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Product: anything that can be offered in a market for attention, acquisition, use, or
consumption That might satisfy a need or want
A. Goods
B. Services
A. Products (Goods):
Product levels:
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Product classifications:
Consumer Products
Consumer products are products and services that are purchased for personal
consumption.
They are classified by how consumers buy them:
Convenience products are products that are purchased frequently, with little
planning.
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Shopping products are products that are purchased less frequently, and
consumers typically compare prices and features before making a
purchase.
Specialty products are products that have unique features or brand images,
and consumers are willing to make a special effort to purchase them.
Unsought products are products that consumers do not normally think
about buying, and they may need to be persuaded to purchase them.
Industrial Products
Industrial products are products that are purchased for further processing or for
use in conducting a business.
They are classified by the purpose for which the product is purchased:
Materials and parts (raw materials) are products that are used to create
other products.
Capital goods are products that aid in the production of other products.
Supplies and services are products that are used to maintain and repair
capital goods.
Consumer products classifications:
Convenience Products
Buying Process: The customer usually buys frequently, immediately, and with a
minimum comparison and buying effort.
Price: Relatively low.
Place / Distribution: Widespread.
Promotion: Mass.
Examples: Newspapers, candy, fast food.
Shopping Products
Buying Process: The customer compares carefully on suitability, quality, price,
and style.
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Price: Higher.
Place / Distribution: Selective.
Promotion: Advertising and personal selling.
Examples: Furniture, cars, appliances.
Specialty Products
Buying Process: The product has unique characteristics or brand identification
for which a significant group of buyers is willing to make a special purchase
effort.
Price: High.
Place / Distribution: Exclusive.
Promotion: Carefully targeted.
Examples: Medical services, designer clothes, high-end electronics.
Unsought Products
Buying Process: The consumer does not know about or knows about but does
not normally think of buying.
Price: Varies.
Place / Distribution: Varies.
Promotion: Aggressive.
Examples: Life insurance, funeral services, blood donations.
1. Product and service decisions:
Product Attributes
Quality
The level of quality that supports the product's positioning.
This can be achieved through a variety of means, such as using highquality materials, rigorous testing, and providing a warranty.
Features
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A competitive tool for differentiating a product from competitors' products.
Features can be physical, such as the size or shape of a product, or they
can be intangible, such as the warranty or customer service that is offered.
Style
The appearance of the product.
This can be influenced by a variety of factors, such as the color, shape, and
materials used.
Design
A product's usefulness and its looks.
The design of a product should be functional and aesthetically pleasing.
Branding
Brand
The name, term, sign, or design—or a combination of these—that identifies
the maker or seller of a product or service.
A brand can be a powerful tool for differentiating a product from competitors'
products.
Brand equity
The differential effect that the brand name has on customer response to the
product.
Brand equity can be built through a variety of means, such as advertising,
public relations, and customer loyalty programs.
Packaging
Designing and producing the container or wrapper for a product.
Packaging should protect the product, be easy to use, and be attractive to
consumers.
Labeling
Identify the product or brand, describe attributes, and provide promotion.
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Labeling should be clear and easy to understand, and it should provide all of
the necessary information about the product.
Product Support Services
Identify the product or brand, describe attributes, and provide promotion.
Product support services can help to differentiate a product from competitors'
products and can also help to build customer loyalty.
2. Product line decisions:
Product line: 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
Product line length: is the number of items in the product line
1. Line filling (adding more items in the same range)
2. Line stretching (lengthen the line beyond the range)
A. Downward to fill a gap
B. Upward to add prestige
3. Product mix decisions:
Product mix: consists of all the products and items that a particular seller offers for
sale
a. Width: number of product lines of a company
b. Length: number of items in a product line
c. Depth: number of versions of products in a product line
d. Consistency: how closely related the product lines are in their use
What else is marketed?
