Product mix class 1

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Product DecisionsProduct Decisions

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 11-2
What is a Product?What is a Product?
 Product:Product: bundle of physical, service, and
symbolic attributes designed to enhance
buyers’ want satisfaction

What are Goods and Services?What are Goods and Services?
 Service:Service: intangible task that satisfies
consumer or business user needs
 Goods-services continuum:Goods-services continuum: device that
helps marketers to visualize the differences and
similarities between goods and services

 Characteristics that distinguish services from
goods:
Intangibility
Inseparability
Perishability
Difficulty of standardization
Frequent requirement of
interaction between buyer
and Seller
Variability

Classifying Goods and Services forClassifying Goods and Services for
Consumer and Business MarketsConsumer and Business Markets
 Consumer productsConsumer products: products destined for
use by ultimate consumers
 Business (or B2B) productsBusiness (or B2B) products: those that
contribute directly or indirectly to the output of
other products for resale
Also called industrial or organizational
products

Types of Consumer ProductsTypes of Consumer Products

 Convenience productConvenience product: good or service that
consumers want to purchase frequently,
immediately, and with minimal effort
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.

 Shopping productShopping product: good or service
purchased only after the customer compares
competing offerings from competing vendors
on such characteristics as price, quality, style,
and color
Typically cost more than convenience
purchases.
Include tangible items.
Shopper lacks complete information and
gathers information during the buying
process.

 Specialty productSpecialty product: good or service with
unique characteristics that cause the buyer to
value it and make a special effort to obtain it
 Unsought productUnsought product: good or service
marketed to consumers who may not yet
recognized in the need for it

Types of Business ProductsTypes of Business Products

 InstallationInstallation: major capital investment by a
business buyer that typically involves expensive
and relatively long-lived products, such as a
new factory or piece of heavy machinery
 Accessory equipmentAccessory equipment: capital product, usually
less expensive and shorter-lived that insulation,
such as a laptop computer
 Component parts and materialsComponent parts and materials: finished
business products that become parts of buying
firms’ final products, such as spark plugs for
new cars

 Raw materialsRaw materials: business product, such as a
farm product (wheat, cotton, soybeans) or
natural product (coal, lumber, iron ore) that
become part of a final product
 SuppliesSupplies: products that represent regular
expenses necessary to carry out a firm’s daily
operations but are not part of the final product.

 Business servicesBusiness services: intangible product
purchased to facilitate a firm’s production
and operating processes such as financial
services, leasing of vehicles, legal advice
and consulting

Levels of ProductLevels of Product
Brand
Name
Quality
Level
Packaging
Design
Features
Delivery
& Credit
Installation
Warranty
After-
Sale
Servic
Core
Benefit
or
Service
Core
Benefit
or
Service
ActualActual CoreCore
Augmented
Product
Augmented
Product

Development of Product LinesDevelopment of Product Lines
 Product LineProduct Line: a series of related products
Motivation
Desire to Grow
Enhancing the Company’s Position in
the Market
Optimal Use of Company Resources
Exploit the Product Life Cycle

 A company’s assortment of product lines and
individual offerings
Product Width--the number of product lines
offered.
Product Length--the number of different
products a firm sells.
Product Depth--variations in each product that
a firm markets in its mix.
The Product MixThe Product Mix

 Product Mix DecisionsProduct Mix Decisions
A firm may lengthen or widen its product
mix
A Company may decide to add variations
that will attract new users
A product may be pruned or altered, and
new product may extend the product life
cycle
Line extension: introduction of a new
product that is closely related to other
products in the firm’s existing line

The Product Life CycleThe Product Life Cycle
 Product life cycleProduct life cycle: progression of products
through introduction, growth, maturity, and
decline stages

 Introduction StageIntroduction Stage
Firm works to stimulate demand for the
new market entry
Promotional campaigns stress features
Additional promotions to intermediaries
attempt to induce them to carry the product
Although prices are typically high, financial
losses are common due to heavy
promotional and research-and-
development costs

 Growth StageGrowth 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 may be necessary

 Maturity StageMaturity Stage
Industry sales continue to grow, but
eventually reach a plateau
Many competitors have entered the
market, and profits began to decline
Differences between competing products
diminish
Available supplies exceed industry demand
for the first time
Competition intensifies and heavy
promotional outlays are common

 Decline StageDecline Stage
Innovations or shifts in consumer
preferences cause an absolute decline in
industry sales
Industry profits fall -- sometimes become
losses
Firms cut prices in a bid for the dwindling
market
Manufacturers gradually drop the declining
items from their product lines

Extending the Product Life CycleExtending the Product Life Cycle
 Marketers usually try to expand each stage of the
life cycle for their products as long as possible
 Product life cycles can stretch indefinitely as a
result of decisions designed to:
Increase the frequency of use by current
customers
Increase the number of users for the
product
Find new uses
Change package sizes, labels, or product
quality

Product Deletion DecisionsProduct 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

Product mix class 1

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