CHAPTER 5

Product and Services

Strategy
Objective: defining and classifying
products, in addition discussing the
decisions that marketers make
regarding products.

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.
Products include more than just tangible
goods but intangible services e.g.
banking, home repair, consultancy.
A product has three levels: the core
product, actual product, and augmented
product;

core product: is the basic problem-solving

benefit that consumers seek when they
buy a product. e.g. a woman buying a
lipstick buys more than lip color but
hopes as well. That is why, when
designing products, marketers first define
the core benefit that the product will
provide to consumers.
actual product: may have five
characteristics - a quality level, features,
design, a brand name, and packaging.
augmented product: offers additional
consumer services and benefits. e.g.
warranty, repair services...

Product Classification

Products are divided into two as:

consumer products and industrial
products:

Consumer products; are those bought by

final consumers for personal consumption.
Consumer products include convenience
products, shopping products, specialty
products, and unsought products. These
products differ in the way how consumers
buy and how marketers market them.

Convenience products: are bought frequently with

minimum comparison and effort e.g. soap, candy,
newspapers... are usually low priced and highly
distributed.
Shopping products: are less frequently purchased,
compared carefully on quality, price, style,
suitability e.g. furniture, clothing, used car are
less distributed but given more sales support.
Specialty products: have unique characteristic and
brand identification for some consumers who spend
special effort to purchase e.g. specific brands and
types of cars, high-priced photographic equipment,
custom-made mens suits e.g. Rolls Royce buyers
do not compare specialty products, they only invest
the time needed to reach the sellers.
Unsought products: are not known by the
consumers or not normally thought to be bought e.g
life insurance, blood donation they require a lot of
promotions and marketing efforts

Industrial products; are those purchased

for further processing or for use in
conducting a business. There are three
groups of industrial products: materials and
parts, capital items, supplies and services.
Materials and parts: include raw materials, sold
directly to industrial users. Price and service
are the major marketing factors rather than
advertising.
Capital items: are industrial products that aid in
the buyers production or operations including
accessory e.g. fax machines desk
Supplies and services: supplies include e.g.
paper, pencils.. Services include e.g. window
cleaning, computer repair, legal consultancy
are usually supplied under contract.

Individual Product
Decisions

There are five important decisions to

be made in the development and
marketing of individual products;
product attributes
branding
packaging
labeling
product-support services

Product Attributes

The benefits that the product will

offer would be based on (1) quality,
(2)features, and (3) design.

Product Quality
Product quality (customer value) has
two dimensions - level and consistency.
Companies must choose a quality level
that matches target market needs and
the quality level of competing products.

Product Features
Features are a competitive tool for
differentiation the companys product
from competitors products. In order to
add new features to its products,
companies can survey its customers.
Product Design
Product design contributes to a
products usefulness and appearance.
Good design can attract attention,
improve product performance, cut
production costs, give the product a
strong competitive advantage.

Branding

A brand is a name, term, sign, symbol or design

or a combination of these to identify the goods
and services of one seller or group of sellers
and to differentiate them from those of
competitors.
For the consumers; brand names help
consumers identify products, get an idea about
the product quality, promise consistency in
quality.

For the producers; brand names provide

legal protection for unique product features
and prevent them to be copied by
competitors. Plus, helps the seller to
segment markets.
Brand Equity
Brand equity is the value of a brand. Brands
vary in the amount of power and value that
they have in the marketplace. A powerful
brand has high brand equity. If the brand
has higher brand loyalty, name awareness,
perceived quality; the brand is accepted to
be having a strong brand equity.

Branding Decisions
Major branding decisions are (1) selecting
the brand name, (2) finding a brand
sponsor, (3) identifying the brand strategy,
(4) repositioning the brand.
Brand Name Selection: A good brand
differentiates the product, communicates its
benefits, suits the target market and
marketing strategies.
Brand Sponsor: A producer has four
sponsorship options. The product may be
sold (1) as a manufacturers (producers)
brand, (2) to a reseller (middleman) who
give it a private

