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MGT301 - Principles of Marketing - Lecture Handout 19

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Lesson overview and learning objectives:

In this chapter we commence an examination of the marketing mix elements the so-called 4P's of marketing, or if considering the extended marketing mix, the 7P's of marketing. 1st p of these 4PS is Product is a complex concept that must be defined carefully.

A. 4PS
o Product

a. Marketing Mix

Marketing Mix

Marketing is a process that revolves around the customers and in order to meet the requirements of the customer marketers formulate and design the marketing mix that is also known as 4Ps (– Four marketing activities—product, Price, Place and Promotion—that a firm can control to meet the needs of customers within its target market ). The marketing mix variables are: Product: Goods, services, or ideas that satisfy customer needs, Price: Decisions and actions that establish pricing objectives and policies and set product prices. Place: The ready, convenient, and timely availability of products and finally the Promotion: Promotion can be defined as activities that are used to inform customers about the organization and its products.
These elements of the marketing mix and strategies related to these elements or the variables are designed by keeping in view all the environmental factors either macro or micro that can influence the marketing in any context. Today is the era of value driven marketing, Value can be defined as a customer’s subjective assessment of benefits relative to the costs in determining the worth of a product. Customer is ready to pay the cost of given product if that product is of some value. This value can be determined as a capability of the product to satisfy the customer’s needs and wants.

When ever customer or the consumer makes the purchasing decisions they (Consumers) don’t buy products; they buy benefits that can be functional benefits( relating to the practical purpose a product serves) or the Psychological benefits (relating to how a product makes one feel) for the reason being products are always purchased in order to fulfill certain needs that are definitely fulfilled through acquiring certain benefits of the product. Today, as products and services become more and more commoditized, many companies are moving to a new level in creating value for their customers. To differentiate their offers, they are developing and delivering total customer experiences. Whereas products are tangible and services are intangible, experiences are memorable. Whereas products and services are external, experiences are personal and take place in the minds of individual consumers. Companies that market experiences realize that customers are really buying much more than just products and services. They are buying what those offers will do for them—the experiences they gain in purchasing and consuming these products and services.

b. WHAT IS A PRODUCT?

A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. It includes physical objects, services, persons, places, organizations, and ideas.’ Pure' Services are distinguished from 'physical' products on the basis of intangibility, inseparability, variability and perish ability. Services are a form of product that consist of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

Product is a complex concept that must be carefully defined. As the first of the four marketing mix variables, it is often where strategic planning begins. Product strategy calls for making coordinated decisions on individual products, product lines, and the product mix.

a) Levels of Product and Services

As shown in the fig each product item offered to customers can be viewed on three levels. Therefore product planners need to think about products and services on three levels:

Levels of Product and Services

  1. The core product is the core, problem solving benefits that consumers are really buying when they obtain a product or service. It answers the question what is the buyer really buying?
  2. The actual product may have as many as five characteristics that combine to deliver core product benefits. They are:
    • Quality level.
    • Features.
    • Design.
    • Brand name.
    • Packaging.
  3. The augmented product includes any additional consumer services and benefits built around the core and actual
    products.

Therefore, a product is more than a simple set of tangible features. Consumers tend to see products as complex bundles of benefits that satisfy their needs. When developing products, marketers must: 1). Identify the core consumer needs that the product will satisfy. 2). Design the actual product and finally 3). Find ways to augment the product in order to create the bundle of benefits that will best satisfy consumer’s desires for an experience. The product. For example, a Sony camcorder is an actual product. Its name, parts, styling, features, packaging, and other attributes have all been combined carefully to deliver the core benefit—a convenient, high-quality way to capture important moments. Sony must offer more than just a camcorder. It must provide consumers with a complete solution to their picture-taking problems. Thus, when consumers buy a Sony camcorder, Sony and its dealers also might give buyers a warranty on parts and workmanship, instructions on how to use the camcorder, quick repair services when needed, and a toll-free telephone number to call if they have problems or questions (augmented level).

