CHAPTER FOUR

PRODUCT AND SERVICE CONCEPT

4.1 Introduction
Product is a key element in the market offering. This holds true whether the product is a television show
(offered by Arts & Entertainment Network), an Internet access service (offered by AT&T), a hamburger
(offered by Wendy’s), a DVD player (offered by Sony), a sweater (offered by Benetton), or a chocolate bar
(offered by Nestlé). No matter where the product originates, no matter which market segment is being targeted,
marketing-mix planning begins with formulating an offering to meet customers’ needs or wants.
4.1.1 What is product?
A product is goods, service or idea consisting of a bundle of tangible and intangible attributes that satisfies
consumers and is received in exchange for money or some other unit of value (time and other valuables).
In marketing, a product is anything that can be offered to a market that might satisfy a want or need.
In retailing, products are called merchandise. In manufacturing, products are purchased as raw materials and
sold as finished goods. In project management, products are the formal definition of the project
deliverables that make up or contribute to delivering the objectives of the project.
In general, product may refer to a single item or unit, a group of equivalent products, a grouping of goods or
services, or an industrial classification for the goods or services. A related concept is sub product, a secondary
but useful result of a production process.
4.2 PRODUCT DEVELOPMENT PROCES
In business and engineering, new product development (NPD) is the term used to describe the complete process
of bringing a new product or service to market. There are two parallel paths involved in the NPD process: one
involves the idea generation, product design and detail engineering; the other involves market research
and marketing analysis. Companies typically see new product development as the first stage in generating and
commercializing new products within the overall strategic process of product life cycle management used to
maintain or grow their market share.
Even though there are different steps to be followed in product development by different authors of different
books, for this module we have taken the steps followed by Berkowitz, et al, (2007) accordingly, there are six
stages of new product development. These stages will be discussed briefly below:
1. Idea Generation: This is often called the "fuzzy front end" of the NPD process. Ideas for new products can
be obtained from basic research using a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats),
Market and consumer trends, company's Research and Development department, competitors, focus groups,
employees, salespeople, corporate spies, trade shows, or Ethnographic discovery methods (searching for
user patterns and habits) may also be used to get an insight into new product lines or product features.
2. Idea Screening: This process involves shifting through the ideas generated above and selecting ones which
are feasible and workable to develop. Pursing non feasible ideas can clearly be costly for the company.
Depending on the number of ideas, screening may be done in rounds with the first round involving
company executives judging the feasibility of ideas while successive rounds may utilize more advanced
research techniques. As the ideas are whittled down to a few attractive options, rough estimates are made of
an idea’s potential in terms of sales, production costs, profit potential, and competitors’ response if the
product is introduced. Acceptable ideas move on to the next step. The purpose of this step is to eliminate
unsound concepts prior to devoting resources to them. And, in this regard screeners must ask (consider) the
following factors during screening:
 Will the customer in the target market benefit from the product?
 Is the product technically feasible?
 Is the product profitable at the target price? (Requires developing a cost/price analysis)