brand (who create and own the brand), (3) as

a licensed brand (a company may be licensed
to sell its products under another companys
brand), or (4) as a co-brand (two companies
combine their brands and create a new one).
Brand strategy: A company has four choices;
line extension; using a successful brand name to
introduce additional items in an existing product
category under the same brand name, such as new
flavors, forms, colors, added ingredients, or
package sizes. Meets consumer desires for variety,
works best when it decreases competition.
brand extension ; using a successful brand name
to launch a new product in a new category. Helps
the

company introduce new product categories more

easily, provides instant recognition and
acceptance, decreases advertising costs. But may
be dangerous if it fails, because it may tarnish the
companys whole image.
multibrands; a strategy under which a seller
develops two or more brands in the same product
category. Offers a way to establish different
features and appeal to different types of buyers,
therefore, may increases the market share of the
company.
new brands; introducing new brand names in new
product categories. Demands lot of company
resources, that is why, nowadays some companies
use megabrand strategies - spending resources
only on brands that can achieve the number one
or two market share position in their categories
and dropping the weaker brands.

Four Brand Strategies

Product Category
Existing
Existing
Brand Name
extention

New

Line
extention

New
New

Multibrands
brands

Brand

Packaging

The activities of designing and producing the

container or wrapper for a product.
There are three packages - the products
primary container; a secondary package that is
thrown away when the product is about to be
used; and the shipping package to ship and
store the product.
Packaging decisions are based on cost and
production.
Packages attract attention and describe the
product.

Labeling

Labels may range from tags attached to

products to graphics that are part of the
package.
Labels may (1) identify, (2) grade, (3) describe,
or (4) promote (through attractive graphics) the
product or brand.
Labels can mislead customers, fail to describe
important ingredients or fail to include
important safety warnings. That is why, laws
regulate labeling in (1) unit pricing, (2) shelf
life, and (3) nutritional value

Product-Support Services

The product-support services augment the

actual product, can help the product to gain a
competitive advantage and create customer
loyalty.
The company should periodically survey its
customers to assess its customers satisfaction
and to get new ideas for product
improvements.
E.g. services to handle complaints, credits,
maintenance, technical issues, customer
information.

Product Line Decisions

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. E.g. Nike produces
several lines of athletic shoes.
In developing product line strategies,
marketers decide on;

product line length; the number of items in

the product line. Product line length is
influenced by company objectives. If the
company wants to position itself as a full-line
company or wants to have high market share
and growth, the company prefers to carry a
longer line. Product lines tend to lenghten
over time. However, such line increases raise
the costs of design, inventory, production,
promotion, that is why, pruning is inevitable.
increasing the length of the product line ;
there are two ways - by streching and filling.
Product line streching occurs when a
company

lengthens (downward, upward or both

ways) its product line beyond its
current range. E.g. Xerox, Marriott
Hotels... On the other hand, product
line filling occurs when a company
adds more items within the present
range of the line. Reasons are;
reaching for extra profit, tyring to
satisfy dealers, use excess capacity,
be the leading full-line company, plug
holes to keep out competitors. E.g.
Sony solar-powered and waterproof
Walkman.

Product Mix Decisions

A product mix (or product assortment)

includes all the product lines and items
that a particular seller offers for sale. E.g.
Avons product mix includes cosmetics,
jewellery, fashion each with sublines such
as lipstick, eyeliner
A companys product mix has four
dimensions: width, length, depth, and
consistency.

Width; refers to the number of different product

lines the company carries. E.g. Procter & Gamble
has a product mix of six lines as detergents,
toothpaste, bar soap, deodorants, fruit juice, and
lotions.
Length; refers to the total number of items that
the company carries. E.g. P&G has 42 different
products under its six lines.
Depth; refers to the number of versions offered of
each product in the line. E.g. one of the products
of P&G may have different sizes and formulations.
Consistency; refers to how closely related the
various product lines are. E.g. P&Gs products are
consistent in the way that they are all consumer
products, but inconsistent in the way that they
perform different functions for buyers.

Services Marketing

Service industries are quite varies:

governmental services - courts,
hospitals, police, fire departments,
postal services, schools etc; private
nonprofit organizations - museums,
colleages, hospitals etc; business
organizations - airlines, hotels,
restaurants, advertising, real estate
etc.