1. Organization marketing: consists of activities undertaken to create, maintain, or
change attitudes and behavior of target consumers toward an organization
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2. Person marketing: consists of activities undertaken to create, maintain, or change
attitudes and behavior of target consumers toward particular people
3. Place marketing: consists of activities undertaken to create, maintain, or change
attitudes and behavior of target consumers toward particular places
4. Social marketing: is the use of commercial marketing concepts and tools in
programs designed to influence individuals’ behavior to improve their well-being and
that of society
B. Services:
Services marketing:
Intangibility means that services cannot be seen, tasted, felt, or smelled before
purchase. This makes it difficult for consumers to evaluate services before they buy
them. For example, you cannot see, taste, feel, or smell a haircut before you get it.
Variability means that the quality of services can vary depending on who provides
them, when, where, and how they are provided. This can make it difficult for
consumers to get consistent service from different providers. For example, the
quality of a haircut can vary depending on the skill of the hairstylist, the time of day
you get it, and the location of the salon.
Inseparability means that services cannot be separated from their providers. This
means that the consumer is involved in the production of the service, which can
affect the quality of the service. For example, the quality of a haircut depends on the
interaction between you and the hairstylist.
Perishability means that services cannot be stored for later sale or use. This
means that services must be produced and consumed at the same time, which can
create challenges for service providers. For example, a haircut cannot be stored for
later use.
In addition to traditional marketing strategies, service firms often require
additional strategies:
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1. Service-profit chain links service firm profits with employee and customer
satisfaction
2. Internal marketing means that the service firm must orient and motivate its customer
contact employees and supporting service people to work as a team to provide
customer satisfaction (internal marketing must precede external marketing)
3. Interactive marketing means that service quality depends heavily on the quality of
the buyer-seller interaction during the service encounter
Branding strategy: building strong brands:
1. Brand positioning
Brand strategy decisions include:
• Product attributes (lowest level)
• Product benefits
• Product beliefs and values (strongest level)
2. Brand name selection
Desirable qualities when choosing a name:
• Suggest benefits and qualities
• Easy to pronounce, recognize, and remember
• Distinctive
• Extendable
• Translatable for the global economy
• Capable of registration and legal protection
3. Brand sponsorship
• Manufacturer’s brand (store brand)
• Licensed brand
• Co-brand
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4. Brand development strategies
New-product development strategy:
Two ways to obtain new products:
Acquisition: the buying of a whole company, a patent, or a license to produce
someone else’s product
New product development: original products, product improvements, product
modifications, and new brands developed from the firm’s own research and
development
Major stages in new-product development:
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New-Product Development Process:
Idea Generation
Systematic search for new-product ideas
Sources of new-product ideas:
Internal: R&D, management, staff, intrapreneurial programs
External: customers, competitors, distributors, suppliers, design firms
Idea Screening
Identify good ideas and drop poor ideas
R-W-W framework: is it real, can we win, is it worth doing?
Concept Development and Testing
Concept testing refers to testing new-product concepts with groups of target
consumers
1. Product idea: an idea for a possible product that the company can see
itself offering to the market
2. Product concept: a detailed version of the idea stated in meaningful
consumer terms
3. Product image: the way consumers perceive an actual or potential product
Marketing Strategy Development
Initial marketing strategy for introducing the product to the market
Marketing strategy statement should include:
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Description of the target market
Value proposition
Sales and profit goals
Business Analysis
Review of the sales, costs, and profit projections to determine whether they
meet the company's objectives
Product Development
Create and test one or more physical versions of the product by the R&D or
engineering departments
Test Marketing
Introduce the product and marketing program into more realistic marketing
settings
It provides the marketer with experience in testing the product and entire
marketing program before full introduction
When firms test market
New product with large investment
Uncertainty about product or marketing program
When firms may not test market
Simple line extension
Copy of competitor product
Low costs
Management confidence
Product life-cycle strategies:
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Product development:
Sales are zero and investment costs increase Product development
Introduction
Slow sales growth and profits are nonexistent
Growth
Rapid market acceptance and increasing profits.
Maturity
Slowdown in sales growth and profits level off or decline
Decline
Sales fall off and profits drop
Pricing strategies:
Price is the amount of money charged for a product or a service. It is one of the most
important elements in the marketing mix, and it can have a significant impact on a
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company's market share and profitability.
There are many different pricing strategies that companies can use. Some of the most
common include:
Customer value-based pricing: This strategy involves setting prices based on
how much value consumers place on the benefits they receive from the product.