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In addition, considering the following important points is crucial.
 A demonstrated need in the marketplace. 
 A regulatory need or legal requirement. (e.g. Emission controls, Safety regulations, Environmental
regulations)
 The capabilities of the organization
 Developing, commercializing and marketing the product do not conflict with other company
objectives.
3. Business Analysis: The business analysis stage looks more deeply into the cash flow the product could
generate, what the cost will be, how much market shares the product may achieve and the expected life of
the product. The key objective at this stage is to obtain useful forecasts of market size (e.g., overall
demand), operational costs (e.g., production costs) and financial projections (e.g., sales and profits).
Additionally, the organization must determine if the product will fit within the company’s overall mission
and strategy. Much effort is directed at both internal research, such as discussions with production and
purchasing personnel, and external marketing research, such as customer and distributor surveys, secondary
research, and competitor analysis. Generally at this step the under mentioned points will be known.
i. Features of product, ii. Marketing strategy and iii. Necessary financial projections.
Additionally, the preparer of business plan will try to;
 Estimate likely selling price based upon competition and customer feedback
 Estimate sales volume based upon size of market
 Estimate profitability and breakeven point
 Effect of the new product on existing products
 Know the Possibility of finding copyright or patent on the product
4. Development: Ideas passing through business analysis are given serious consideration for development.
Companies direct their research and development teams to construct an initial design or prototype of the
idea. Marketers also begin to construct a marketing plan for the product. Once the prototype is ready the
marketer seeks customer input. However, unlike the concept testing stage where customers were only
exposed to the idea, in this step the customer gets to experience the real product. Basically, this step which
is by and large about turning the idea on paper into a prototype involves; Designing the product,
Manufacturing and testing (laboratory and consumer tests)
5. Market Testing: Products surviving to Step 4 are ready to be tested as real products. In some cases the
marketer accepts what was learned from concept testing and skips over market testing to launch the idea as
a fully marketed product. But other companies may seek more input from a larger group before moving to
commercialization. The most common type of market testing makes the product available to a selective
small segment of the target market (e.g., one city), which is exposed to the full marketing effort as they
would be to any product they could purchase. Generally this step focuses on;
 Exposing actual products to prospective consumers under realistic purchase situations.
 Test the product (and its packaging) in typical usage situations
 Conduct focus group customer interviews or introduce at trade show
 Make adjustments where necessary
 Produce an initial run of the product and sell it in a test market area to determine customer acceptance
6. Commercialization: If market testing displays promising results the product is ready to be introduced to a
wider market. It is often considered post-NPD: positioning and launching a new product in full scale
production and sales. This step includes; Launch the product, Produce and place advertisements and other
promotions, Fill the distribution pipeline with product and Critical path analysis is most useful at this stage.
Generally, NPD is a proactive process (a process which is made prior to happening of change), Ongoing

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 process (continuous development), especially in large industry leaders, usually performed by cross-
functional teams.
4.3 Service
A service is any act or performance that one party can offer to another that is essentially intangible and does not
result in the ownership of anything. Its production may or may not be tied to a physical product. Services
include airlines, hotels, and maintenance and repair people, as well as professionals such as accountants,
lawyers, engineers, and doctors. Many market offerings consist of a variable mix of goods and services.
4.3.1 Categories of Service Mix
Five categories of an offering’s service mix can be distinguished:
A. Pure tangible good: The offering is a tangible good such as soap; no services accompany the product.
B. Tangible good with accompanying services: The offering consists of a tangible good accompanied by one
or more services. General Motors, for example, offers repairs, maintenance, warranty fulfillment, and other
services along with its cars and trucks.
C. Hybrid: The offering consists of equal parts of goods and services. For example, people utilize restaurants
for both food and service.
D. Major Service with accompanying minor goods and services: The offering consists of a major service
along with additional services or supporting goods. For example, airline passengers are buying
transportation service, but they get food and drinks, as well.
E. Pure service: The offering consists primarily of a service; examples include baby-sitting and
psychotherapy. An increasing number of companies that are known for their tangible goods offerings are
now looking to boost profits from services.
4.3.2 Characteristics of Services and Their Marketing Implications
Services have four major characteristics that greatly affect the design of marketing programs: intangibility,
inseparability, variability, and perishability.
1. Intangibility: Services are intangible. Unlike physical products, they cannot be seen, tasted, felt, heard, or
smelled before they are bought. The person who is getting a face lift cannot know the Nature of Services,
see the exact results before the purchase, just as the patient in the psychiatrist’s office or know the exact
outcome before treatment.
2. Inseparability: Services are typically produced and consumed simultaneously, unlike physical goods,
which are manufactured, put into inventory, distributed through resellers, and consumed later. If a person
renders the service, then the provider is part of the service. Because the client is also present as the service
is produced, provider-client interaction is a special feature of services marketing—both provider and client
affect the outcome.
3. Variability: Because services depend on who provides them and when and where they are provided, they
are highly variable. Knowing this, service firms can take three steps toward quality control. The first is
recruiting the right service employees and providing them with excellent training. The second step is
standardizing the service-performance process throughout the organization. Companies can do this by
preparing a flowchart that depicts every service event and process. Using this flowchart, management can
identify potential fail points and then plan improvements. The third step is monitoring customer satisfaction
through suggestion and complaint systems, customer surveys, and comparison shopping.
4. Perishability: Services cannot be stored; once an airplane takes off or a movie starts, any unsold seats
cannot be held for future sale. Perishability is not a problem when demand for a service is steady, but
fluctuating demand can cause problems.