Nature and Characteristics of

a Service

Service intangibility; means that services cannot

be seen, tasted, felt, heard or smelled before
they are bought. That is why, buyers look for
signals for service quality from the place,
people, price, equipment and communications
that they can see.
Service inseparability; means that services
cannot be separated from their providers. If a
service employee provides the service, then the
employee is part of the service. Both the provider
and the customer affect the service outcome.

Service variability; means that the quality of

services depends on who provides them, plus,
when, where, and how they are provided. E.g.
within a given Marriott hotel, one reception
desk agent may be cheerful and efficient,
another would be unpleasant and slow. Service
providers service quality depends on his energy
and his frame of mind at the time of each
customer encounter.
Service perishability; means that services
cannot be stored for later sale or use. E.g. the
demand for public transportation during the
rush-hour. Service perishability is a serious
problem when demand fluctuates. Here, the
marketer needs to design strategies for
producing better match

between demand and supply. E.g.

hotels charge lower rates in the offseason to attract more guests;
restaurants hire part-time employees to
serve during peak periods; tour
operators and airline companies have
last-minute sales.

Marketing Strategies for

Service Firms

Services are different form tangible

products, that is why, additional marketing
approaches are needed to market services.
In service businesses, the customer and
front-line service employees interact.
Service providers must interact effectively
with customers to satisfy them. That is
why, companies take care of their
employees to make profit. Because they
believe that only

satisfied and productive service

employees can create satisfied and loyal
customers.
Internal marketing; means that the service
firm must effectively train and motivate its
customer-contact employees to provide
customer satisfaction.
Interactive marketing; means that service
quality depends on the quality of the buyerseller interaction during the service
encounter.

In order to increase the profit margin,

there are three major marketing tasks for
service companies;

Managing Service Differentiation

Differentiated offer, delivery and

image are the keys for the solution
to price competition.

The offer can provide innovative

features like e.g. in-flight movies,
advance seating, frequent-flyer award
programs in an airlines. British Airways
offers a sleeping compartment and hot
showers.

The delivery can be differentiated by

having better customer-contact
people, developing a superior
physical environment, or by
designing a superior deliver process
like e.g. home banking can be
provided as a better way to deliver
banking services.
The image can differentiate the
service company through symbols
and branding.

Managing Service Quality

A service firm can also differentiate

itself by delivering consistently higher
quality than its competitors do.

Service quality will always vary,

depending on the interactions between
employees and customers. A company
cannot always prevent service problems
but can recover them. A good service
recovery can turn angry customers into
loyal ones. Companies empower front-line

service employees (giving authority

to do whatever it takes to keep
customers happy) to recover
problems.
Good service companies also
communicate their qualities to
employees and provide performance
feedback.

Managing Service Productivity

Service productivity can be increased by;

training the employees better or hiring new and

better employees
industrializing the service with equipment and
standardized production as in McDonalds
using technology to save time and money

Trying to increase the productivity would

reduce quality and diminish customer
service. That is why, some service providers
accept to have lower productivity levels.

Marketing
Organizations, Persons,
Places, and Ideas

Organization marketing; consists of activities

undertaken to create, maintain, or change the
attitudes and behavior of target customers toward
an organization. Corporate image advertising is a
major tool for a company to build up or maintain
its favorable image in various publics over many
years.
Person marketing; consists of activities
undertaken to create, maintain, or change
attitudes or behavior toward particular people.
Politicians, entertainers, business leaders etc.
practice persons marketing.

Place marketing; involves activities undertaken

to create, maintain or change attitudes or
behavior toward particular places. There are
two basic types - business site marketing and
tourism marketing. Business site marketing
involves developing, selling, or renting sites for
factories, stores etc.Tourism marketing
involves attracting vacationers to tourist
locations and organizations e.g. I love New
York.
Idea marketing; also called social marketing,
involves the marketing of social ideas such as
public health (e.g. drug abuse), family
planning, environmental (e.g. protecting the
wild life) campaigns.

International Product
and Service Marketing

International product and service

marketers must;
first; figure out what products and
services to introduce and in which
countries
second; decide how much to
standardize or adapt their products
and services

standardization helps a company to

build a consistent worldwide image,
reduces production, research and
development, advertising and
product design costs.
adaption helps a company to develop
its product offering in a way that
satisfies customers with different
attitudes, buying behaviors and
cultures.