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Lecture # 5 FEBRUARY 9, 2012

PRODUCT DECISIONS Text Reference:


Principles of Marketing Kotler & Armstrong

Unit 5 - - Product Decisions Learning Objectives


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y y y y y y y

At the end of this unit students should be able to:


Explain product classifications Outline the range of individual product decisions Identify the challenges of creating a new product development strategy Discuss how an idea moves from idea generation to concept testing Outline how a potential product is developed Explain the purposes of test marketing Discuss product life-cycle strategies

What is a Product
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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 bundle of benefits designed to meet the needs and problems of identified target markets.

y y y

The value of a product derives from what is does for a customer (Lewis,Chambers,1995)

Products include: y Physical objects, services, events, places, persons., organizations, ideas or mixes of these entities
y y The concept of a product is not limited to physical y Services y People y Organizations y Places y Activities (entertainment) y Ideas (Kotler, Bowen, Makens, 1996)

objects

y y y

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 or values that customer receive when they make a purchase

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Features of a product
Prominent or distinctive characteristic of a product. Product features include both the quality of its components and the tangible extras that extend its basic functions to make it distinctive. Features help to determine the positioning of the product

Benefits y What a product or service will do for the consumer as opposed to what the product is made of or how it is made.
y y

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 y Added elements image, feel and customer appeal


y y

Customers view products a bundles of benefits and choose the best bundle for their money.

Product levels
Core benefit
benefit the customer is really buying What is the buyer really buying? Experience, convenience, relaxation/problem solving, connectivity (mobile users) Develop product and service features, design, a quality level, a brand name, and packaging. (must be present for the customer to use it 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)

Actual product

Augmented product

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

Discussion Questions

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:y y y

Nondurable goods Durable goods Services

Marketers may embrace product/services decisions at three levels:


1. 2. 3.

Individual product and service decisions Product line decision Product mix decision

Product/Service Decisions

Individual Product Decisions


Fig. 8.2

3. Packaging

2. Branding

Product and Service decisions

4. Labeling

1. Product Attributes

5. Product support service

Individual Product Decisions


As outlined in Fig 8.2 in developing and marketing individual products, major decisions are focused on:
y y y y y

Product Attributes Branding Labeling Packaging Support services

Product And Service Attributes


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Defines the benefits it will offer Product attributes include: Product Quality a positioning tool used by marketers. Its the products ability to satisfy stated or implied needs Features used as competitive tools (differentiation) Style & design distinctive appearance, attention grabber

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 Quality Ease of operation and repair Product style and design.

Product Quality has two dimensions: Level and consistency. Quality level should support the products position in the target market. Product quality also means performance quality the ability of the product to perform its functions. Freedom from defects

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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: identify products confirm product - features, benefits, and quality. Increases sellers advantages legal trademark, for unique features of the product assists in market segmentation Marketers need to build and manage brands

i. ii.

iii.

y y y

iii. y

Branding Strategy
y y

Brand Equity The differential effect that knowing the brand name has on customer response to the product or its marketing The brands 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 Brands


Brand Positioning Attributes Benefits Beliefs & Values Brand Sponsorship
Manufactures

Brand Name Selection Selection protection

Brand Development Line Brand extensions Multibrands New brands

Brand Positioning Attributes Benefits Beliefs & Values

Private Brand Licensing Co-branding

y Packaging
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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.

y y y

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: y

instructions for use, batch # y promotion of the product - graphics


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Labelling can sometimes be misleading laws y Fair Trading Commission


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Identification of products e.g. LASCO, GRACE Describes the productplace, expiry date, contents (active ingreds. registered office

In addition to the functions labelling must: y now state shelf life, unit pricing & nutritional content
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Pepsis New Logo pg 233

Product Support Services

Customer service is another element of product strategy. A companys 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 Decision


Beyond decisions about individual products and services, product strategy also calls for building a product line. y 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.
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Nike produces several lines of athletic shoes and apparel. Nokia produces several lines of telecommunication products.

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

Product Line Decision

Set of all product lines and items that a particular seller offers for sale. There are 4 dimensions to a companys 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.

number of versions offered of each product in the line.

Depth -

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

Inseparability

SERVICES

Variability Perishability

y Service
y

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). y Marketers must find ways to enhance the service quality (providers) and make service more tangible
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Service 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 companys culture of quality & excellence

Service Inseparability
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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

y Service
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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

y y

The Service Profit Chain


Focuses on: y Internal service quality recruitment & selection of employees which
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Internal marketing to enhance productivity & service delivery skills Satisfied employees Greater service value Truly satisfied & loyal customers Company profitability

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.

REVIEW

For Review -Mini Case Study


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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