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 4.4 Product Protection
Ideas are a difficult thing to protect, because they are so easily imitated or copied; such as copying a piece of
written material, using a similar brand name, or creating a product in imitation of someone else's product.
"Intellectual property" refers to those ideas that can be considered "owned" by an individual or company and
are therefore protectable under the law. The intent of intellectual property law is to encourage innovation by
giving the creators of new ideas ample time to profit from their ideas and recuperate their development costs.
The Ethiopian Intellectual Property Office (EIPO) is an autonomous unit of the Ethiopian Science and
Technology Agency. It was established in 2003 to provide legal protection for intellectual property (IP) rights.
Under a Director-General the EIPO comprises five core business units and two support units. It is based
in Addis Ababa. Generally, as many literatures of the discipline state there are three basic forms of product
protection which are discussed hereunder:
4.4.1 Patent 
It is a set of exclusive rights granted by a state to an inventor or his assignee for a fixed period of time in
exchange for a disclosure of an invention. Patents protect an invention that is "novel" (new and original) and
"non-obvious" (to someone with technical expertise in the field of the invention). This has traditional been
primarily used for physical devices (machines, electronics, certain manufactured goods), but has recently been
applied to more abstract concepts, such as computer software algorithms or business processes.
4.4.1.1 Rationale for Use of Patents: There are four primary incentives embodied in the patent
system:
I. to invent in the first place;
II. to disclose the invention once made;
III. to invest the sums necessary to experiment, produce and market the invention;(post R&D costs are
higher than conception)
IV. to design around and improve upon earlier patents.
4.4.1.2 What can you patent? There are 3 basic criteria for a new product to be patented. These
are;
1. The invention must be new (first in the world).
2. It must be useful (functional and operative).
3. It must show inventive ingenuity and not be obvious to someone skilled in that area.
4.4.1.3 Where to register: You must obtain patent protection in each country where you want
protection. Patents are generally the most expensive forms of IP protection.
4.4.2 Trademark 
A trademark or trade mark or trade-mark is a distinctive sign or indicator used by an individual, business
organization, or other legal entity to identify that the products or services to consumers with which the
trademark appears originate from a unique source, and to distinguish its products or services from those of
other entities. Trademarks protect your brand, i.e., the name of your company or a specific product.
A trademark is designated by the following symbols:
• ™ (for an unregistered trade mark, that is, a mark used to promote or brand goods)
• ℠ (for an unregistered service mark, that is, a mark used to promote or brand services)
• ® (for a registered trademark)
A trademark is typically a name, word, phrase, logo, symbol, design, image, or a combination of these
elements. There is also a range of non-conventional trademarks comprising marks which do not fall into these
standard categories, such as those based on color, smell, or sound.
4.4.2.1 Benefits of Trademark Registration
• Constructive notice nationwide of the trademark owner’s claim.

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 • Evidence of ownership of the trademark.
• Jurisdiction (control) of federal courts may be invoked.
• Registration can be used as a basis for obtaining registration in foreign countries.

