Lecture 5
Principles of Marketing
Theocharis Katranis
Spring Semester 2013
Principles of Marketing
1
Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Today’s Lecture
1. Define Product and Product Classification
2. Define and Discuss Consumer and industrial Products
3. Discuss branding, Packaging, Labeling, and product
Support Services.
4. Discuss the Product mix Decisions.
5. Discuss the New Product Development Strategy and
Process as well as the Product Life-cycle Strategies.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
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.
Principles of Marketing
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Theocharis Katranis, MBA,
Spring Semester 2013
Lecture 5
What is a Service?
A Service is any activity or benefit that one
party can offer to another that is essentially
Intangible and does not result in the ownership
of anything.
Principles of Marketing
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Theocharis Katranis, MBA,
Spring Semester 2013
Lecture 5
The Three Levels of
Product and Services
1. Core Customer Value Level
2. An Actual Product Level
3. Augmented Product Level
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Theocharis Katranis, MBA,
Spring Semester 2013
Lecture 5
The Three Levels of
Product and Services
1. Core Customer Value Level
The Product Planners need to answer the
Question “What is the buyer really buying?”
Product Planners must first define the core,
problem-solving benefits or services that
consumers seek.
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Theocharis Katranis, MBA,
Spring Semester 2013
Lecture 5
The Three Levels of
Product and Services
2. An Actual Product Level
Product Planners must turn the core benefit into
an actual product.
Product Planners need to develop product an
services features, design, a quality level, a brand
name and packaging.
Principles of Marketing
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Theocharis Katranis, MBA,
Spring Semester 2013
Lecture 5
The Three Levels of
Product and Services
3. Augmented Product Level
Product Planners must build an augmented
product around the core benefit and actual
product by offering additional consumer services
and benefits.
Principles of Marketing
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Theocharis Katranis, MBA,
Spring Semester 2013
Lecture 5
The Three Levels of Product
and Services
Augmented Product
Delivery
and
Credit
Actual Product
Brand
Name
Product
Support
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Quality
Lever
Core
Customer
Value
After-sale
Service
Features
Design
Packaging
Warranty
Theocharis Katranis, MBA,
Spring Semester 2013
Lecture 5
Product and Services
Classifications
1. Consumer Products
2. Industrial Products
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Consumer Product
Definition:
It is a Product bought by final consumer for
personal consumption.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Consumer Products Classifications
1. Convenience Products
2. Shopping Products
3. Specialty Products
4. Unsought Products
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Consumer Products Classifications
1. Convenience Products
It is a consumer product that customers usually
buy frequently, immediately and with a
minimum of comparison and buying effort.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Consumer Products Classifications
2. Shopping Products
It is a consumer product that the customer, in
the process of selection and purchase, usually
compares on such bases as suitability, quality,
price, and style.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Consumer Products Classifications
3. Specialty Products
It is a consumer product with unique
characteristics or brand identification for
which a significant group of buyers is willing
to make a special purchase effort.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Consumer Products Classifications
4. Unsought Products
It is a consumer product that the consumer
either does not know about or knows about but
does not normally think of buying.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Consumer Products Classifications
Marketing
Considerations
Customer
Buying
Behavior
Price
Distribution
Promotion
Examples
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Industrial Products
Definition:
It is a Product bought by individuals and
organizations for further processing or for use in
conducting a business.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The Three Groups of
Industrial Products
1. Material and Parts
2. Capital Items
3. Supplies and Services
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The Three Groups of
Industrial Products
1. Material and Parts
Materials and Parts group include raw materials
(farm products like wheat, cotton) and
manufactured raw materials (like iron, cement,
wires) and parts (like small motors, tires).
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The Three Groups of
Industrial Products
2. Capital Items
Capital Items are Industrial products that aid in
the buyer’s production or operations including
installations (like factories, offices, generators)
and accessory equipment (like hand tools, lift
trucks, computers, fax machines).
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The Three Groups of
Industrial Products
3. Supplies and Services
Supplies include operating supplies (like
lubricants, pencils, paper) and repair and
maintenance items (like paint, nails, brooms).
Business Services include maintenance and repair
services (like window cleaning, computer repair)
and
business
advisory
services
(legal,
Management consulting, advertising)
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Individual Product
and Service Decisions
Individual Product Decisions
Product
Attributes
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Branding
Packaging
Theocharis Katranis, MBA
Labeling
Product
Support
Services
Spring Semester 2013
Lecture 5
Product and
Service Attributes
1. Product Quality
2. Product Features
3. Product Life and Design
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
1. Product Quality
Definition
It is the characteristics of a product or
service that bear on its ability to satisfy
stated or implied customer needs.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
2. Product Features
Definition:
The company decides to add more features
to a product in order to differentiate
company’s product from competitors
products.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
3. Product Life and Design
Product Designers should think less about product
attributes and technical specifications and more
about how customers will use and benefit from the
product.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Branding
Definition:
A Brand is a name, term, sign, symbol or design or
a combination of these, that identifies the maker or
seller of a product or service.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Packaging
Definition:
It is the activities of designing and producing
the container or wrapper for a product.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Labeling
Definition:
Labels range from simple tags attached to
products to complex graphics that are part of the
package.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Support Services
It is the decision of a company to fix any
problem related to the company’s products i.e. to
solve successfully a complaint by a customer.
Nowadays, many companies include support
services to their total offerings, because
companies realized that …
It is important for the customer and helps him to
build trust, positive relationship and confidence
with the company.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Line Decisions
Definition
It 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 ranges.