Therefore, a product is more than a simple set of tangible features. Consumers tend to see products as complex bundles of benefits that satisfy their needs. When developing products, marketers first must identify the core consumer needs the product will satisfy. They must then design the actual product and find ways to augment it in order to create the bundle of benefits that will best satisfy consumers.

b) Product Classification

There are three basic types of product classifications. Durable products are used to over an extended period of time. Nondurable products are more quickly consumed, usually in a single use or a few usage occasions. 'Pure' Services are activities or benefits offered for sale which are intangible, inseparable from the consumer, perishable in that they are experiential and do not result in ownership of anything. Either consumer or industrial customers can buy each of these
products. Consumer products are sold to the final end-user for personal consumption. Individuals and other organizations to use in their administrative or processing operations buy business-to-business products. Industrial products are the most widely used of these products and consist of consumables such as paper clips or raw materials that are converted to finished products. Lets discuss these classifications in detail:

I. Consumer Products

Consumer products are those bought by final consumers for personal consumption. Marketers usually classify these goods further based on how consumers go about buying them. Consumer products include convenience products, shopping products, specialty products, and unsought products. These products differ in the ways consumers buy them and therefore in how they are marketed

  • Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum of comparison and buying effort. Examples include soap, candy, newspapers, and fast food. Convenience products are usually low priced, and marketers place them in many locations to make them readily available when customers need them.
  • Shopping products are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price, and style. When buying shopping products and services, consumers spend much time and effort in gathering information and making comparisons. Examples include furniture, clothing, used cars, major appliances, and hotel and motel services.
  • Shopping products marketers usually distribute their products through fewer outlets but provide deeper sales support to help customers in their comparison efforts.
  • Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Examples include specific brands and types of cars, highpriced photographic equipment, designer clothes, and the services of medical or
    legal specialists. A Lamborghini automobile, for example, is a specialty product because buyers are usually willing to travel great distances to buy one. Buyers normally do not compare specialty products. They invest only the time needed to reach dealers carrying the wanted products.
  • Unsought products are consumer products that the consumer either does not know about or knows about but does not normally think of buying. Most major new innovations are unsought until the consumer becomes aware of them through advertising. Classic examples of known but unsought products and services are life
    insurance and blood donations to the Red Cross. By their very nature, unsought products require a lot of advertising, personal selling, and other marketing efforts.

II. Industrial Products

Industrial products are those purchased for further processing or for use in conducting a business. Thus, the distinction between a consumer product and an industrial product is based on the purpose for which the product is bought. If a consumer buys a lawn mower for use around home, the lawn mower is a consumer product. If the same consumer buys the same lawn mower for use in a landscaping business, the lawn mower is an industrial product.
The three groups of industrial products and services include materials and parts, capital items, and supplies and services. Materials and parts include raw materials and manufactured materials and parts. Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and natural products (fish, lumber, crude petroleum, iron ore). Manufactured materials and parts consist of component materials (iron, yarn, cement, wires) and component parts (small motors, tires, castings). Most manufactured materials and parts are sold directly to industrial users. Price
and service are the major marketing factors; branding and advertising tend to be less important. The demand for industrial products is derived from the demand for consumer products. This is known as "derived demand." Capital items are industrial products that aid in the buyer's production or operations, including installations and accessory equipment. Installations consist of major purchases such as buildings (factories, offices) and fixed equipment (generators, drill presses, large computer systems, elevators). Accessory equipment includes portable factory equipment and tools (hand tools, lift trucks) and office equipment (fax machines, desks). They have a shorter life than installations and simply aid in the production process. The final group of business products is supplies and services. Supplies include operating supplies (lubricants, coal, paper, pencils) and repair and maintenance items (paint, nails, brooms). Supplies are the convenience products of the industrial field because they are usually purchased with a
minimum of effort or comparison. Business services include maintenance and repair services (window cleaning, computer repair) and business advisory services (legal, management consulting, advertising). Such services are usually supplied under contract.

III. Organizations, Persons, Places, and Ideas

In addition to tangible products and services, in recent years marketers have broadened the concept of a product to include other "marketable entities” namely, organizations, persons, places, and ideas. Organizations often carry out activities to "sell" the organization itself. Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers towards an organization. Both profit and nonprofit organizations
practice organizational marketing. People can also be thought of as products. Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people. All kinds of people and organizations practice person marketing. Ideas can also be marketed. In one sense, all marketing is the marketing of an idea, whether it is the general idea of brushing your teeth or the specific idea that Crest provides the most effective decay prevention

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