Hult | Pride | Ferrell

Marketing Part 4
Foundations 5e Product
Decisions
 10: Product Decisions
11: Developing and Managing Goods
and Services

© 2013 South-Western, a part of Cengage Learning 10-2

 Learning Objectives
 To understand the concept of a product
 To explain how to classify products
 To examine the concepts of product item,
product line, and product mix and
understand how they are connected
 To understand the product life cycle and its
impact on marketing strategies
 To describe the product adoption process
 To understand why some products fail and
some succeed
© 2013 South-Western, a part of Cengage Learning 10-3
 Product
A good, a service, or an idea received in an
exchange
• Includes function, social and psychological
utilities, and benefits
• Includes supporting services such as installation,
guarantees, product information, etc.
Good: A tangible, physical entity
Service: The intangible result of the
application of human and mechanical efforts to
people or objects
Idea: A concept, philosophy, image, or issue
© 2013 South-Western, a part of Cengage Learning 10-4
 The Total Product

© 2013 South-Western, a part of Cengage Learning 10-5

 The Core Product

Sports
Drink Rehydrates

The Core Product

The product’s fundamental utility or main
benefit
Addresses the basic need of the consumer

© 2013 South-Western, a part of Cengage Learning 10-6

 Supplemental Features

 Provide the added value or attributes in

addition to a product’s core utility
• Installation
• Delivery
• Training
• Financing
 Help differentiate the product brand

© 2013 South-Western, a part of Cengage Learning 10-7

 Symbolic and Experiential Benefits

 Buyers purchase the benefits and satisfaction

they think the product will provide
 Products often carry symbolic meaning
 The shopping experience can provide benefit

© 2013 South-Western, a part of Cengage Learning 10-8

 Classifying Products

Consumer Products
Products purchased to satisfy personal and
family wants and needs
Business Products
Products bought to use in a firm’s operations
to resell or to make other products
Purchased to satisfy the goals of the
organization

© 2013 South-Western, a part of Cengage Learning 10-9

 Classification of Consumer Products

© 2013 South-Western, a part of Cengage Learning 10-10

 Convenience Products
Relatively inexpensive, frequently purchased items
for which buyers exert minimal purchasing effort
Strategic Considerations:
 Require no search
 Many retail outlets
 Low per-unit gross margins
 Heavy brand promotion, limited retailer promotion
 Packaging important
 Reliance on self-service
 Available at many retailers
 Usually low price points
© 2013 South-Western, a part of Cengage Learning 10-11
 Shopping Products
Items for which buyers are willing to expend
considerable effort in planning and making
purchases
• More extensive search
• Available substitutes
• Less frequent purchase
Strategic Considerations:
 No brand loyalty
 Fewer retail outlets than convenience
 Lower inventory turnover
 Channel members demand higher gross margins
 Personal selling
 Producer and channel member cooperation
© 2013 South-Western, a part of Cengage Learning 10-12
 Specialty Products

Items with unique characteristics that buyers are

willing to expend considerable effort to obtain
• Require extensive search
• Are generally higher price points
• Have no ready substitutes
Strategic Considerations:
 Limited retail outlets
 Lower inventory turnover
 High gross margins

© 2013 South-Western, a part of Cengage Learning 10-13

 Discussion Question

 Into which category

do Clarks shoes
fall?
• Convenience
• Shopping
• Specialty

© 2013 South-Western, a part of Cengage Learning 10-14

 Discussion Questions

 A bicycle is usually a shopping

product
 When might it be a specialty product?
 What about denim jeans or t-shirts?
Are they ever specialty products?

© 2013 South-Western, a part of Cengage Learning 10-15

 Unsought Products
Products purchased to solve a sudden problem;
products of which customers are unaware; and
products that people do not necessarily think of
buying
• No search
• Price not important
• Purchased compelled
Strategic Considerations:
 Build trust with consumers prior to need
 Recognizable brand
 Superior performance
© 2013 South-Western, a part of Cengage Learning 10-16
 Classification of Business Products

© 2013 South-Western, a part of Cengage Learning 10-17

 Business Products
 Products bought to use in an organization’s
operations, to resell, or to make other products
• Installations: Facilities and non-portable equipment
• Accessory Equipment: Not part of the final product
• Raw Materials: Natural materials that are part of a
product
• Component Parts: Finished items ready for assembly
or that need little processing
• Process Materials: Used in production but not
identifiable
• MRO Supplies: Maintenance, repair and
operating items that are not part of the final product
• Services: Intangible products in operations
© 2013 South-Western, a part of Cengage Learning 10-18
 Think About It
 Business products vary widely
• Pens and paper
• Furniture and equipment
• Technology solutions and services
 Click here to explore the business products
and services offered by Cisco.
 What kinds of business products does Cisco
sell?
 Can you identify instances where business
and consumer products are the same?

© 2013 South-Western, a part of Cengage Learning 10-19

 Product Line

Product Item
A specific version of a product that is a distinct
offering among an organization’s line of
products
Product Line
A group of closely related product items
viewed as a unit because of marketing,
technical, or end-use considerations

© 2013 South-Western, a part of Cengage Learning 10-20

 Product Mix

Product Mix
The total group of products that an
organization makes available to customers
• Width of Product Mix: The number of
product lines a company offers
• Depth of Product Mix: The average
number of different products in each product
line

© 2013 South-Western, a part of Cengage Learning 10-21

 Discussion Question

 Does this
advertisement
illustrate Burberry’s
product mix or a
product line?

