The document discusses different levels in a customer value hierarchy, including the core benefit, basic product, expected product, and augmented product. It also discusses different types of goods in terms of durability and tangibility, such as nondurable goods, durable goods, and services. Additionally, it covers different classifications of consumer goods including convenience goods, shopping goods, and specialty goods.

1. Chapter12
Prepared by:
Manabat, Yona Mari Carmela B.
Mungcal, Raphael L.
Sapnu, Clarissa T.

2. Potential Product
Augmented Product
Expected Product
Basic Product
Core Benefit
Product
Levels:
The
Customer
– Value
Hierarchy
2SAPNU

3.  The service or benefit the
customer is really buying.
◦ Example: The need of a customer to get
from one place to another
3SAPNU

4.  The basic product that might satisfy the
inner needs of the customer.
 Example: A car
4SAPNU

5.  A set of attributes and conditions
buyers normally expect when they
purchase this product.
 Example: A car that is in working
condition and has decent mileage ,etc.
5SAPNU

6.  Product that exceeds customer expectations
◦ Example: any brand (for example, a Ford) that is in
fully working condition, has an attractive design,
passed all safety tests, built-in alarm and air
condition, etc. The car is also accompanied by other
benefits such as warranty , instalments, etc.
6SAPNU

7.  Encompasses all the possible augmentations and
transformations the product is offering might
undergo in the future
◦ Example: the car is much safer than the competitors’
products; it tends to break down less frequently than
other cars, has the best mileage, etc.
7SAPNU

8.  Durability and tangibility
◦ Nondurable goods – are tangible goods normally consumed
in one or a few uses.
◦ Durable goods – are tangible goods that normally survive
many uses
◦ Services- are intangible. Inseparable, variable, and
perishable products that normally require more quality
control, supplier credibility, and adaptability.
| SAPNU
8SAPNU

9. 9SAPNU

10. | SAPNU
10SAPNU

11. SAPNU
11SAPNU

12.  Consumer – Goods classification
◦ Convenience goods – purchased frequently,
immediately, and with minimal effort.
◦ Shopping goods – are those the consumer
characteristically compares on such bases as
suitability, quality, price and style.
◦ Specialty goods – have unique characteristics
or brand identification for which enough
buyers are willing to make a special
purchasing effort
◦ Unsought goods – are those the consumer
does not know about or normally think of
buying. | SAPNU
12SAPNU

13. | SAPNU
13SAPNU

14. | SAPNU
14SAPNU

15. | SAPNU
15SAPNU

16. 16SAPNU

17.  Materials and Parts – are goods that
enter the manufacturer’s product
completely
◦ Raw materials
 Farm products (wheat, cotton, fruits, livestock
and vegetables)
 Natural products (fish, lumber, crude
petroleum, iron ore)
SAPNU 17

18. SAPNU 18

19. SAPNU 19

20. ◦ Manufactures materials and parts
 Component materials (iron, yarn, cement, wires)
 Component parts (small motors, tires, casting)
 Capital items – are long-lasting goods that
facilitate developing or managing the
finished product.
◦ Installations (factories, offices) and heavy
equipment (generators, drills, etc)
◦ Equipment (personal computer, desks)
| SAPNU
20SAPNU

21. SAPNU 21

22. SAPNU 22

23.  Supplies and business services – are short-
term goods and services that facilitate
developing or managing the finished
product
◦ Supplies
 Maintenance and repair items (paints, nails, brooms)
 Operating supplies (lubricants, coal, writing paper)
◦ Business services
 Maintenance and repair service (window cleaning, copier
repair etc.)
 Business advisory services (legal, management
consulting, advertising) | SAPNU
23SAPNU

24. 24SAPNU

25. SAPNU 25

26. 26SAPNU

27.  Form – size, shape, or physical structure of a
product.
 Features – most products can be offered with
varying features that supplement their basic
function.
 Customization – marketers can differentiate
products by customizing them.
 Performance Quality – the level at which the
product’s primary characteristics operate.
| SAPNU
27SAPNU

28.  Conformance quality – the degree to which
all produced units are identical and meet
promised specifications
 Durability – a measure of the product’s
expected operating life under natural or
stressful conditions
 Reliability – a measure of the probability
that a product will not malfunction or fail
within a specified time or period
| SAPNU
28SAPNU

