CHAPTER FOUR:

PRODUCT AND SERVICE CONCEPT

Overview of Product and Service
People satisfy their needs and wants with products. A product is anything that can be
offered to a market for attention, acquisition, use or consumption that might satisfy a
want or need.
Product Classifications. Products can be classified in three groups according to their
durability or tangibility.
a) Non-durable goods: Non-durable goods are tangible goods that normally are
consumed in one or few periods of time e.g. Beer, soap, salt, etc.
b) Durable goods: Durable goods are those tangible goods that usually survive many
users e.g. Refrigerator, TV, clothing, etc.
c) Services: Services are activities, benefits or satisfactions that are offered for sale e.g.
Haircut, repairing, etc.
Products can also be classified based on the purpose for which they are bought as
consumer and industrial product
Consumer Products: Consumer products are those bought by final consumers for
personal consumption. Consumer products include convenience products, shopping
products, special products and unsought products.

Industrial Products: on the other hand, are products that are bought for further
processing, not for final consumption

4.2. Product Planning and Development process

A firm can obtain a new product in two ways:
1. Through acquisition- by buying a whole company, a patent, or a license to
produce some one else’s product.
2. Through new product development by the company’s own research and
development effort. By new product we mean original products, product
improvements, product modifications or new brands that the firm develops
through its own research and development endeavors.
The reason we have to concentrate on new product development is that new products
continue to fail at disturbing rate. Sometimes certain products reach at the decline stage
1
the moment it is introduced to the market. Why do so many products fail? There are
several reasons:
1. Although the idea may be good, the market size has been overestimated
2. or perhaps the actual product was not designed well
3. Or it was incorrectly positioned in the market, priced too high, or advertised
poorly.
4. sometimes the cost of product development is higher than expected
5. sometimes competitors fight back harder than expected
The remedy lies in strong new product planning and in setting up a systematic new
product development process for finding and growing new products. The product
planning and development process comprises several major steps:
1. Idea generation
New product development starts with idea generation- the systematic search for new
product ideas. The ideas could emerge form various idea sources or creative problem-
solving new product idea may come from several sources. The sources may be
categorized into two: internal and external sources.
Internal sources: this source includes executives, employees, scientists, sales
persons, top management etc.
External source includes customer, distributors, dealers, competitors and other
institution.
However, they need an in-depth development and refinement into final product or service
to be offered. The company ought to generate as many ideas as possible in order to find a
few good ones. It is better to collect some 10 to 12 ideas. If you want to find a few ideas
with the power to fascinate consumers. Frustrate competitors, and thrill investors, you
must first generate hundreds of unconventional strategic ideas.
2. Idea screening
The purpose of idea generation is to create a large number of ideas from which a few best
ideas can be selected. The purpose of idea screening is to reduce to number of ideas
generated during idea generation stage. The first idea reducing stage is idea screening,
which helps to spot good ideas and drop poor ones as soon as possible before thy go into
production and commercialization stages. Idea screening is necessary because ideas are

2
not equally sound and valuable. Thus, poor ideas are screened and rejected as early as
possible. Product ideas should be screened from the point of view of our knowledge,
market potential, raw material ail ability, import export related matters, availability of
skilled human resources, profitability and capacity to be compatible with existing
competitors in market. Hence the first idea pruning stage is careening. In screening stage
tow types of errors must be avoided. They are:
1. Drop Error-which occurs when the company dismisses good idea. If the
company makes so many drop errors, its standard is too conservative.
2. A go-error- That occurs when company permits a poor idea to move into dep’t
and commercialization.
3. Concept development
An attractive idea can be developed into product concept it is important to distinguish
between a product idea, a product concept, and a product image. A product idea is an
idea for a possible product that a company can see itself offering to the market. A product
concept is a version of the idea stated in a meaningful consumer stated term.
Commercialization. Concept testing calls for testing new product concept with groups of
target consumers. The concept may be presented to consumers’ symbolically or
physically. Here concept is in word or in writings only. Consumer preferences obtained
in market research can be incorporated Consumers are called up on to review this written
concept for their comments and suggestions
4. Market strategy Development
After concept, testing proves best, the next step is marketing strategy development;
designing an initial marketing strategy for introducing the proposed product to the
market. The marketing strategy statement consists of three parts:
The first part describes the target market: the planned product positioning, the
sales, market share and profit goals for the first few years
The second part outlines the product’s planned price, distribution and marketing
budget for the first year
The third part describes the planned long-run sales, profit goals and marketing
mix strategy.

3
5. Business Analysis
Business analysis is the basic assessment of the product’s compatibility in market place
and its potential profitability. Bothe the size of the market and competing products are
studied at these points. Cost-benefit analysis is made to see the viability of the product if
manufactured. The company’s capacity to produce that new product in terms of resource
available and can be evaluated and if the benefit is greater than the cost, then the move to
the product development is progressed. Otherwise, the idea can reject at this stage also.
6. Product development
This stage covers
Prototype development
Consumer’s testing of the prototype
Branding, packaging and labeling
Consumer testing of the model product will make way for final selection of the most
acceptable model for mass production and distribution.
7. Test marketing
Test marketing is a trial mini launch of product in limited areas that represent the
potential market. The test marketing of the product is done in pre-decided city or areas.
This will help to study the responses, suggestions and comments before embarking in to
mass scale production. It is the step used to discover weaknesses to be eliminated before
the product is fully launched and to incorporate responses, suggestions and comments in
to the product before the product is manufactured on large-scale production.
8. Commercialization
At this stage the entrepreneur after incorporating necessary amendments based on
consumer suggestions and comments, it can launch full scale promotional activities. Mass
production will start with improved features and distribution channel will be organized to
distribute the product.
4.3. Product protection
Any idea which gives a trade advantage or proprietary information is called intellectual
property. Intellectual property is a legal definition of ideas, inventions, artistic works, and
other commercially valuable products created out of one’s own mental processes.
Intellectual property differs from other forms of property because it is intangible, a

4
product of the human imagination. There are three forms of intellectual property rights an
entrepreneur should think about as he creates something different and better. These are
Patents, copy write, and trade mark registration.
4.3.1. Patents
A patent is a grant of a property right by the government to an inventor. It is issued
through the Ethiopian science and Technology. The most common type of patent is called
a utility patent and it is granted for years. All patents, however, have the distinction of
being assets with commercial value because they provide exclusive rights of ownership to
patent holders, their heirs and assigns. (An “assign” is anyone who might be assigned
ownership or rights through sales or license of a patent.)
Patents are exclusive property rights that can be sold, transferred, willed, licensed or used
as collateral much like other valuable assets. In fact, most independent inventors do not
commercialize their inventions or create new products from their ideas. Instead they sell
or license their patents to others who have the resources to develop products and
commercial markets.
Types of Patents
The patent law provides the three categories of patents as: utility patents, design patents,
and plant patents. There are no other proper names or categories of patents however one
often hears an inventor speak of obtaining a product patent or a process patent. Both of
these are normally called utility patents. In some instances, they will be design patents,
and for botanical creations they are issued as plant patents.
a) Utility Patents
A utility patent is granted for new products, process, machines, methods of
manufacturing, and compositions of matter. This category excludes most botanical
creations related to plant and agricultural use process
b) Design patents
Design patents are granted for any new or original ornamental design for an article of
manufacture. A design patent protects the appearance of the article, not the article itself.
An inventor could easily register both a utility patent and a design patent, but the design
patent has a limited life. