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CHAPTER 2

PRODUCT IN
THEORY AND
PRACTICE

WHAT IS PRODUCT?
Is the object the exchange
process, the thing which the
producer or supplier offers to a
potential customer in exchange for
something else which the supplier
perceives as of equivalent or a
greater value.

THREE BROAD CATEGORIES OF


DEMAND

EFFECTIVE
POTENTIAL
LATENT

EFFECTIVE DEMAND
Is the kind of demand in which economist are primarily interested
and my be defined as demand backed up by purchasing power

LATENT DEMAND
May be thought of as one which the consumer is unable to satisfy,
usually for lack of purchasing power

POTENTIAL DEMAND
May be said to exist where a consumer possesses purchasing power but not
currently buying.

ASSUMPTION ABOUT
COSTUMER DEMAND

The costumers wants remain unchanged throughout

S/he has fixed the amount of money available


S/he one of many buyers
S/he knows the price of all goods, each of which is
homogeneous
S/he can, if s/he wishes spend their money in very small amount
S/he acts rationally

THREE BROAD FACTORS HAVE


GENERAL INFLUENCE ON DEMAND

DEMOGRAPICS
BUYER BEHAVIOR
AVAILABILITY

CLASSIFICATION OF CONSUMER
GOODS

COVENIENCE GOODS Those consumer


goods which the customer purchases frequently,
immediately and with the minimum of effort e.g.
chocolate, pens, shoe repair.

SHOPPING GOODS Those

consumer goods
which the costumer in the process of selection and
purchase characteristically compares on such bases as
suitability, quality, price and style, e.g. cosmetics, TVs
hairstyle.

SPECIALITY GOODS Those consumer


good on which a significant group of buyers are
habitually willing to make a special purchasing
effort, e.g. house, car, holiday

FOUR SPECIFIC PROBLEM


Ex post definition and circular logic :
Product are classified ex post and classification
theory gives no hint about how to classify new
products or how to change existing product.

The problem of induction :


Experiences with similar or existing products
give few guides to appropriate or optimum
strategy

Fussy sets : Product classification


of the same product differs according
to the nature of the consumer and at
different times for the same
consumer

Generalizability of scheme :
Application of a classification scheme
requires the specification of all
physical market and social context.

THE GROWTH OF BRANDING MAY


BE ATTRIBUTED TO MANY
FACTORS INCLUDING :
The growth of mass production and
consumption
Improved transportation and
communication
Advance in packaging
Increased literacy and the growth of
advertising

New types of retail outlet


Improved standards of living
The development of laws to
protect trademarks

BRAND BUILDING IS SEEN


ESSENTIAL TO :
Build stable , long term demand
Add the value looked for by customer
Develop a sound basis for future growth and
expansion
Maintain the interest of intermediaries,
specially retailers
Create a reputation as an organization that
people will want to develop relationships with .

SEVERAL IMPORTANT POINTS


IN BRANDING

Brand can take many forms and are not


just names
Brand are not restricted to physical
products
Most importantly, successful brands confer
a sustainable competitive advantage the
corollary being that unsuccessful brands
have precisely the opposite effect.

CHARACTERISTICS OF A BRAND
NAME
A form of identification or badge of origin
A promise of a certain level of consistency in
performance
Reassurance as to the authenticity and
authenticity and performance of the product
An indicator of the essential properties or
attributes of the product.

THE GLOBAL TOP TEN BRAND


NAMES /SOURCE BUSINESS WEEK

1.Coca -Cola

6. Nokia

2. Microsoft

7. Disney

3. IBM

8.McDonalds

4.GE

9. Toyota

5.Intel

10. Marlboro

CHARACTERISTICS OF A
PRODUCT
RELATIVE ADVANTAGE
COMPATIBILITY
COMPLEXITY
DIVISIBILITY
COMMUNICABILITY

THE BUYGRID ANALYTIC


FRAMEWORK
BUY CLASSES
NEW TASK
MODIFIED REBUY
STRAIGHT REBUY

THE BUYGRID ANALYTIC FRAMEWORK


FOR INDUSTRIAL BUYING SITUATIONS
1. ANTICIPATION OR RECOGNATION OF A PROBLEM
( NEED) AND A GENERAL SOLUTION
2 .DETERMANATION OF CHARACTERISTICS AND
QUALITY OF A NEEDED ITEM
3. DESCRIPTION OF CHARACTHERITICS AND QUANTITY
OF A NEEDED ITEM
4. SEARCH FOR AND QUALIFICATION OF POTENTIAL
SOURCES

5. ACQUISITION AND ANALYSIS OF PROPOSAL


6. EVALUATION PROPOSALS AND SELECTION OF
SUPPLIERS
7. SELECTION OF ORDER ROUTINE
8. PERFORMANCE FEEDBACK AND EVALUATION