29.  Repairability – measures the ease of
fixing a product when it malfunctions
or fails.
 Style – describes the product’s look
and feel to the buyer.
| SAPNU
29SAPNU

30.  Ordering ease - refers to how easy it is for
the customer to place an order with the
company
 Delivery – refers to how well the product or
service is brought to the customers
 Installation – refers to work done to make a
product operational in its planned location
30SAPNU

31.  Customer training – helps the customer’s
employees use the vendor’s equipment
properly and efficiently
 Customer consulting – includes data,
information systems, and advice services
the seller offers to buyers.
 Maintenance and repair- programs help
customers keep purchased products in
good working order.
SAPNU
31SAPNU

32.  Returns – feedbacks
◦ Controllable returns – result from problems or
errors by the seller or customer and can mostly
be eliminated with improved handling or storage,
better packaging, etc.
◦ Uncontrollable returns – result from the need for
customers to actually see, try, or experience
products in person to determine suitability and
can’t be eliminated by the company in the short
run.
SAPNU 32

33. • totality of features that affect how a product
looks, feels, and functions to a consumer
• offers functional and aesthetic benefits and
appeals to both our rational and emotional
sides
33MUNGCAL

34.  a very data-driven approach with three
phases: observation, ideation, and
implementation
 requires intensive ethnographic studies of
consumers, creative brainstorming
sessions, and collaborative teamwork to
decide how to bring the idea to reality
34MUNGCAL

35.  stretches from basic needs to particular items that
satisfy those needs
 composed of six levels
Product hierarchy
35MUNGCAL

36. 1. Need family
◦ the core need that underlies the existence of a
product family
2. Product family
◦ product classes that can satisfy a core need
3. Product class or product category
◦ group of products within the product family
4. Product line
◦ group of products within a product class
5. Product type
◦ group of items within a product line
6. Item or stock-keeping unit or product
variant
◦ distinct unit within a brand or product line
36MUNGCAL

37.  group of diverse but related items that
function in a compatible manner
Product mix or product
assortment
• set of all products and items a particular seller offers
for sale
• consists of various product lines
• has four dimensions: width, length, depth, and
consistency
37MUNGCAL

38. 1. Width
◦ number of product lines the company carries
2. Length
◦ total number of items in the mix
3. Depth
◦ number of variants each product has
4. Consistency
◦ how closely related the various product lines are
38MUNGCAL

39. In offering a product line, companies
normally develop a basic platform and modules
that can be added to meet different customer
requirements and lower production costs.
Sales and Profits
 Companies should recognize that items can differ
in their potential fpr being priced higher or
advertised more as ways to increase their sales,
their margins, or both.
39MUNGCAL

40. Market Profile
◦ The product line manager must review
how the line is positioned against
competitors’ lines.
 Product map
 shows which competitor’s items are competing with
the other companies’ items
 identifies market segments
Product line analysis provides
information for two key decision areas –
product line length and product mix pricing.
40MUNGCAL

41. Company objectives influence product line
length.
 To induce up-selling
 To facilitate cross-selling
 To protect against economic ups and
downs
High market share and market growth: longer
product lines
High profitability: shorter product lines
41MUNGCAL

42. Reasons why product lines tend to lengthen
over time
 Excess manufacturing capacity
 Customer satisfaction
A company lengthens its product line in
two ways: line stretching and line filling.
42MUNGCAL

43. Line stretching
 lengthens its product line beyond its
current range
 has three kinds
1. Down-market stretch
◦ Middle-market companies introduce a lower-priced line.
2. Up-market stretch
◦ Companies enter the high end of a market or simply
position themselves as full-line manufacturers.
3. Two-way stretch
◦ Middle-market companies stretch their line in both
directions.
43MUNGCAL

44. Line filling
 lengthens its product line by adding more
items within the present range
Motives for line filling
1. To gain incremental profits
2. To satisfy the customers
3. To utilize excess capacity
4. To become the leading full-time company
5. To keep out competitors
|
44MUNGCAL