4.4.2.2 Types of trademarks: There are three basic categories of trade-marks:

 Ordinary marks are words or symbols (or a combination of these features), that distinguish the goods or
services of a specific firm or individual. Suppose you opened a courier business which you called "Giddy-
up." You could register the words as a trade-mark (assuming all legal requirements were met) for the
service you offer.
 Certification marks identify goods or services which meet a defined standard. They are owned by one
person but licensed to others to identify wares or services which meet a defined standard. Examples are: the
Woolmark design owned by Woolmark Americas, Ltd., for use on clothing and other goods and the logo of
the Association of Professional Engineers.
 Distinguishing guise identifies the shaping of goods or their containers, or is a mode of wrapping or
packaging wares. If you manufactured candy molded to look like butterflies, you might want to register the
butterfly shape as a trade-mark under "distinguishing guise."
4.4.2.3 Do you need to register a trademark? Although trademarks are established by common
law (you establish your trademark simply by using it), in the event of dispute, you will have
a much stronger case if you have registered your trade mark with the appropriate body.
4.4.2.4 Where to register: Trademarks must be registered in each country where the item will be
sold.
4.4.2.5 Duration of protection: Your federal trademark registration lasts 15 years, with 15-year
renewal terms. Your trademark rights can last indefinitely if you follow these steps and
continue to use the mark to identify your goods and services.
4.4.2.6 Unregistered trademarks: Before a trademark is formally registered, the owner has what
are called "common law" rights to the mark, provided that person or entity is the first to use
it in commerce. But this will depend on factors such as the extent to which, and the manner
in which, the trademark has been used and has become known. Unregistered trademarks
have further drawbacks. Under Ethiopian trademark law, a company is prohibited from
directing attention to its product in a way that is confusing to the public. A company is also
prohibited from making use of a false description that will mislead the public as to the
character, quality, quantity or composition of the product, the geographical origin of the
product, or the mode of manufacture, production, or performance of the product.
4.4.3 Copyright 
A copyright protects the specific form in which ideas are recorded, and is the form of protections used to
protect literary (books, articles, poems) and artistic (cartoons, music) works. Anything you write or records,
even discussion forum posts, is immediately protected under copyright law unless you specifically place it into
the public domain or some other licensing agreement (e.g., Creative Commons or the user agreement of the
web site on which it is first posted).
You do not have to have proprietary intellectual property to have a successful business, but if you have spent
time and money developing unique intellectual property, you definitely want to take advantage of the laws that
allow you to protect those ideas from unfair competition. Take inventory of your intellectual assets and
consider what forms of intellectual property protection might be right for you.

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 4.4.3.1 What can you copyright? You can copyright any of your creative work, such as:
Books, Music, Art, Film, Photographs, Movies/videos, Sculpture, User Guides, Manuals, Logos (if a logo is an
expression and used for decorative purposes)
4.4.3.2 What is actually copyrighted? Copyright does not protect the idea behind the work. It only
protects the work once it is written or in a fixed state. Copyright gives you the right to the
unique way you express an idea, but not to the idea itself (titles, names, catch phrases and
short word combinations are not protectable by copyright).
4.4.3.3 Levels of protection: The date a particular work was created is extremely important (in
other words, who came up with it first). The easiest way to prove ownership is to send a
copy of the work to yourself by registered mail (but don't open it) or by email.
4.4.4 Trade Secrets
4.4.4.1 What is trade secret protection? It is a protection for your ideas for future improvements
or innovations (i.e. trade secrets) under common law. If you have a formula or process you
want to protect but don't want to patent it because you didn't want to share it with anyone,
what you really have is a trade secret. The best example of this kind of IP is the formula for
Coca-Cola. Its real value is that only three or four people know what it is. Keeping it as a
trade secret means they don't have to share it now, or in 20 years when the patent expires.
4.4.5 The Intellectual Property System In Ethiopia
Ethiopia became a party to the convention establishing the world intellectual Property Organization (WIPO) in February
1998. Ethiopia joined the Nairobi Treaty on the Protection of the Olympic Symbol in 1981. It is a member of the Treaty
establishing the Common Market for Eastern and Southern Africa (COMESA) which was formed in 1994, the Partnership
Agreement between members of the African, Caribbean and Pacific (ACP) Group of states and the European Union (EU).
Ethiopia has also applied to become a member of the World Trade Organization (WTO) and negotiation will start in the
near future.
The government established the Ethiopian Intellectual Property Office in 2003 in having the understated Objectives:
 To facilitate the provision of adequate legal protection for and exploitation of intellectual property in the
country;
 To collect, organize and disseminate technological information contained in patent documents and encourage its
utilization;
 To study, analyze and recommend policies and legislation on intellectual property to the government;
 To promote knowledge and understanding of intellectual property among the general public.
The existing laws and directives in Ethiopia in the field of Intellectual Property (IP) are the Patent Proclamation and the
Implementing Regulation, the Copyright and Related Rights Proclamation and The Trademark Registration Directive.
According to the proclamation in order to be granted a patent, an invention must fulfill three conditions:
 It must be new- It should never have been published or publicly used before.
 It should be capable of industrial application -It must be something which can be industrially manufactured or used.
 It must be "non-obvious”. It should not be an invention which would have occurred to any specialist working in the
relevant field.
The proclamation excludes the following from patentability:
 Inventions contrary to public order or morality,
 Plant or animal varieties or essentially biological processes for the production of plants or animals,
 Schemes, rules or methods for playing games or performing commercial and industrial   activities and computer
programs,
 Discoveries, scientific theories and mathematical methods,
 Methods for treatment of the human or animal body by surgery or therapy as well as diagnostic methods practiced on
the human or animal body. Rights of a patentee include making, using and exploiting the patented invention in any
other way.

