MKT 201 - Lec 5 Product Decisions

PRODUCT DECISIONSPRODUCT DECISIONS

Lecture # 5FEBRUARY 9, 2012

Text Reference: Principles of Marketing

Kotler & Armstrong

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

Explain product classificationsOutline the range of individual product decisionsIdentify the challenges of creating a new product

development strategyDiscuss how an idea moves from idea generation to

concept testingOutline how a potential product is developedExplain the purposes of test marketingDiscuss product life-cycle strategies

Unit 5 - - Product Decisions Learning Objectives

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 bundlebundle of benefits designed to meet the needs and problems of identified target markets.

What is a Product

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

Products include:Physical objects, services, events, places, persons., organizations,

ideas or mixes of these entities

The concept of a product is not limited to physical objects ServicesPeopleOrganizationsPlacesActivities (entertainment) Ideas (Kotler, Bowen, Makens, 1996)

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 orexperiences, benefits or valuesvalues that customer receive when they make a purchase

Features of a product

Prominent or distinctive characteristic of a product.

Product features include both the quality quality of its components and the tangible extrasextras that extend its basic functions to make it distinctive.

Features help to determine the positioning of the product

BenefitsWhat a product or service will dowill do for

the consumer as opposed to what the product is made of or how it is made.

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 Added elements – image, feel and customer appeal

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

Product levelsProduct levels

Core benefit benefit the customer is really buying – What is the buyer really buying? Experience, convenience, relaxation/problem solving, connectivity (mobile users)

Actual product Develop product and service features, design, a quality level, a brand name, and packaging.

(must be present for the customer to use it

Augmented product

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)

Discussion QuestionsDiscussion Questions

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

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:-

Nondurable goodsDurable goodsServices

Product/Service DecisionsProduct/Service Decisions

Marketers may embrace product/services decisions at three levels:

1. Individual product and service decisions2. Product line decision3. Product mix decision

Individual Product DecisionsIndividual Product DecisionsFig. 8.2Fig. 8.2

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

Product AttributesBrandingLabelingPackagingSupport services

Individual Product DecisionsIndividual Product Decisions

Defines the benefits it will offer

Product attributes include:Product Quality – a positioning tool used by marketers. Its the

product’s ability to satisfy stated or implied needs

Features – used as competitive tools (differentiation)

Style & design – distinctive appearance, attention grabber

Product And Service AttributesProduct And Service Attributes

Quality • Ease of operation and repair• Product style and design.

• Product Quality has two dimensions: Level and consistency.

• Quality level should support the product’s position in the target market.

• Product quality also means performance quality – the ability of the product to perform its functions.

• Freedom from defects

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:

i. identify productsii. confirm product - features,

benefits, and quality.

iii. Increases sellers advantages - legal trademark, for unique features of the product

iii. assists in market segmentation

Marketers need to build and manage brands

Branding StrategyBranding StrategyBrand Equity

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

The brand’s 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 BrandsBuilding Strong BrandsBrand Positioning

AttributesBenefits

Beliefs & Values

Brand Positioning

AttributesBenefits

Beliefs & Values

Brand SponsorshipManufactures

Private Brand

LicensingCo-branding

Brand Name Selection

Selection protection

Brand Positioning

AttributesBenefits

Beliefs & Values

Brand Development

Line Brand extensionsMultibrandsNew brands

Packaging

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.

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:-

Identification of products e.g. LASCO, GRACE

Describes the product- place, expiry date, contents (active ingreds. registered office

instructions for use, batch #

promotion of the product - graphics

Labelling can sometimes be misleading – laws

Fair Trading Commission

In addition to the functions labelling must:

now state shelf life, unit pricing & nutritional content

Pepsi’s New Logo pg 233

Product Support ServicesProduct Support Services

• Customer service is another element of product strategy. A company’s 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 DecisionProduct Line Decision

Beyond decisions about individual products and services, product strategy also calls for building a product line.

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.

• NikeNike produces several lines of athletic shoes and apparel.

• NokiaNokia produces several lines of telecommunication products.

Product Line DecisionProduct Line Decision

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

• Set of all product lines and items that a particular seller offers for sale.

• There are 4 dimensions to a company’s 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. Depth - number of versions offered of each product in the line.

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

SERVICES

VariabilityPerishability

Inseparability

Service 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).Marketers must find ways to enhance the service

quality (providers) and make service more tangible

Service VariabilityService 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 company’s culture of quality & excellence

Service InseparabilityService Inseparability

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

Service 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

The Service Profit ChainThe Service Profit Chain

Focuses on:Internal service quality – recruitment & selection

of employees which

o Internal marketing to enhance productivity & service delivery skills

o Satisfied employees o Greater service valueo Truly satisfied & loyal customerso Company profitability

REVIEWREVIEW

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.

For Review -Mini Case StudyFor Review -Mini Case Study

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