© 2001 South-Western College Publishing

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CHAPTER EIGHT

PRODUCT and SERVICES CONCEPTS

Prepared by Jack Gifford

Miami University (Ohio)

© 2001 South-Western College Publishing

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WHAT IS A PRODUCT?

The product offering, the heart of an organization’s marketing program, is usually the starting point in creating a marketing mix.

A marketing manager cannot determine a price, design a promotion strategy, or create a distribution channel until the firm has a product to sell.

© 2001 South-Western College Publishing

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WHAT IS A PRODUCT?

“A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.”

“A product may be defined as everything, both favorable or unfavorable, that a person or organization receives in an exchange.”

© 2001 South-Western College Publishing

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WHAT IS A PRODUCT ?

Physical objectsServicesPeople’s expertisePlacesMembership in an

organization Ideas

Baseball & Bat

Barbershop

Political Beliefs

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IMPORTANCE OF SERVICES

A service is the result of applying human or mechanical efforts to people or objects

Services involve a deed, a performance, or an effort that cannot be physically possessed

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IMPORTANCE OF SERVICES

ServiceSector

Non-serviceWorkers

0%

10%

20%

30%

40%

50%

60%

70%

80%

Service Product

GDP

SERVICEWORKERS

More than 8 of 10 workers currently labor to produce services

The service sector accounts for 74% of the U.S. Gross Domestic Product

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HOW SERVICES DIFFER FROM GOODS

Intangibility

Inseparability

Heterogeneity

Perishability

They cannot be touched, seen, tasted, heard, or felt or stored.

Few search qualities (characteristics that can be easily assessed before purchase)

More experience quality (can be assessed only after use)

Credence quality (difficult to assess even after purchase; i.e. medical services)

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HOW SERVICES DIFFER FROM GOODS

Intangibility

Inseparability

Heterogeneity

Perishability

Production and consumption activities inseparable Airline and flight from A to B

Services cannot normally be produced in a centralized location and consumed in decentralized locationsYour hotel room and you

must be in the same physical location

Service quality is dependent upon the quality of employees

© 2001 South-Western College Publishing

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HOW SERVICES DIFFER FROM GOODS

Intangibility

Inseparability

Heterogeneity

Perishability

Services tend to be less standardized and uniform than products because they depend upon performance of employees and individuals

Consistency is gained through training, standard operating procedures, and mechanization of support areas Automatic coin receptacles on

toll roads

© 2001 South-Western College Publishing

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HOW SERVICES DIFFER FROM GOODS

Intangibility

Inseparability

Heterogeneity

Perishability

Services cannot be stored, warehoused or inventoried An empty seat in a theatre

cannot produce revenue later A car not rented results in no

revenue for that day

This condition of perishability results in discount pricing of services at almost any price greater than their variable cost.

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MARKETERS SHOULD NEVER SELL PRODUCTS TO CONSUMERS

People buy holes, not drills!

People buy fashion, status, reference groups approval, and warmth, but not coats!

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TYPES OF CONSUMER PRODUCTS

•Convenience

•Shopping

•Specialty

•Unsought

Is relatively inexpensive and merits little shopping effort (combs, aspirin, tissues)

Is more expensive and found in fewer stores; invest some shopping effort; compare several brands

Homogeneous

Heterogeneous

Expensive; compare many brands; reluctant to accept substitutes

New goods

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PRODUCT ITEMS, LINES AND MIXES

A product item is a specific version of a product

A product line is a group of closely related product items

A product mix includes all the products a company sellsMix width (breadth) = number of product lines

offeredMix depth = number of items in a product line

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PRODUCT MIX

DepthWidthConsistency/Variety

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PRODUCT ITEMS, LINES AND MIXES

Organizations derive several benefits from organizing related items into product lines, including the following:Advertising economiesPackage uniformityStandardized componentsEfficient sales and distributionEquivalent quality

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ADJUSTMENTS TO PRODUCT ITEMS, LINES AND MIXES

Product modifications Quality or durability modifications Functional modifications Style modifications

Repositioning Changing consumer perceptions of a brand May require physical changes in the product Changing target customers

Product line extensions Add products to an existing product line

Product line contraction

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A BRAND is a name, term, symbol, design or combination that identifies a seller’s products and differentiates them from competitors’ products.

A BRAND NAME is that part of a brand that can be spoken, including letters, words and numbers. If it cannot be spoken, it is called a BRAND MARK

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BRANDING DEFINITIONS Logo: a brand name or company name written in a distinctive way Trademark: A legally protected brand name or brand mark. A registered

trademark gives a marketer proprietary rights to a symbol or name. Service mark: provides the same identifying function for services that a

trademark provides for goods. It can also be legally protected by registration Generic Name: describes a product or an item that is, or has become part of

our standard vocabulary (scotch tape, kerosene, linoleum)

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BENEFITS OF BRANDING

The creation of BRAND EQUITY

The development of a MASTER BRAND

The economic value of company and brand names because of their positive image in the minds of their consumers (MICROSOFT)

Top-of-mind brand for consumers when they think of a category of products (NIKE for shoes)

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SELECTING A BRAND NAME Easy to remember and pronounce Short and distinctive Invokes a positive connotation Suggests product function Suggests an image Communicates attributes and benefits Communicates something about the users Avoids linguistic traps Translates globally well

Jiffy Cake MixPassion CologneDust BusterSoft n Silky

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GENERIC PRODUCTS versus BRANDED PRODUCTS

A generic product is typically a no-frills, no-brand-name, low-cost product that is simply identified by its product category

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TYPES OF BRANDS

MAUFACTURER’S BRANDS = Name is owned and advertised by the manufacturer or under their guidelines

DISTRIBUTOR’S OR PRIVATE BRANDS = Name is owned and controlled by a wholesaler or retailer

Black & Decker

Sears

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BREADTH OF BRAND NAMES

FAMILY: a single brand name for a product line (Campbell’s Soups)

INDIVIDUAL: separate brand names for items within a line (Snickers, Milky Way, Three Musketeers)

COMBINATION OF ABOVE: (Kellogg’s Rice Krispies)

WORLD: ( Levi’s, Marlboro, Coca-Cola ) Concept of Co-branding

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PACKAGING AND LABELING

FunctionsContainmentProtectionPromotion & aestheticsFacilitate storage, use and

convenienceRecycling and reduce

environmental damage

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PACKAGING AND LABELING

FunctionsPersuasiveInformationalUniversal product codesLegal requirements

WarrantiesExpressImplied

Warranty…………………………………………………...