Good-value pricing: This strategy involves offering the right combination of quality
and good service at a fair price.
Value-added pricing: This strategy involves adding value-added features and
services to a product to differentiate it from the competition and justify a higher
price.
Cost-based pricing: This strategy involves setting prices based on the costs of
producing, distributing, and selling the product plus a fair rate of return for the
company's effort and risk.
Competition-based pricing: This strategy involves setting prices based on
competitors' strategies, costs, prices, and market offerings.
When setting prices for new products, companies often use either market-skimming
pricing or market-penetration pricing.
Market-skimming pricing: This strategy involves setting a high initial price to
"skim" revenue layers from the market. This strategy is often used for products that
are perceived as being high-quality or innovative.
Market-penetration pricing: This strategy involves setting a low initial price in
order to penetrate the market quickly and deeply. This strategy is often used for
products that are in a competitive market or that are new to the market.
Place (distribution):
Supply chain management: is the process of managing upstream and downstream
value-added flows of materials, final goods, and related information among suppliers,
the company, resellers, and final consumers
Supply chain: “make and sell” view includes the firm’s raw materials, productive inputs,
and factory capacity
Demand chain: “sense and respond” view suggests that planning starts with the needs
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of the target customer, and the firm responds to these needs by organizing a chain of
resources and activities with the goal of creating customer value
Value delivery network: is the firm’s suppliers, distributors, and ultimately customers
who partner with each other to improve the performance of the entire system
Intermediaries: offer producers greater efficiency in making goods available to target
markets. through their contacts, experience, specialization, and scale of operations,
intermediaries usually offer the firm more than it can achieve on its own.
From an economic view: intermediaries transform the assortment of products into
Assortments wanted by consumers
channel members add value by bridging the major time, place, and possession
gaps that
Separate goods and services from those who would use them
How Intermediaries Add Value
Information
Promotion
Contact
Matching
Negotiation
Physical distribution
Financing
Risk taking
Disintermediation: occurs when product or service producers cut out intermediaries
and go
Directly to final buyers, or when radically new types of channel intermediaries displace
traditional
Ones
Channel Design Decisions
Targeted levels of customer service
What segments to serve
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Best channels to use
Minimizing the cost of meeting customer service requirements
Types of intermediaries
Number of marketing intermediaries
Responsibilities of channel members
Channel Design Decisions: Identifying Major Alternatives
Intensive distribution
Candy and toothpaste
Selective distribution
Television and home appliance
Exclusive distribution
Luxury automobiles and prestige clothing
Channel Management Decisions
Selecting channel members
Managing channel members
Motivating channel members
Evaluating channel members
Marketing Logistics and Supply Chain Management
Warehousing: includes all activities involved in selling goods and services to those
buying for-resale or business use. Decisions: How many, What types, Location,
Distribution centers.
Inventory management: Just-in-time systems, exact product location, automatic
order-placing.
Transportation: affects the pricing of products, delivery performance, and condition
of the goods when they arrive. (Truck, Rail, Water, Pipeline, Air, Internet)
Logistics information management: the management of the flow of information,
including customer orders, billing, inventory levels, and customer data.
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Promotion
The Specific Blend of Advertising, Public Relations, Personal Selling, and Direct
Marketing Tools That the Company Uses to Persuasively Communicate Customer
Value and Build Customer Relationships
The Promotion Mix: The promotion mix is the combination of advertising, public
relations, personal selling, and direct marketing that a company uses to reach its target
market and achieve its marketing objectives.
The Major Promotion Tools
Advertising: Any paid form of non-personal presentation and promotion of ideas,
goods, or services by an identified sponsor.
Broadcast advertising
Print advertising
Internet advertising
Outdoor advertising
Sales promotion: Short-term incentives to encourage the purchase or sale of a
product or service.
Discounts
Coupons
Displays
Demonstrations
Public relations: Building good relations with the company's various publics by
obtaining favorable publicity, building up a good corporate image, and handling or
heading off unfavorable rumors, stories, and events.
Press releases
Sponsorships
Special events
Web pages
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Personal selling: The personal presentation by the firm's sales force for the
purpose of making sales and building customer relationships.
