Chapter 6Product and service

concepts

Learning objectives

1 Define the term product

2 Classify consumer products

3 Discuss the importance of services to the economy

4 Identify the differences between services and goods

5 Explain why services marketing is important to manufacturers

Learning objectives (cont.)

6 Define the terms product item, product line and product mix

7 Describe marketing uses of branding

8 Describe marketing uses of packaging and labelling

9 Describe how and why product warranties are important marketing tools

Learning objective 1

Define the term marketingDefine the term product

Product

Everything, both favourable and

unfavourable, that a person

receives in an exchange.

1

What is a product?

Promotion

Place (distribution)

Price

1

Product is the heart

of the marketing

mix

Learning objective 2

Describe four marketing management philosophies.Classify consumer

products

Product classifications

Businessproduct

Consumer product

A product used to manufacture other goods or services, to facilitate an organisation’s operations or to

resell to other consumers.

Product bought to satisfy an individual’s personal wants.

2

Types of consumer products

Unsoughtproducts

Specialtyproducts

Shoppingproducts

Convenienceproducts

Consumerproducts

Businessproducts

Products

2

Types of consumer products (cont.)

Convenienceproduct

Shoppingproduct

Specialtyproduct

Unsoughtproduct

A relatively inexpensive item that merits little shopping effort.

A product that requires comparison shopping because it is usually more expensive and found in fewer stores.

A particular item for which consumers search extensively and are reluctant

to accept substitutes.

A product unknown to the potential buyer or a known product that the

buyer does not actively seek.

2

Learning objective 3

Describe four marketing management philosophies.

Discuss the importance of services to the economy

Service

The result of applying

human or mechanical

efforts to people or

objects.

3

The importance of services

8 out 10 workers are inservice sector

Services account for 74% of US GDP

Service occupations will be responsible for all job growth

through 2005

3

Learning objective 4

Identify the differences between services and goods

How services differ from goods

4

Characteristics that distinguish services:

• intangibility

• inseparability

• heterogeneity

• perishability.

Characteristics of services

Intangibility

Inseparability

Heterogeneity

Perishability

Services that cannot be touched, seen, tasted, heard or felt in the

same manner as goods.

A characteristic of services that allows them to be produced and

consumed simultaneously.

A characteristic of services that makes them less standardised and

uniform than goods.

A characteristics of services that prevents them from being stored,

warehoused or inventoried.

4

Learning objective 5

Explain why services

marketing is important

to manufacturers

Services marketing in manufacturing

Strong competitive advantages

5

Learning objective 6

Define the terms

product item, product

line and product mix

Product items, lines and mixes

Product item

Product line

Product mix

A specific version of a product that can be designated as a distinct offering among an organisation’s products.

A group of closely related product items.

All products that an organisation sells.

6

Benefits of product lines6

Why form product lines?

• Advertising economies

• Package uniformity

• Standardised components

• Efficient sales and distribution

• Equivalent quality

Product mix width

• diversifies risk

• capitalises on established reputations.

The number of product lines an organisation offers:

6

Product line depth

• attracts buyers with different preferences

• increases sales/profits by further market segmentation

• capitalises on economies of scale

• evens out seasonal sales patterns.

The number of product items in a product line:

6

Adjustments

Product modification

Productrepositioning

Product lineextension or contraction

Adjustments to product items,lines and mixes

6

Product modifications6

• Quality modification

• Functional modification

• Style modification

Planned obsolescence

The practice of modifying

products so those that

have already been sold

become obsolete before

they actually need

replacement.

6

Repositioning6

Why reposition established brands?

• Changing demographics

• Declining sales

• Changes in social environment

Product line extension

Adding additional products

to an existing product line

in order to compete more

broadly in the industry.

6

Product line contraction

• some products have low sales or cannibalise sales of other items

• resources are disproportionately allocated to slow-moving products

• items have become obsolete because of new product entries.

Symptoms of product line over-extension:

6

Learning objective 7

Describe marketing uses of branding

Brand

A name, term, symbol, design or combination thereof that identifies a seller’s products and differentiates them from competitors’ products.

7

Branding

Brand name

Brandmark

Brand equity

Masterbrand

That part of a brand that can be spoken, including letters, words and numbers.

The elements of a brand that cannot be spoken.

The value of company and brand names.

A brand so dominant that it comes to mind immediately when a product category,

use, attribute or benefit is mentioned.

7

Benefits of branding

Product identification

Repeat sales

New product sales

Branding distinguishes products from competition

7

An effective brand name …

• is easy to pronounce

• is easy to recognise and remember

• is short, distinctive and unique

• describes the product, use and benefits

• has a positive connotation

• reinforces the product image

• is legally protectable.

7

Master brands

Photography

Adhesive bandages

Rum

Vacuum cleaners

Biscuits

Cream cheese

Crayons

Petroleum jelly

Kodak

Band-Aid

Bundaberg

Hoover

Arnott’s

Philadelphia

Crayola

Vaseline

7

Branding strategies7

Brand No brand

Manufacturer’s brand Private brand

Individualbrand

Family brand

Individualbrand

Combi-nation

Family brand

Combi-nation

Generic brand

A no-frills, no-brand-name,

low-cost product that is

simply identified by its

product category.

7

Manufacturers’ brands versusprivate brands

Manufacturers’ brand

Private brand

The brand name of a manufacturer.

A brand name owned by a wholesaler or a

retailer.

7

Advantages of manufacturers’ brands

7

• Develop customer loyalty

• Attract new customers

• Enhance prestige

• Offer rapid delivery so can carry less inventory

• Ensure dealer loyalty

Advantages of private brands7

• Earn higher profits

• Less pressure to mark down prices

• Manufacturer may drop a brand or become a direct competitor to dealers

• Ties to wholesaler or retailer

• No control over distribution of manufacturers’ brands

Individual brands versusfamily brands

Individual brand

Family brand

Using different brand names for different products.

Marketing several different products under the same

brand name.

7

Co-branding

Ingredientbranding

Cooperative branding

Complementary branding

Types of co-branding

7

Trademarks

• Many parts of a brand and associated symbols qualify for trademark protection.

• The mark has to be continuously protected.

• Rights continue for as long as it is used.

A trademark is the exclusive right A trademark is the exclusive right to use a brand.to use a brand.

7

Describe marketing

uses of packaging and

labelling

Learning objective 8

Packaging8

Functions of packaging:

• contain and protect

• promote

• facilitate storage, use

and convenience

• facilitate recycling.

Labelling

Persuasive

• Focuses on promotional theme

• Information is secondary

Informational

• Helps make proper selections

• Lowers cognitive dissonance

• Includes use/care

8

Universal product codes

A series of thick and thin

vertical lines (bar codes),

readable by computerised

optical scanners, that

represent numbers used to

track products.

8

Describe how and why

product warranties are

important marketing tools

Learning objective 9

Product warranties

Warranty

Expresswarranty

Implied warranty

A confirmation of the quality or performance of a good or service.

A written guarantee.

An unwritten guarantee that the good or service is fit for the purpose for which it was sold (UCC).

9

Product warranties (cont.)

Written guarantee

Implied warranty

Express warranty

Unwritten guarantee

9