Transcript What are Goods and Services?

Chapter 8
Create the Product
Chapter Objectives
1. Define what a Product is
2. Explain the “Layers” of a product
3. Describe how marketers classify
products
4. Understand New Product Development
5. Explain the Product Life Cycle
6. Explain the process of Product Adoption
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Products/Goods/Services Overview
Product: bundle of physical, service,
and symbolic attributes designed
to satisfy a consumer’s wants and
needs
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What are Goods and Services?
 Goods: tangible products
 Services: intangible tasks that satisfy
consumer or business user needs
 Goods-services continuum: device that
helps marketers to visualize the differences
and similarities between goods and services
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Importance of the Service Sector
 The service sector produces almost $2.5
trillion annually in sales receipts.
 Services account for four out of five jobs
in the U.S.
 The U.S. runs a trade deficit in products,
but a trade surplus in services
Q. Can you name some of the largest
service sector industries in the United
States?
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Layers of the Product Concept
 Core product:
– All the benefits the product will provide
 Actual product:
– Physical good or delivered service that
supplies the desired benefits
 Augmented product:
– Actual product plus supporting features such
as warranty, credit, delivery, installation, and
repair service after the sale
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Figure 8.2
Layers of the Product
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Classifying Goods:
How Long Does the Product Last?
 Durable goods provide benefits over a
period of months, years, decades
– Examples: automobile, washing machine
 Nondurable goods are consumed in
the short term
– Examples: newspapers, beverages, printer
cartridges
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Types of Consumer Products
1. Convenience Product: good or service that
consumers want to purchase frequently,
immediately, and with minimal effort
Marketers further subdivide the convenience
category:
– Impulse goods and services are purchased
on the spur of the moment.
– Staples are convenience goods and services
that consumers constantly replenish to
maintain a ready inventory.
– Emergency goods and services are bought
in response to unexpected and urgent needs.
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Types of Consumer Products
Q. Can you give an example or two of each
of the types of (consumer) convenience
products?
– Impulse goods and services
– Staples
– Emergency goods and services
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 Gum and Candy
– An Impulse Convenience Good
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Types of Consumer Products
2. Shopping product: good or service purchased
only after the customer compares competing
offerings from competing vendors on such
characteristics as price, quality, style, & color
– Typically cost more than convenience
purchases.
– Include goods and services.
– Shoppers need information to make a purchase
decision gather it during the buying process.
Q. Can you name a shopping product or two?
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Ads for shopping
products
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Types of Consumer Products
3. Specialty product: good or service with
unique characteristics that cause the
buyer to value it and make a special
effort to obtain it
Q. Can you name a specialty product or
two?
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 Gucci
A Specialty
Product
– Print reads:
Gucci
timepieces
Neiman Marcus
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Types of Consumer Products
4. Unsought product: good or service
marketed to consumers who may not
yet recognized they have a need for it
Q. Can you name an unsought product or
two?
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 Unsought
product: good
or service
marketed to
consumers who
may not yet
recognized in
the need for it
– Figure 11.4
• Pet Insurance
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Consumer Product Classification
Consumer Factors
Factor
Convenience
Goods and
Services
Shopping
Goods and
Services
Specialty
Goods and
Services
Planning time
involved in purchase
Very little
Fairly
Considerable
Extensive
Purchase frequency
Frequent
Less frequent
Infrequent
Importance of
convenient location
Critical
Important
Unimportant
Comparison of price
and quality
Very little
Considerable
Surprisingly
little
Consumer Factors
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Consumer Products Classification
Marketing Mix Factors
Factor
Convenience
Goods and
Services
Shopping Goods
and Services
Specialty Goods
and Services
Price
Low
Relatively high
Usually High
Promotion
Advertising and
promotion by
producer
Personal selling
and advertising by
both producer and
retailer
Personal selling
and advertising
by both producer
and retailer
Distribution channel length
Long
Relatively short
Very short
Number of sales outlets
Many
Few
Very few
Marketing Mix Factors
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Classifying B2B Products
 B2B products are classified by how
organizational customers use them
1. Equipment is used in daily operations
2. Maintenance, repair, and operating (MRO)
goods are consumed relatively quickly
3. Raw materials are products of fishing,
lumber, agricultural, and mining industries
that are used in the manufacture of finished
goods
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Classifying B2B Products
 B2B products are classified by how
organizational customers use them
4. Processed materials are created when raw
materials are transformed from their original state
5. Specialized services are purchased from outside
suppliers and may be equipment based or nonequipment based
6. Component parts are manufactured goods or
subassemblies of finished goods that
organizations need to complete
their own products
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Developing New Products
New-product development - a continuous
process of looking for entirely new
products or for ways to make an existing