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Any person who wants to use the patented invention has to get the authorization of the owner. The patentee does not have
import monopoly right over the products of the patented invention in Ethiopia.

There are certain limitations of rights of the patentee include in the proclamation:
 Acts done for non-commercial purposes,
 The use of the patented invention solely for the purposes of scientific research and experimentation,
 The use of patented articles on aircraft, land vehicles or vessels of other countries which temporarily or
accidentally enter in to the air space, territory or waters of Ethiopia,
 Acts in respect of patented articles which have been put on the market in Ethiopia by   the owner of the patent or
with his consent.
 The use of the patented invention for national security, nutrition, health or for the development of vital sectors of
the economy, subject to payment of an equitable remuneration to the patentee.
The duration of a patent is 15 years which may be extended for a further period of five years if proof is furnished that the
invention is properly worked in Ethiopia.
Trademark Directive is issued in the country in 1986 with the following objectives in that it helps
 To centrally deposit trademarks which are used by local and foreign enterprises to distinguish their goods or services.
 To distinguish the products or services of one enterprise from those of other enterprises and prevent consumers from
being victims of unfair trade practices.
 To provide information on trademark ownership and right of use when disputes arise between parties;
 To provide required information on trademarks to government and individuals.
Protection is granted after publication of cautionary notice.
Copyright is protected on the basis of the copyright and related rights proclamation issued in 2004.
The proclamation gives protection to literary, artistic and scientific works which include:
 books, pamphlets, articles, computer programs and other writings;
 speeches, lectures, addresses, sermons, and other oral works;
 dramatic, dramatic-musical works, pantomimes, choreographic works, and other works created for stage production;
 musical works, with or without accompanying words;
 audiovisual works and sound recordings
 works of architecture;
 works of drawing, painting, sculpture, engraving, lithography, tapestry, and other works of fine arts;
 photographic and cinematographic works;
 illustrations, maps, plans, sketches, and three dimensional works related to geography, topography, architecture or
science;
 derivative works;
 Collection of works, collection of mere data (databases) whether readable by machine or other form.
The Proclamation gives protection to:
 works of authors who are nationals of or have their habitual residence in Ethiopia;
 works first published in Ethiopia; or works first published in another country and published within thirty days in
Ethiopia;
 audio-visual works whose producer has his headquarter or habitual residence in Ethiopia; and
 works of architecture erected in Ethiopia and other artistic works incorporated in a building or other structure
located in Ethiopia.
The author of a work shall be entitled to protection, for his work upon creation where it is an original work; and written
down, recorded, fixed or otherwise reduced to any material form. Quality of the work and the purpose for which the
work may have been created is not taken in to consideration. The rights of performers, producers of phonograms and
broadcasting organizations are also protected by law. Copyright is protected for the life of the author plus fifty years.
Fifty years for the rights of performers and producers of sound Recordings and 20 years for the rights of broadcasting
organizations

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Challenges facing the IP System in Ethiopia
As per the writing of Wondwossen Belete, Ethiopian Intellectual Property Office (December 2004) the following are
some of the major problems related to IP system in Ethiopia.
 Lack of Institutional IP policies and management units
 Weak coordination between IP policies and other relevant government policies.
 Weak institutional capacity and in particular there is a lack of experienced and well-  qualified officials for IP
administration.