45. Line modernization, featuring, and pruning
 Product lines need to be modernized.
 The product line manager typically selects
one or a few items in the line to feature.
 The company may try to boost demand for
slower sellers.
 Product line managers must periodically
review the line for deadwood that
depresses profits.
 Multibrand companies all over the world try
to optimize their brand portfolios.
MUNGCAL 45

46.  Product Mix
- also known as product assortment
- refers to the total number of product
lines that a company offers to its customers
 Product Mix Pricing
- searches for a set of prices that
maximizes profits on the total mix
46MANABAT

47. 47MANABAT

48. 48MANABAT

49.  Product Line Pricing
- separating goods into cost categories
in order to create various quality levels in the
minds of consumers
49MANABAT

50. 50MANABAT

51. 51MANABAT

52.  Optional-feature Pricing
- companies offer optional products,
features, and services with their main product
52MANABAT

53. 53MANABAT

54. 54MANABAT

55.  Captive-product Pricing
- pricing items made specifically for use
with a core product, usually from the
same manufacturer
- necessary to the function of the core
product
55MANABAT

56. 56MANABAT

57. 57MANABAT

58.  Two-Part Pricing
- consists of fixed charge that does not
vary with usage or consumption and an
additional charge that does vary with usage or
consumption.
58MANABAT

59. 59MANABAT

60. 60MANABAT

61.  By-product Pricing
- a pricing method used in situations
where a saleable by-product results in the
manufacturing process
- pricing low-value by-products to get rid
of them or to earn extra margin in profit
61MANABAT

62. 62MANABAT

63. 63MANABAT

64.  Product-building Pricing
- firm offers its products only as a bundle
- mixed bundling
- offers goods both individually and
in bundles, normally charging less for the
bundle than if the items were purchased
separately
64MANABAT

65. 65MANABAT

66. 66MANABAT

67.  Co-branding
- dual-branding or brand bundling
- marketers often combine their products
with products from other companies in various
ways
67MANABAT

68. 1. Same-company co-branding
- company with more than one product
promotes their own brands together
simultaneously
- company links its one brand products
with the other brand
68MANABAT

69. 69MANABAT

70. 2. Joint venture co-branding
- defined as two or more companies
going for a strategic alliance to present a
product to the target audience
70MANABAT

71. 71MANABAT

72. 3. Multiple-sponsor co-branding
- involves two or more
companies working together to form a
strategic alliance in technology, promotions,
sales, etc.
- a product has more than one sponsor
72MANABAT

73. 73MANABAT

74. 4. Retail co-branding
- retail establishments use the same
location to optimize space and profits
74MANABAT

75. 75MANABAT

76.  It is a special case of co-branding. It creates
brand equity for materials, components, or
parts that are necessarily contained within
other branded products
76MANABAT

77.  Requirements for Successful Ingredient Branding
1. Consumers must believe the ingredient matters
to the performance or success of the end
product.
2. Consumers must be convinced that not all
ingredient brands are the same and that the
ingredient is superior.
3. A distinctive symbol or logo must clearly signal
that the host product contains the ingredient.
4. There should be programs that can help
consumers understand the advantages of the
branded ingredient
77MANABAT

78. 78MANABAT

79. Packaging
- includes all the activities of designing and
producing the container for a product
- factors contribute to growing use of
packaging:
a. self-service – attract attention and make
favorable overall impression
b. consumer affluence – consumers are willing to
pay a little more for the appearance,
convenience, and prestige of better packaging
79MANABAT

80. c. company and brand image
- instant recognition of the company or
brand
- creates a ‘billboard effect’
d. innovation opportunity
80MANABAT

81. 81MANABAT

82. 82MANABAT

83. 83MANABAT

84.  Objectives of packaging
1. Identify the brand
2. Convey descriptive and persuasive information
3. Facilitate product transportation and protection
4. Assists at0home storage
5. Aid product consumption
84MANABAT

85.  Label can be a simple attached tag or an
elaborately designed graphic that is part of the
package.
 Functions:
1. It identifies the product
2. It describes the product
3. It promotes the product
85MANABAT

86. 86MANABAT

87.  Warranties
- are formal statements of expected
product performance by the manufacturer
 Guarantees
- reduce the buyer’s perceived risk
- suggest that the product is of high
quality and the company and is services are
dependable
MANABAT 87