product better
 Successfully introducing new products
is becoming more difficult
– R&D costs are enormous
– Products become obsolete faster
– “Slotting fees” are high
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New Product Development
 Innovation:
A product that customers perceive to
be new and different from existing
products
 The Federal Trade Commission says:
– A product must be entirely new or changed
significantly to be called new, and
– A product may be called “new” for only six
months
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New Product Development Stages

There is an 80% average failure rate of new
products…so its helpful to follow a
methodology
 Six stages through which new product ideas
progress before being introduced to the overall
market
1. Idea Generation
2. Screening
3. Business Analysis
4. Development
5. Test Marketing
6. Commercialization
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New Product Development Stages
1. Idea Generation - new product ideas which
come from many sources including: Sales
force and other employees, customers, R&D
specialists, the competition, suppliers,
retailers, independent inventors
2. Screening - identifying ideas with commercial
potential and can meet company objectives
3. Business Analysis - Assessing the new
product’s market potential, growth rate, likely
competitive strengths, and compatibility with
organizational resources
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New Product Development Stages
4. Development - converting an idea into a
physical product. May include prototypes
5. Test Marketing - Introduction of a trial version
of a new product supported by a complete
marketing campaign to a selected city of
television coverage area
6. Commercialization -The firm establishes
marketing strategies, funds outlays for
production and marketing, and launches the
product
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The Product Life Cycle
Product life cycle: progression products go
through; introduction, growth, maturity,
and decline stages
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The Product Life Cycle
1. Introduction Stage
– Firm works to stimulate demand for the new
market entry
– Promotional campaigns stress features
– Promotions to intermediaries attempt to induce
them to carry the product
– Financial losses are common due to heavy
promotional and R&D costs
Q. Can you name a product that is in the
Introduction Stage?
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The Product Life Cycle
2. Growth Stage
– Sales volume rises rapidly
– Firm usually begins to realize substantial
profits
– Success attracts competitors
– Firm may need to make improvements to the
product
– Additional spending on promotion and
distribution is usually necessary
Q. Can you name a product that is in the
Growth Stage?
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The Product Life Cycle
3. Maturity Stage
 Industry sales continue to grow, but eventually
reach a plateau
 Many competitors have entered the market, and
profits began to decline for everyone
 Differences between competing products
diminish
 Available supplies exceed industry demand for
the first time
 Heavy promotional outlays are common
Q. Can you name a product that is in the
Maturity Stage?
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Strategies for Stretching the Product
Life Cycle
Marketers usually try to stretch profitable
stages (growth/maturity) of the life cycle
for their products as long as possible.
Q. How can profitable stages of product
life cycles be stretched?
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Strategies for Stretching the Product
Life Cycle
Increasing the frequency of use by
current customers
Increasing the number of users for the
product
Finding new uses
Changing package sizes, labels, or
product quality
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 Quaker Oats
– A new application
for a mature
product
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 Using Promotion
and Product
Extensions to
Extend the
Maturity Stage of
the Product Life
Cycle
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 Kraft
– New cubed
cheese for
snacking
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The Product Life Cycle
4. Decline Stage
– Innovations or shifts in consumer preferences
cause an absolute decline in industry sales
– Industry profits fall -- often become losses
– Firms cut prices in a bid for the dwindling
market
– Manufacturers gradually drop the declining
items from their product lines
Q. Can you name a product that is in the
Decline Stage?
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Product Deletion Decisions
 Product lines must sometimes be pruned
and marginal products eliminated
 This decision is typically faced during the
late maturity and early declined stages of
the product life cycle
 An unprofitable item may be continued in
order to provide a complete line for
customers (ex: Sensor blades)
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The Consumer Adoption Process
Adoption process: series of stages consumers go
through in deciding whether or not to become a
regular user of a new product:
1. Awareness – first learn about it
2. Interest – begin to seek info
3. Evaluation – consider the benefits
4. Trial – first purchase
5. Adoption (or rejection) – use regularly (or not)
6. Confirmation – choice is confirmed via
marketing communications
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Figure 8.3
Adoption Pyramid
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Adopter Categories
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 Consumer innovators: people who purchase
new products almost as soon as the products
reach the market
 Early Adopters: People likely to purchase new
products before most others
Benefits of Targeting Innovators & Early Adopters:
– Suggestions for modifying the product may be
obtained from these individuals
– Acceptance or rejection of the product by
innovators and early adopters can help forecast
sales
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Adopter Categories
Q. Where would you place yourself on this chart
for a new gadget? A restaurant chain new to
the area? A new household product?
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