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PRODUCT DECISIONSPRODUCT DECISIONS
Lecture # 5FEBRUARY 9, 2012
Text Reference: Principles of Marketing
Kotler & Armstrong
At the end of this unit students should be able to:
Explain product classificationsOutline the range of individual product decisionsIdentify the challenges of creating a new product
development strategyDiscuss how an idea moves from idea generation to
concept testingOutline how a potential product is developedExplain the purposes of test marketingDiscuss product life-cycle strategies
Unit 5 - - Product Decisions Learning Objectives
Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.
Kotler/Armstrong 14th Edition
A product is an offering of a business entity as it is perceived by both present and potential customers
Comprised of both tangible and intangible elements.
It is a bundlebundle of benefits designed to meet the needs and problems of identified target markets.
What is a Product
The value of a product derives from what is does for a customer (Lewis,Chambers,1995)
Products include:Physical objects, services, events, places, persons., organizations,
ideas or mixes of these entities
The concept of a product is not limited to physical objects ServicesPeopleOrganizationsPlacesActivities (entertainment) Ideas (Kotler, Bowen, Makens, 1996)
Tangible vs Intangible
Tangibles: physical aspect of a product service that can be seen.
Intangibles: these are the non-physical qualities of a good or service that cannot be touched.
Intangible relate to experiences, benefits orexperiences, benefits or valuesvalues that customer receive when they make a purchase
Features of a product
Prominent or distinctive characteristic of a product.
Product features include both the quality quality of its components and the tangible extrasextras that extend its basic functions to make it distinctive.
Features help to determine the positioning of the product
BenefitsWhat a product or service will dowill do for
the consumer as opposed to what the product is made of or how it is made.
The marketing task is to ensure that the product and the proper attributes and the features communicate to buyers in a way that demonstrates that the product will create the intended benefits.
Added Values Added elements – image, feel and customer appeal
Customers view products a bundles of benefits and choose the best bundle for their money.
Product levelsProduct levels
Core benefit benefit the customer is really buying – What is the buyer really buying? Experience, convenience, relaxation/problem solving, connectivity (mobile users)
Actual product Develop product and service features, design, a quality level, a brand name, and packaging.
(must be present for the customer to use it
Augmented product
Additional consumer benefits and services associated with the basic product (Helps to differentiate it from the competitor, customer see prod as bundles of goods to satisfy their need)
Discussion QuestionsDiscussion Questions
Should marketers stress the tangibles or intangibles on their promotional activities?
Under what circumstances might be appropriate to emphasize the tangibles aspects of a product or service
What are some examples of benefits or experiences that consumers of products and services
Products may be classified on the basis of: Durability Tangibility Use
As it relates to use; products can fall in 2 main categories:
1. Consumer products – are products and services bought by final consumers for personal consumption and include.
• Convenience products / goods• Shopping products / goods• Specialty products / goods• Unsought products/goods
Industrial products – those purchased by individuals and organizations for further
processing or for use in conducting business. Industrial products include:Materials and parts, capital items, supplies and business services.
As it relates to tangibility and durability products may be classified into:-
Nondurable goodsDurable goodsServices
Product/Service DecisionsProduct/Service Decisions
Marketers may embrace product/services decisions at three levels:
1. Individual product and service decisions2. Product line decision3. Product mix decision
Individual Product DecisionsIndividual Product DecisionsFig. 8.2Fig. 8.2
As outlined in Fig 8.2 in developing and marketing individual products, major decisions are focused on:
Product AttributesBrandingLabelingPackagingSupport services
Individual Product DecisionsIndividual Product Decisions
Defines the benefits it will offer
Product attributes include:Product Quality – a positioning tool used by marketers. Its the
product’s ability to satisfy stated or implied needs
Features – used as competitive tools (differentiation)
Style & design – distinctive appearance, attention grabber
Product And Service AttributesProduct And Service Attributes
Quality • Ease of operation and repair• Product style and design.
• Product Quality has two dimensions: Level and consistency.
• Quality level should support the product’s position in the target market.
• Product quality also means performance quality – the ability of the product to perform its functions.
• Freedom from defects
Branding
Name, symbol, term sign or design or a combination
Identifies the maker or seller of a product or service.
Differentiates them form the competitors
Pg 231 Pspsi vs Coca Cola
Branding can improve value of a product. It helps to:
i. identify productsii. confirm product - features,
benefits, and quality.
iii. Increases sellers advantages - legal trademark, for unique features of the product
iii. assists in market segmentation
Marketers need to build and manage brands
Branding StrategyBranding StrategyBrand Equity
The differential effect that knowing the brand name has on customer response to the product or its marketing
The brand’s ability to capture consumer preference and loyalty
If the customer responds favorably to the vs a generic pr unbranded copy of the same product. And vice versa
Brand vary in the amount of power and value they hold in the marketplaces capture consumer preference and loyalty. YouTube, Google
Building Strong BrandsBuilding Strong BrandsBrand Positioning
AttributesBenefits
Beliefs & Values
Brand Positioning
AttributesBenefits
Beliefs & Values
Brand SponsorshipManufactures
Private Brand
LicensingCo-branding
Brand Name Selection
Selection protection
Brand Positioning
AttributesBenefits
Beliefs & Values
Brand Development
Line Brand extensionsMultibrandsNew brands
Packaging
The activities of designing and producing the container or wrapper for a product.
