority: includes skeptics who adopt new products when they feel it is necessary.Laggards: are the last adopters. They distrust new products, and when they finally adopt the innovation, it may have been replaced by a new product.