 What is the
difference?

© 2013 South-Western, a part of Cengage Learning 10-22

 Concepts of Product Mix Width and Depth
Applied to U.S. Procter and Gamble
Products

© 2013 South-Western, a part of Cengage Learning 10-23

 Firms to Know: Gatorade
 Gatorade’s sports drinks have long been a
favorite among athletes
 Different product lines for different needs
 The G Series
• Formulated for endurance athletes
• Prime: A pre-sport sports drink
• Perform: The traditional Gatorade
• Recover: Post-sports drink with protein
 The G Series Pro
• Formulated for professional athletes
 G Natural
• Only available in Whole Foods
• Natural salts, sugars and flavors

© 2013 South-Western, a part of Cengage Learning 10-24

 The Stages of the Product Life Cycle

© 2013 South-Western, a part of Cengage Learning 10-25

 Stages of the Product Life Cycle:
Introduction
 The first stage of a product’s life cycle
 Sales start at zero and profits are negative
 High risk of failure
 Buyers must be made aware of:
 Features
 Uses
 Advantages
 Sellers lack:
 Resources
 Technological knowledge
 Marketing know-how
© 2013 South-Western, a part of Cengage Learning 10-26
 Stages of the Product Life Cycle:
Growth
 Sales rise rapidly, profits reach a peak, and
then they start to decline
 Promotion costs drop as a percentage of
sales
 Marketers must:
 Stress brand benefits to encourage brand loyalty
 Intensify segmentation
 Strengthen market share
 Analyze production position
 Ensure efficient distribution system
© 2013 South-Western, a part of Cengage Learning 10-27
 Stages of the Product Life Cycle:
Maturity
 The sales curve peaks and starts to decline and
profits continue to fall
• Intense competition
• Emphasis on improvements and differences in
competitors’ products
• Weaker competitors exit the market
• Advertising and dealer-oriented promotions
predominate
• Distribution sometimes expands to the global market
 Strategic objectives:
 Generate cash flow
 Maintain market share
 Increase share of customer
© 2013 South-Western, a part of Cengage Learning 10-28
 Selected Approaches for Managing
Products in the Maturity Stage

© 2013 South-Western, a part of Cengage Learning 10-29

 Stages of the Product Life Cycle:
Decline

 Sales fall rapidly during this stage

 Marketers will likely:
 Eliminate/reposition items
 Cut promotion
 Eliminate marginal distributors
 Plan to phase out product

© 2013 South-Western, a part of Cengage Learning 10-30

 Discussion Question

 What stage of the product life cycle do you

think the following products are in?
• MP3 players
• Bottled water
• E-readers
• Desktop computers
• Tennis shoes

© 2013 South-Western, a part of Cengage Learning 10-31

 The Five-Stage Process of Product
Adoption
1. Awareness: The buyer becomes aware of the
product
2. Interest: The buyer seeks information and is
receptive to learning about the product
3. Evaluation: The buyer considers the product’s
benefits and decides whether to try it
4. Trial: The buyer examines, tests, or tries the
product to determine if it meets his or her needs
5. Adoption: The buyer purchases the product and
can be expected to use it again whenever the
need for this general type of product arises
© 2013 South-Western, a part of Cengage Learning 10-32
 Most New Ideas Have Skeptics

© 2013 South-Western, a part of Cengage Learning 10-33

 Adopter Categories

 Innovators: First adopters of new products

 Early Adopters: Careful choosers of new
products
 Early Majority: Those adopting new
products just before the average person
 Late Majority: Skeptics who adopt new
products when they feel it is necessary
 Laggards: The last adopters who distrust
new products
© 2013 South-Western, a part of Cengage Learning 10-34
 Distribution of Product Adopter
Categories

© 2013 South-Western, a part of Cengage Learning 10-35

 Why Some Products Fail

 Failure to match product to needs

 Failure to send right message
 Technical/design problems
 Poor timing
 Overestimate market
 Ineffective promotion
 Insufficient distribution

© 2013 South-Western, a part of Cengage Learning 10-36

 Product Successes and Failures

© 2013 South-Western, a part of Cengage Learning 10-37

 Think About It

 Some very successful companies have

experienced high-profile failures
 Have you heard about any of these products?
 Why did they fail?

© 2013 South-Western, a part of Cengage Learning 10-38

 Important Terms

Good Product item

Service Product line
Idea Product mix
Consumer products Width of product mix
Business products Depth of product mix
Convenience products Product life cycle
Shopping products Introduction stage
Specialty products Growth stage

© 2013 South-Western, a part of Cengage Learning 10-39

 Important Terms continued

Unsought products Maturity stage

Installations Decline stage
Accessory equipment Product adoption process
Raw materials Innovators
Component parts Early adopters
Process materials Early majority
MRO supplies Late majority
Business services Laggards

© 2013 South-Western, a part of Cengage Learning 10-40