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Kotler, Armstrong Principles of Marketing 4e Chapter 8 Products: Goods, Services and Experiences Chapter Objectives (1) 1. Describe the nature of product in marketing management. 2. Explain the concept of the goods–services continuum. 3. Define the term product, including the core, actual and augmented product. 4. Explain product classifications, and contrast the differing types of consumer products and business-to-business products. 5. Explain services classifications and discuss the marketing of services. Chapter Objectives (2) 6. Discuss an extended notion of product that includes marketing persons, experiencing events, places, political ideas, causes, non-profit services, and fundraising endeavours. 7. Outline the range of individual product decisions marketers make, discussing the product attributes of quality, features and design. 8. Discuss branding, and contrast the differences among line extensions, brand extensions, multibrands and new brands. Chapter Objectives (3) 9. Illustrate product line and product mix decisions, describing stretching and filling the product line length, line modernisation, line featuring and line width. 10. List some of the considerations marketers face in making international product decisions, including whether or not to standardise or adapt product and packaging. 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. It includes physical objects, services, persons, places, organisations and ideas. – The most basic level is the core product, which addresses the question: What is the buyer really buying? – Actual products may have as many as five characteristics: a quality level, features, styling, a brand name, & packaging. – Augmented product, additional consumer services and benefits built around the core and actual products. Descriptions of a product's quality, features, style, brand name, and packaging identify the: A. B. C. D. E. core product actual product augmented product tangible product intangible product Figure 8.2 Three Levels of Product Figure 8.3 An Illustration of the Three Levels of Product Product Classifications (1) • Consumer Products – Products bought by final consumers for personal consumption. • Convenience Products – Consumer goods and services that the customer usually buys frequently, immediately and with the minimum of comparison and buying effort. • Shopping Products – Consumer goods and services that the customer, in the process of selection and purchase, compares on the basis of suitability, quality, price and style. Product Classifications (2) • Speciality Products – Consumer goods and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. • Unsought Products – Consumer goods and services that the consumer either doesn’t know about or knows about but doesn’t normally think of buying. Table 8.2 Marketing Considerations for Consumer Products Business-to-Business (B2B) Products • B2B products: Goods bought by individuals and organisations for further processing or for use in conducting a business. • The three groups of business products: – Materials and parts– industrial goods that enter the manufacturer’s product completely, including raw materials and manufactured materials and parts. – Capital items- industrial goods and services that enter the finished product partly, including installations and accessory equipment. – Supplies and services- industrial goods and services that don’t enter the finished product at all. Figure 8.4 Classification of Business Products Services • Service organisations offer customers something that is intangible: the interaction does not result in the ownership of anything that endures. • Services are responsible for over 70%of ‘total value added’ and over 80% of ‘total employment’ in Australia. Characteristics of Services • Intangibility • High involvement and personal nature • Variability of service encounters • Synchronous delivery and consumption • Perishability of services Service Quality Measures • Service consumption mostly involves people in service encounters, services are experiential in nature and often require special measures to assess quality such as mystery shoppers. Extending the Classification of Goods and Services (1) • Event marketing – Combines elements of marketing goods with those of services, particularly the experiential aspects of sporting, entertainment and other staged events delivered over a period of time. • Person marketing – People such as athletes need to be marketed before they can be used for endorsements. In similar manner politicians are marketed. • Political marketing – Politicians market themselves as well as political ideologies and their political parties. Extending the Classification of Goods and Services (2) • Cause marketing – Marketing an idea or social cause such as nuclear-free living or catching public transport to and from work. Causerelated marketing positions a brand by telling customers that part of the selling price will be given to charity or a good cause. • Non-profit marketing – Marketing as practised by a variety of organisations whose aim is to make surpluses so as to continue their operations, but who don’t seek to make profits for shareholders. • Experiences marketing – Adding value for customers buying products and services through customer participation and connection by managing the environmental aspects of the relationship. Figure 8.5 Individual Product Decisions Individual Product Decisions • Product Attribute Decisions – Product quality is the ability of a product to perform its functions; it includes the product’s durability, reliability, precision, ease of operation and repair, and other valued attributes. Product Attribute Decisions • Product Features – A product can be offered with varying features. From a basic model to a higher level e.g. car industry. • Product Design – The process of designing a product’s style and function: creating a product that is attractive; easy, safe and inexpensive to use and service; and simple and economical to produce and distribute. Branding • Consumers view a brand as an important part of the product, and branding can add value to a product. • Powerful brand names have consumer franchise: they gain brand recognition and can ultimately command strong consumer loyalty –they have brand equity. Branding • A brand is a name, term, sign, symbol or design, or a combination of these intended to identify the goods or services of one seller to a group of sellers and to differentiate them from those of the competitors. Figure 8.6 An Overview of Branding Decisions The most enduring meanings of a brand are its: A. attributes and benefits B. values, benefits, attributes, and personality C. personality, attributes, and benefits D. values, culture, and personality E. attributes, benefits, and values Four Levels of Brand Meaning • Attributes – A brand brings to mind certain attributes such as ‘high prestige’. • Benefits – Customers buy functional and emotional benefits. • Values – A brand says something about the buyers’ values. • Personality – A brand also projects a personality-if the brand were a person, what kind of person would it be? Brand Equity • The value of a brand based on the extent to which it has high brand loyalty, name awareness, perceived quality, strong brand associations, and other assets such as patents, trademarks and channel relationships. To Brand or Not to Brand • Branding is strong that hardly anything goes unbranded. • Generic products are unbranded, and plainly packaged, less expensive versions of common products. • In Australia, the market share for generics has dropped in recent years. Brand Name Selection • Desirable qualities for a brand name include: – It should suggest something about the product’s benefits and qualities. – It should be easy to pronounce, recognise and remember. – The brand name should be distinctive. – The name should translate easily into foreign languages. – The name be capable of registration and legal protection. Brand Sponsor Decision • Manufacturers’ brand – Created and owned by the producer of a product or service. • Private brand – Created and owned by a reseller of a product or service. • Licensing – Some companies license names or symbols previously created by other manufacturers. • Co-branding – The practice of using the established brand names of two different companies on the same product. Arnott's biscuits with M&M candies in them would be an example of the use of a __________ strategy. A. B. C. D. E. line extension co-branding repositioning brand extension line filling Brand Strategy • There are four brand strategy choices: – – – – Line extension Brand extension Multibrands New brands • Brand Repositioning – May be necessary due to competitive action, or due to implementation of a new strategy, a marketer might need to change both the product and its image to better meet customer expectations with its brands. Figure 8.7 Four Brand Strategies Packaging • The activities of designing and producing the container or wrapper for a product. • Labelling is part of packaging and consists of printed information appearing on or with the package. • Product-Support Services- more companies are using product support services as a major tool in gaining competitive advantage. 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 ranges. • Product line length – Stretching downward – Stretching upward – Stretching both ways Figure 8.8 Product Line Stretching Decisions Product Mix Decisions • A product mix is the set of all product lines and items that a particular seller offers for sale. • The product mix can be described as having breadth, length, depth and consistency. – Breadth is the number of different product lines. – Length is the total number of items the company carries. – Depth is the number of versions offered of each product in the line. – Consistency is how closely the various product lines are in end use, production requirements, and distribution channels. International Product Decisions • International marketers face decisions such as what products to introduce and in which countries. Then, how much to standardise or adapt their products for world markets. • Standardisation helps with a consistent image and lower manufacturing costs, no duplication of research and development, advertising and product design. • However, consumers around the world differ in their cultures, attitudes and buying behaviours. Also, markets vary in economic conditions, competition, legal requirements and physical environments that means companies must respond to the differences.