Chapter 8 Product and Service Concepts

1. Chapter 8Product and Service Concepts Professor Jason C. H. Chen, Ph.D. School of Business Administration Gonzaga University Spokane, WA 99223 chen@jepson.gonzaga.edu

2. After studying this chapter you should be able to: • Understand the differences between goods and services. • Differentiate between consumer and business products, and discuss the different types of each. • Recognize that marketers need to appreciate the perspective of the consumer. • Define and discuss the importance of product quality, product design, branding, packaging, and customer service. • Explain how the different product components need to be integrated to meet the needs of customers.

3. OPENING VIGNETTE WWW.FRITOLAY.COM • What useful information may be found on the Frito-Lay Web page? • What is Frito-Lay’s basic philosophy for doing business?

4. The Good/Services Continuum Target Market Product Place Promotion Price Product idea Brand Package Warranty Physical good/services Features Benefits Quality level Accessories Installation Instruction Product line Type of Brand: Individual or family Manufacturer or dealer Protection Promotion Enhancement None, limited full, extended

5. What Is a Product? • Product: • An idea, a physical entity (a good), a service, or any combination of the three that is an element of exchange to satisfy individual or business objectives .

6. Types of Products • Goods: • Physical products • with form and • substance • Consumer Products: • Those used by • consumers for their • own use and • satisfaction. • Services: • Non-physical products • usually involving • performance • Business Products: • Those used in the • running of a business • or in the manufacture • of products for resale.

7. The Good/Services Continuum Exhibit 8-1 The Good/Services Continuum Paper Truck Production equipment Auto repair Uniform rental Restaurant Healthcare Haircut Accounting Goods Goods (Intangible, Perishable, Inseparable, and Variable in quality) (Tangible, Storable,, Separable, and Standardized in quality)

8. Product Differentiation • Product Differentiation: • Exists when a firm’s offerings differ or are perceived to differ from those of competing firms on any attribute, including price.

9. Goods: Physical products. Services: Nonphysical products. Goods and Services

10. Tangibility When produced relative to when consumed Where produced(storing and transporting) Differences Balancing supply and demand Contact with customer by producer of product Differences in Goods and Services © 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Basic Marketing

11. Characteristics and Strategies for Services Service Characteristic Service Strategy Intangible Associate service with something tangible Perishable Manage demand to utilize supply Inseparable Capitalize advantages of person providing service Variable Standardize service delivery as much as possible

12. Product Classes • Two broad classes • consumer products • business products • Classes help in planning marketing mix needed • Based on how the customer views the product • how consumers think about and shop for products • how business/organizational buyers think about products and how they'll be used

13. Consumer Products: Products that are purchased by consumers for their own personal use. Business Products: Products purchased by a firm or organization for its own use. Consumer and Business Products

14. Consumer and Business Products Exhibit 8-3 Consumer and business products Products Consumer Products Business products • Convenience • Staples (bread, • toothpaste) • Impulse (candy, • magazine) • Emergency • (snow hovel, • antifreeze) • Shopping • TV • Minivan • Vacation • condo • Specialty • Timberland boots • Krups • coffeemaker • Rolex watch • Capital • Physical • facilities • (office • building) • Accessory • equipment • (fax machine, • desks) • Production • Raw materials • (oil, farm, • products) • Component • materials (steel, paper) • Component • parts (disk • drive, car • radio) • Operational • Supplies (pen’s, light bulbs) • Services (accounting, • janitorial)

15. Types of Consumer Products Convenience Products Shopping Products Specialty Products

16. Types of Business Products Capital Products Production Products Operational Products

17. Consumer Product Classes

18. Consumer Product Classes and Marketing Mix Planning

19. Business Product Classes

20. Special Consideration with Business Products • Derived demand • Demand for goods and services is derived from the demand for what firms produce and sell • Demand elasticity faced by whole industry • Tax treatment • Capital item • Expense item © 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Basic Marketing

21. Business Product Classes and MarketingMix Planning

22. Examples of Possible Blends of Physical Goods and Services in a Product

23. Product Components (Exhibit 8-5) Product Components • Product Features • Quality • Design • Branding • Packaging • Service Features • Purchase services • Usage services

24. Recognized Trademarks and Symbols Helpin Promotion

25. Brand: A name, term, sign, symbol, design, or combination that a uses to identify its products and differentiate them from those of competitors. Brand Name: The element of a brand that can be vocalized: IBM Tide Snickers Diet Coke Branding

26. Brand Mark: The element of a brand that cannot be vocalized: MGM Lion The Buick symbol The Nike Swoosh Trademark: A brand or part of a brand that is registered with the U.S. Patent and Trademark Office. Branding

27. Building Brands Exhibit 8-6 Brand-building process Brand identity Brand awareness Brand image Brand promise Brand experience Brand loyalty Brand equity

28. Types of Brands Generics (Products typically not branded) Manufacturer Brand (National brand or regional brand) Distributor Brand (Store brand, private brand, or private label)

29. The World’s 10 Most Valuable Brands Rank Brand 2002 Brand Value ($billions) • Coca-Cola 69.6 • Microsoft 64.1 • IBM 51.2 • GE 41.3 • Intel 30.9 • Nokia 30.0 • Disney 29.3 • McDonald’s 26.4 • Marlboro 24.2 • Mercedes 21.0

30. Conditions Favorable to Branding • Product easy to identify by brand • Consistent quality can be maintained • Widespread availability is possible • Strong demand enables price to be high enough to support branding • Economies of scale are possible • Favorable shelf locations can be obtained

31. Levels of Brand Familiarity • Brand Rejection • Brand Nonrecognition • Brand Recognition • Brand Preference • Brand Insistence

32. Keys to Choosing A Brand Name Is easy to pronounce, recognize, and remember. Is distinctive in some way. Can be translated into other languages.

33. Characteristics of a Good Brand Name • Short and simple • Easy to spell and read • Easy to recognize and remember • Easy to pronounce • Can be pronounced in only one way • Can be pronounced in all languages (for international markets) • Suggestive of product benefits • Adaptable to packaging/labeling needs • No undesirable imagery • Always timely (does not get out-of-date) • Adaptable to any advertising medium • Legally available for use (not in use by another firm)

34. Branding Decisions • What kind of brand to use? • Individual Brand • Family Brand • Licensed Brand • No brand at all (generic products) • Who does the branding? • Manufacturer Brand • Dealer Brand

35. Packaging • Label: • A printed description of the product on the package. • Package: • The container or wrapper for a product.

36. Functions of Packaging • Protecting the product until consumed. • Storing the product until consumed. • Facilitating consumption of the product. • Promoting the product. • Facilitating disposal of the product.

37. Some Ways Packaging Benefits Consumersand Marketers

38. Customer Service: Describes the assistance provided to help a customer with the purchase or use of a product. Important Elements of Customer Service: Providing information about product alternatives. Training in product use. Credit and financing services. Customer Service