1. Chapter 9:
Product Planning for Goods
and Services

2. Strategic Planning for Product
Target Market
Summary Overview
A modern view of products goes beyond a physical item for sale and focuses on those things that help consumers satisfy needs. Products are need-satisfiers and consumer problem-solvers.
Product
Place
Promotion
Price
Defining “Product”: Key Terms and Ideas
Product. Product means the need-satisfying offering of a firm. This definition is important because it reminds managers to focus on consumers and not on the technical and managerial details involved in producing products.
Quality. From a marketing perspective, quality means a product’s ability to satisfy a customer’s needs or requirements. Quality may be absolute or relative, but in all cases the customer’s expectations for quality in a given product forms the basis for determining how to achieve customer satisfaction.
Goods/Services. A product can be a physical good or an intangible service, or it can be a blend of both.
Discussion Note: Consumers are increasingly demanding more services with the goods they buy. For example, in the personal computer business successful companies offer reliable equipment coupled with extensive, free technical telephone support services. Both together are the product the customer buys.
Differences Between Goods and Services. Since both are products, this distinction is not usually necessary. But in fine tuning a product’s position, recognizing these differences can aid marketers in planning:
Intangible. Goods have a physical existence. Services are deeds performed for a customer.
Simultaneous production and consumption. Services are produced and consumed at the same time. Products are produced first then sold for later consumption.
Perishable. Services cannot be stored for later use.
Transported. Services cannot be transported to another location for sale.
Customer presence. Many services require the presence, even participation, of the customer.
Product
Idea
Physical
good/service
Features
Quality level
Accessories
Installation
Instructions
Product line
Brand
Type of Brand:
Individual or family
Manufacturer or dealer
Package
Protection,
Promotion,
(or both)
Warranty
None, full, or
limited
Exhibit 9-1
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3. Consumer Product Classes
Summary Overview
Products may be grouped into classes that share important characteristics or functions that marketers must perform or provide to the customer. Consumer products are products meant for the final consumer and fall into four broad classes: convenience, shopping, specialty, and unsought.
Consumer
Product
Classes
Convenience
Specialty
Unsought
Shopping
Consumer product classes are discussed on this slide. Business product classes are products meant for use in producing other products. These are covered on the following slide.
Product Classes: Consumer Products
Consumer product classes are based on how consumers think about and shop for products:
Convenience Products. Convenience products are needed by consumers but consumers aren’t willing to spend much time and effort shopping for them. These products may be bought often, require little service or selling, be inexpensive and bought out of habit. Types include:
Staples. Staples are bought often, routinely, and without much thought. Branding is used for many staples to make them easier to remember and find.
Impulse. Impulse products are bought quickly, as unplanned purchases, because of a strongly felt need. These purchases may be strongly affected by the immediate situation.
Emergency. Emergency products are purchased immediately when the need is great. Consumers don’t shop around for these products nor ask how much they cost.
Shopping Products. Shopping products are those that customers feel are worth the time and effort to compare with competing products. Homogeneous shopping products are those that the customer sees as basically the same and wants at the lowest price. Heterogeneous shopping products are seen as different, perhaps in quality and suitability.
Specialty Products. Specialty products are consumer products that the consumer really wants and makes a special effort to find. These are characterized by the consumer’s willingness to search.
Unsought Products. Unsought products are those the customer doesn’t want yet or know that he or she can buy. New unsought products represent ideas potential customers don’t know about yet. Regularly unsought products are ones that just don’t motivate customers to seek them out, even though they may need them.
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4. Business Products Business Product Classes Installations Component
Parts and
Materials
Accessories
Professional
Services
Raw
MRO
Supplies
Summary Overview
Many factors affect strategy planning for business products. Business markets are characterized by derived demand -- the demand for business products derives from the demand for the final consumer products they are used to make. This means that demand tends to be inelastic -- a change in price doesn’t have much effect on the quantity ordered. Business suppliers may face almost pure competition. Tax treatments affect buying too--a capital item lasts for years and is depreciated over its life. An expense item is deducted in the year it is bought.
Business Products
Business product classes are based on how buyers see products and how they’ll be used:
Installations. Installations are important capital items. One of a kind installations such as office buildings and custom-made equipment require special negotiations for each sale.
Accessory Equipment. Accessories are short-lived capital items such as tools and production equipment.
Raw Materials. Raw materials are unprocessed expense items. They become a physical part of the goods the firm makes. Farm products are grown or raised by farmers. Natural products are those that occur in nature, such as wood and mineral ores.
Component Parts and Materials. Components are processed expense items that become part of a finished product. Component parts are finished or nearly finished products in themselves that go into other products, like tires for a car. Component materials are processed goods but require more processing before becoming part of the final product (wire).
MRO Supplies. MRO stands for Maintenance, Repair, and Operating supplies. Maintenance supplies include products like paint and light bulbs. Repair supplies are parts needed to fix worn or broken equipment. Operating supplies include things needed to do the work, like copier toner and paper clips.
Professional Services. These are specialized services that support a firm’s operations, such as management or presentation graphics consulting. Here the service part of the product is emphasized.
