1 Chapter 4 (§3.12) Products

§3.12 Products 2 Chapter questions  What is a product?  How to evaluate a product?  How can products be classified?  How can companies differentiate products?  How can a company build and manage its product mix and product lines?

§3.12 Products 3 What is a product?  Anything that can be offered to a market to satisfy a want or need.  Broadly defined, products include physical objects, services, events, persons, places, organizations, ideas or mixes of these entities.  A product is a set of tangible and intangible attributes including packaging, colour, price, quality and brand, plus the services and reputation of the seller.  Discussion: exemplify products. fruits, salads, salt, soft drinks, ready food, computers, furniture renting, window cleaning, hotels, cloth, dress making, tires, car maintenance, travel, legal consulting ….

§3.12 Products 4 MKTG tools for evaluating products  3 Levels of a Product Core product Actual product Augmented product  Discussion: identify the 3 levels of a hotel and its services Rest and sleep Bed, furniture, bedroom, toilet room Clean bed, fresh towels, quiet, A home – like hotel

§3.12 Products 5 What are the benefits of this product?

§3.12 Products 6 Exercise— take the car as an example to analyze the 3 levels of its values.  The core product: convenience & speed  The tangible, physical product: drive, buy and collect  The added product: the warranty, the customer service support & after- sales service.

§3.12 Products 7 Classification of products  Two product categories: 1. Consumer products intended for household consumer, non-business use. 2. Business products intended primarily for producing other products or providing services in a business.

§3.12 Products 8 Classification of consumer goods  Four types of consumer goods: (On the basis of shopping habits) 1.convenience goods 2.shopping goods 3.specialty goods 4.unsought goods.

§3.12 Products 9 1. Convenience goods  consumer is familiar with and buys with minimum effort  typically have a low unit price  products purchased frequently  readily accessible and widely distributed  retailers usually carry several brands, e.g. tobacco, toothpaste, and batteries.

§3.12 Products Shopping goods  Consumers usually compare price, quality and style.  Buying habits affect distribution and promotional strategies.  Manufacturers work closely with retailers.  Retail stores often buy shopping goods in large quantities. Distribution direct from manufacturers to the retailer is common, e.g. appliances, furniture.

§3.12 Products Specialty goods  Consumer: has strong brand preference is willing to forgo more accessible substitutes is willing to invest time and effort in product search fewer store outlets, e.g. sound equipment.

§3.12 Products Unsought goods  Consumer goods that are not yet known or that are not yet needed.  Seller must place emphasis on demonstrating that consumers might have a need for this product (e.g. prepaid funeral plan).

§3.12 Products 13 Exercise: Convenience product ( ), Shopping product( ), specialty product( ), unsought product ( )  Customer buying behavior : a. frequent purchase, little planning, little comparison or shopping effort, low customer involvement b. strong brand preference and loyalty, special purchase effort, little comparison of brands, low price sensitivity c. less frequent purchase, much planning and shopping effort, comparison of brands on price, quality, style d. little product awareness, knowledge (or, if aware, little or even negative interest) ac b d

§3.12 Products 14 Exercise: Convenience product ( ), Shopping product( ), specialty product( ), unsought product ( )  price: a. high price b. low price c. varies ba ac

§3.12 Products 15 Exercise: Convenience product ( ), Shopping product( ), specialty product( ), unsought product ( )  distribution: a. varies b. selective distribution in fewer outlets c. exclusive distribution in only one of a few outlets per market area d. widespread distribution, convenient locations d b c a

§3.12 Products 16 Exercise: Convenience product ( ), Shopping product( ), specialty product( ), unsought product ( )  promotion: a. aggressive advertising and personal selling by producer and resellers b. more carefully targeted promotion by both producer and resellers c. advertising and personal selling by both producer and resellers d. mass promotion by the producer dc b a

§3.12 Products 17 Exercise: Convenience product ( ), Shopping product( ), specialty product( ), unsought product ( )  Examples: a. toothpaste, magazine, laundry detergents b. major appliances, televisions, furniture, clothing c. luxury goods, such as Rolex watches or fine crystal d. life insurance, Red Cross blood donations a b cd

§3.12 Products 18 Classification of business goods Five categories (On the basis of how products enter the production process): 1.Raw materials — goods in their natural state. 2.Fabricated materials and parts — they become part of the product. 3.Installations — manufactured business products. 4.Accessory equipment — used in the production operations of a business. 5.Operating supplies — aid in the firm ’ s operation.

§3.12 Products 19 Services  A clear definition is difficult, although services are invariably marketed together with physical goods.

§3.12 Products 20 Classification of services  Several categories exist: consumer services business services delivery method customer involvement

§3.12 Products 21 Things to know about services  Services can be classified according to whether they are delivered mechanically or by people, e.g. ATM vs bank teller.  A consistent delivery standard should apply.  Security, reliability and location of the mechanical service.  Training, motivation and ability of customer service staff.  The extent to which a customer is involved in the delivery of the service, e.g. self-serve.

§3.12 Products 22 Differentiation … 1  Product differentiation  Service differentiation To be branded, products must be differentiated. Marketers are always looking for new dimensions of differentiation.

§3.12 Products 23 Product differentiation  Form  Features  Quality  Durability  Reliability  Repairability  Style Service differentiation  Ordering ease  Delivery  Installation  Customer training  Customer consulting  Maintenance & repair Differentiation … 2

§3.12 Products 24  individual product decisions,  product line decisions  product mix decisions Marketers make product/services decisions at 3 levels: Differentiation … 3

§3.12 Products 25 Product attributes Branding Packaging Labeling Product support services  Individual product decisions: Differentiation … 4

§3.12 Products 26  Product line decisions A group of products within a product class that closely related because they perform a similar function, are sold to the same customer group, are marketed through the same channels, or fall within given price ranges. Differentiation … 5

§3.12 Products 27  Product mix decisions A product mix is the set of all product lines and items a particular seller offers for sale. A product mix consists of various product lines. 4 product-mix dimensions: width, (line)length, depth, consistency Differentiation … 6

§3.12 Products 28 Product Mix Width Width - number of different product lines Length Length - total number of items within the lines Length Length - total number of items within the lines Depth Depth - number of versions of each product Product Mix - all the product lines offered Product Mix - all the product lines offered Consistency Differentiation … 7

§3.12 Products 29 Ex: Product-mix width & Product-line length for P&G products Product- line length Product-mix width DetergentsTooth- paste Bar soapDisposable diapers Tissue paper Ivory SnowGleemIvoryPampersCharming TideCrestZestLuvsPuffs CheerSafeguardBounty DreftOil of Olay Dash Bold Gain Era Differentiation … 8

§3.12 Products 30 Class activity  Describe and evaluate a company ’ s product mix in terms of width, length, depth and consistency.