… I.e. BMW car series / HP printers and cartridges
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Line Decisions
1. Product Line Length
It is the number of items in the Product Line.
The line is too short if the managers can increase
profits by adding items.
The line is too long if the managers can increase
profits by dropping items.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Line Decisions
Reasons for Adding Items to the product line
1. Reaching for Extra Profits
2. Satisfying Dealers
3. Using Excess Capacity
4. Plugging holes to keep out competitors
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Line Decisions
Reasons for Dropping Items from the product line.
1. Large decrease in Sales of a product,
meaning lower profits for the company.
2. Too many competitors in one Market
Segment.
3. Increase of the Production Costs mainly to
the increase in the prices of Raw Materials.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Mix or
Product Portfolio
Decisions
Definition
A Product Mix consists of all the Product Lines
and Items that a particular seller offers for sale.
i.e. Sony Electronics, Sony Computer
Entertainment, Sony Pictures Entertainment and
Sony Financial Services.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Mix or
Product Portfolio
Decisions
The FOUR important Dimensions
1. Width
2. Length
3. Depth
4. Consistency
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Mix or
Product Portfolio
Decisions
The FOUR important Dimensions
1. Width
It refers to the number of different product
lines the company carries.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Mix or
Product Portfolio
Decisions
The FOUR important Dimensions
2. Length
It refers to the total number of items the
company carries within its corder line.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Mix or
Product Portfolio
Decisions
The FOUR important Dimensions
3. Depth
It refers to the number of versions offered to
each product in the line.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Mix or
Product Portfolio
Decisions
The FOUR important Dimensions
4. Consistency
It refers to how closely related the various
product lines are in end use, production
requirements, distribution channels.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
International Product
Decisions
Companies must pay special attention when
making Product decisions in foreign
markets.
Companies should collect and analyze all
possible and available information and then
to decide their actions.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Designing Product: New
Product Development and
Product Life-Cycle Strategies
New-product development is the development
of original products, product improvements,
product modifications, and new brands through
the firm’s own product-development efforts.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Reasons for Failure of New
Products
1. Overestimation of market size
2. Poor Design
3. Incorrectly Positioned
4. Launched at the wrong time
5. Priced too high
6. Poorly Advertised
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
New Product
Development Process
The EIGHT steps of the process
1. Idea
Generation
2. Idea
Screening
3. Concept
Development
and Testing
5. Business
Analysis
6. Product
Development
7. Test
Marketing
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Theocharis Katranis, MBA
4. Marketing
Strategy
Development
8. Commercialisation
Spring Semester 2013
Lecture 5
New Product
Development – Idea
Sources
1. Internal Data Sources
Ideas within the company i.e. Executives,
Scientist, Sales people, Manufacturing Staff.
2. External Data Sources
Ideas from Distributors and Suppliers.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The EIGHT steps Definitions
1. Idea Generation
It is the systematic search for New-product ideas.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The EIGHT steps Definitions
2. Idea Screening
It is the screening of New-product ideas in
order to spot good ideas and drop poor ones as
soon as possible.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The EIGHT steps Definitions
3. Concept Development and Testing
Concept Development is a detailed version of the
new-product idea stated in meaningful consumer
terms.
Concept Testing is the testing of new-products
concepts with a group of targets consumers to find out
if the concepts have strong consumer appeal.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The EIGHT steps Definitions
4. Marketing Strategy Development
It is the designing of an initial marketing strategy
for a new product based on the product concept.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The EIGHT steps Definitions
5. Business Analysis
It is the review of the sales, costs, and profit
projections for a new product to find out whether
these factors satisfy the company’s objectives.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The EIGHT steps Definitions
6. Product Development
It is the development of a product concept into a
physical product in order to ensure that the
product idea can be turned into a workable
market offering.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The EIGHT steps Definitions
7. Test Marketing
It is the stage of a new-product development in
which the product and marketing program are
tested in realistic market settings.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
The EIGHT steps Definitions
8. Commercialisation
It is the introduction of a new product into the
market.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Life-Cycles
Strategies
Definition of a Product Life-Cycle
It is the course of a product’s sales and profits
over its lifetime.
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Life-Cycles
Strategies
The FIVE stages of a Product Life-Cycle
1. Product Development.
2. Introduction
3. Growth
4. Maturity
5. Decline
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Life-Cycles
Strategies
1. Product Development.
It begins when the company finds and develops
a new-product idea.
During this period, sales are zero and the
company’s investments costs mount.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Life-Cycles
Strategies
2. Introduction
It is a period of slow sales growth as the product
is introduced in the market.
Profits are nonexistent in this stage because of
the heavy expenses of product introduction.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Life-Cycles
Strategies
3. Growth
It is a period of rapid market acceptance and
increasing profits.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Life-Cycles
Strategies
4. Maturity
It is a period of slowdown in sales growth
because the product has achieved acceptance by
most potential buyers.
Profits level off or decline because of increased
marketing outlays to defend the product against
competition.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Product Life-Cycles
Strategies
5. Decline
It is a period when sales fall off and profits
drop.
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
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Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Summary - Lecture 5
1. Defined Product and Product Classification
2. Defined and Discussed Consumer and industrial
Products
3. Discussed branding, Packaging, Labelling, and
product Support Services.
4. Discussed the Product mix Decisions.
5. Discussed the New Product Development Strategy and
Process as well as the Product Life-cycle Strategies.
Principles of Marketing
Theocharis Katranis, MBA
Spring Semester 2013
Lecture 5
Chapters 8 and 9
END of Lecture 5
Thank you for your attention
Principles of Marketing
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Theocharis Katranis, MBA
Spring Semester 2013