Sales presentations
Trade shows
Incentive programs
Direct marketing: Involves making direct connections with carefully targeted
individual consumers to both obtain an immediate response and lasting customer
relationships, through the use of direct mail, telephone, direct-response television,
email, and the internet to communicate directly with specific consumers.
Catalogs
Telemarketing
Kiosks
The New Marketing Communications Landscape
Consumers are better informed.
There is more communication.
There is less mass marketing.
Communications technology is changing.
Integrated Marketing Communications
Integrated marketing communications (IMC) is the integration by the company of its
communication channels to deliver a clear, consistent, and compelling message about
the organization and its brands.
Steps in Developing Effective Marketing Communication
1. Identify the target audience:
What will be said
How it will be said
When it will be said
Where it will be said
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Who will say it
2. Determine the communication objectives.
Marketers seek a purchase response that results from a consumer decision making
process that includes the stages of buyer readiness
Awareness → Knowledge → Liking → Preference → Conviction → Purchase
3. Design the message.
Message content is an appeal or theme that will produce the desired response
1. Rational appeal relates to the audience’s self-interest
2. Emotional appeal is an attempt to stir up positive or negative emotions to
motivate a purchase
3. Moral appeal is directed at the audience’s sense of right
4. Choose the media.
Personal communication involves two or more people communicating directly with
each other
Face to face, Phone, Email, Internet chat
Non-personal communication is media that carry messages without personal
contact or feedback, including major media and events that affect the buyer directly
5. Select the message source.
The message’s impact on the target audience is affected by how the audience
views the communicator
Celebrities
Athletes
Entertainers
Professionals
Health care providers
Setting the Total Promotion Budget and Mix
1. Affordable budget method: sets the budget at an affordable level and ignores the
effects of promotion on sales
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2. Percentage of sales method: sets the budget at a certain percentage of current or
forecasted sales or unit sales price
3. Competitive-parity method: sets the budget to match competitor outlays,
representing industry standards
4. Objective-and-task method: sets the budget based on what the firm wants to
accomplish with promotion
Final Revision:
1. How are specialty products distributed?
Answer: Specialty products are distributed through only one or a few exclusive
outlets per
market area.
2. What are the desirable qualities for a brand name?
Answer: Desirable qualities for a brand name include the following: (1) it should
suggest
something about the product's benefits and qualities; (2) it should be easy to
pronounce,
recognize, and remember; (3) it should be distinctive; (4) it should be extendable;
(5) the name
should translate easily into foreign languages; and (6) it should be capable of
registration and
legal protection.
3. Each product will have a life cycle, although its exact shape and length is not known
in
advance. Briefly explain each phase of the product life cycle, and give an example
for
each phase.
Answer: Product development begins when the company finds and develops a
new-product idea. Sales are zero and the company's investment costs mount.
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Introduction 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. Growth is a period of rapid market acceptance and increasing
profits. Maturity 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. Decline is
the period when sales fall off and profits drop. A company may seek to reinvigorate
a product in decline or maintain it hoping competition will diminish or harvest it or
drop it. (+ personal example)
1. When McDonald's and other fast food restaurants offer "value menu" items at
surprisingly low prices, they are most likely using ________.
A) break-even pricing
B) target profit pricing
C) good-value pricing
D) cost-plus pricing
E) target return pricing
2. ________ involves setting prices based on the costs for producing, distributing, and
selling the product plus a fair rate of return for effort and risk.
A) Value-based pricing
B) Competition-based pricing
C) Cost-based pricing
D) Penetration pricing
E) Break-even pricing
3. Companies facing the challenge of setting prices for the first time can choose
between
two broad strategies: market-penetration pricing and ________.
A) comparative pricing
B) competitive pricing
C) market-skimming pricing
D) market-segmentation pricing
E) cost-plus pricing
4. Product mix ________ refers to the total number of items a company carries within
its
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product lines.
A) length
B) depth
C) height
D) width
E) consistency
5. Product mix ________ refers to the number of versions offered for each product in
the
line.
A) length
B) depth
C) height
D) width
E) consistency
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