Traditionally, wrapper was used for holding and protecting the product
Some products contain a primary container cleansing cream /panadol within a box (that is thrown away).
Packaging is used has a marketing tool –consumer recognition of a brand or thee company
Additionally the package may contain packages for shipping and distribution.
The final package helps to identify the product as well as, a temporary storehouse for the product until it reaches the final consumer.
Some packaging can be used after the primary use e.g. plastic, shatterproof
Packaging is now used as a part of the marketing tool or promotional strategy– company or brand recognition (commercial) for company.
Product should also be safe for the consumer. (Child safe packaging
attention grabber, attractively designed packaging gives companies a competitive advantage
Poorly designed packages can cause wrap rage
Labelling Functions: (important features of packaging
Labels may range from simple tags attached to products to complex graphics that are part of the package. They perform several functions:-
Identification of products e.g. LASCO, GRACE
Describes the product- place, expiry date, contents (active ingreds. registered office
instructions for use, batch #
promotion of the product - graphics
Labelling can sometimes be misleading – laws
Fair Trading Commission
In addition to the functions labelling must:
now state shelf life, unit pricing & nutritional content
Pepsi’s New Logo pg 233
Product Support ServicesProduct Support Services
• Customer service is another element of product strategy. A company’s offer usually includes some support services, which can be a minor or major part of the total offering.
• Companies survey customers periodically to assess the value of current services and to obtain ideas for new ones.
• Once the company has assessed the value of various support services to customers, it must next assess the costs of providing these services.
• Companies can develop packages or bundle of services that will both delight customers and yield profits to the company.
• Companies now use a sophisticated mix of phone, e-mail, fax, internet and interactive voice and data techniques to provide support services that were not possible before.
Product Line DecisionProduct Line Decision
Beyond decisions about individual products and services, product strategy also calls for building a product line.
A Product line is 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 range.
• NikeNike produces several lines of athletic shoes and apparel.
• NokiaNokia produces several lines of telecommunication products.
Product Line DecisionProduct Line Decision
Major product line decision involves
Product line length – the number of items in the product line.
Company may lengthen its line in two ways:1. Line stretching – lengthening of the product line
beyond its current range (upward, downward or both ways).
2. Line filling – adding more items within the present range of the line
Eg Sandals/Beaches Group
• Set of all product lines and items that a particular seller offers for sale.
• There are 4 dimensions to a company’s product mix:
1.Width – number of different product lines the company carries – for e.g. Procter & Gamble markets a fairly wide product mix consisting of 250 brands organized in five major product lines:
Personal beauty and care
House and home
Health and wellness
Baby and family
Pet nutrition and care products
2. Depth - number of versions offered of each product in the line.
E.g. P & G Crest Toothpaste comes in 16 varieties, raging from crest Multicare, Crest Cavity Protection, Crest Dual Action Whitening, Kids cavity Protection, Crest Baking Soda and Crest Tartar Protection.
3. Eg LASCO – Baby Foods & Nutritional Products
3. Length – total number of items the company carries within its product lines.
P & G carries many brands within each line. For e.g. house and home line includes 7 laundry detergents, six handsoaps, five shampoos and four dishwashing detergents.
4. Consistency – refers to how closely related the various product lines are in their end use, production requirements, distribution channels, or some other way.
What is a Service
Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything
Services are a form of product that consists of:
Activities, benefits, or satisfaction offered for sale
E.g.. Banking, hotel, airline retail, retail
SERVICES MARKETING Has grown dramatically in recent times.
Varies –Govt – courts, hospitals military services
Business organizations – hotels
NFP – churches, charities Four special characteristics must be taken into account when
designing marketing programmes
Nature & Characteristics of a Service
Intangibility
SERVICES
VariabilityPerishability
Inseparability
Service Intangibility
Services which cannot be seen, tasted, touched or felt, heard or smelled before purchase.
E.g. Services in a hotel, on an airline (promise).Marketers must find ways to enhance the service
quality (providers) and make service more tangible
Service VariabilityService Variability
The quality of the service depends on who provides them and when, where, and how they are provided.
E.g. one employee may not live up to the expectations of the company’s culture of quality & excellence
Service InseparabilityService Inseparability
A major characteristic of services produced and consumed at the same time and cannot be separated from their providers.
People interaction is a special feature of services marketing
After sales services, etc
Service Perishability
A major characteristic of services
They cannot be stored for later use or sale
Eg. An unused hotel room, a missed appointment
Utilizing unused capacity-discounts in hotels
Match capacity with demand
The Service Profit ChainThe Service Profit Chain
Focuses on:Internal service quality – recruitment & selection
of employees which
o Internal marketing to enhance productivity & service delivery skills
o Satisfied employees o Greater service valueo Truly satisfied & loyal customerso Company profitability
REVIEWREVIEW
1. Define the major classifications of products and services.
2. Describe the special characteristics of services which will affect the design and promotion of a marketing program.
For Review -Mini Case StudyFor Review -Mini Case Study
For several decades the family owned group of companies known as Gregory Family Emporium has successfully owned and managed businesses such as hardware, auto parts, food processing, and building construction. The organization has just secured controlling interest in a large resort hotel and appointed you as Marketing Director.
Carefully explain and illustrate both why and how the approach required to successfully market these services would be different from what the organization has been accustomed