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5. Maintain Availability
Branding
Rejection
Nonrecognition
Recognition
Preference
Insistence
Change Position
Increase Awareness
Continue Education
Maintain Availability
Develop High
Brand Equity
Focus:
Focus :
Summary Overview
Branding means the use of a name, term, symbol, or design to identify a product. Some companies use a combination of some or all of these when branding. A brand name is a word, letter, or a group of letters. A trademark includes only those words, symbols, or marks that are legally registered for use by a single company. A service mark is a trademark that refers to a service offering. Brands developed to help identify quality with a specific product.
Branding
Brand familiarity means how well customers recognize and accept a company’s brand. Five levels of brand familiarity are useful for strategy planning:
Rejection. Brand rejection means that potential customers won’t buy a brand unless its image is changed.
Nonrecognition. Brand nonrecognition means final consumers don’t recognize a brand at all even though middlemen may use it for identification and control.
Recognition. Brand recognition means that customers remember the brand.
Discussion Note: Reaching this level can be critically important. For example, a supermarket may hold 20,000 different products and many varieties of a single type of product. Recognition may be all that is necessary to induce purchase.
Preference. Brand preference means that target customers usually choose the brand over other brands.
Insistence. Brand insistence means customers insist on a firm’s branded product and are willing to search for it. Most marketers seek to develop brand insistence for their products. Brand equity--which refers to the value of the brand’s overall strength in the market--can lead to high brand equity.
Teaching Tip: You might tell students to remember this relationship when new-product development is discussed.
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6. What Kind of Brand to Use?
Family
Brand
Individual
Brand ?
Brand
Choices ? ?
Summary Overview
In developing a product concept, a marketing manager must consider the different possible approaches for branding.
Brand Strategies
Family Brand. This refers to the use of the same brand name for several products, such as Sears’ Craftsmen tools or Kenmore appliances. This is a good approach if the individual products are of a similar quality. A special case of family branding is a Licensed Brand, a well-known brand such as Sunkist that sellers pay a fee to use.
Individual Brands. When a company makes very unrelated products that require a separate identity to avoid confusion, developing individual brands for each can be a good idea. Or some companies develop several versions of a product such as toothpaste, each with a unique position in the market.
Generic Products. These are products that have no brand at all other than the identification of their contents.
Manufacturer Brands. These are brands created by producers. This approach is used to help develop demand for the same product across many markets.
Teaching Tip: Consider linking manufacturer brand to promotion “pull,” which is developed in detail later in the course.
Dealer Brands. Also called private brands, these brands are created by middlemen (ex: JC Penney’s “Arizona” jeans or Sears’ “Canyon River” jeans). These are usually used to generate higher margins for the middlemen than they can get with the manufacturer brand. This conflict has led to a “battle of the brands” -- a competition between manufacturers and middlemen brands.
Manufacturer ? ?
Dealer ? ?
Generic
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7. The Strategic Importance of Packaging
Convenient packages are easier to use, making purchase decisions easier for the customer as well.
Summary Overview
Packaging involves promoting and protecting the product. Good packaging makes products easier to identify and promotes the brand at the point of purchase and in use.
The Strategic Importance of Packaging
Packaging Makes a Difference. Packaging can do more than contain and protect the product. The package can make the product easier to use and more convenient for the customer to store.
Packaging Sends a Message. Creative use of design in packaging can visually help to tie the product to other elements of the promotion mix.
Packaging May Lower Distribution Costs. Good packages save space and are easier to handle and display. In helping distributors and end-sale retailers, good packages are more welcome by these intermediaries.
Universal Product Codes (UPC) Speed Handling. Using these bar codes with register-based computers speeds check-out of customers and vastly improves inventory monitoring.
Teaching Tip: Ask students if they have any stories about some of their favourite products that never seem to get scanned at a checkout. Ask them how much more time it takes to hand enter the code. Could that time savings lead to lower costs? How can packages be re-designed? For example, a 25 kilogram bag of dog food at Wal-Mart used to be all but impossible to scan. Now, the UPC tag is a sticker that peels off at checkout. No more lifting the bag out of the cart, no more wrinkled, unreadable tags!
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8. Using Warranties to Improve the Marketing Mix
A warranty says the company stands behind the product. Consumers often feel more comfortable with products they know come with assurances.
Warranty
Summary Overview
A warranty explains what the seller promises about its product. A marketing manager should decide whether to offer a warranty and if so, what the warranty will cover and how it will be communicated to target customers. Producers must provide a clearly written warranty if they choose to offer any warranty. The warranty does not have to be strong.
Key Warranty Considerations
Warranties Improve the Marketing Mix. A warranty says that the company stands behind the product. This is reassuring to customers and can make a big difference in whether customers buy the product, especially if the product is complex or expensive.
Service Guarantees. Backing up a product or service with service guarantees helps consumers focus on specific levels of satisfaction and expectations. Service guarantees are becoming more common but there’s more risk in offering a service guarantee than a warranty on a physical product.
Cost. The cost of warranty support ultimately must be covered by the price that consumers pay.
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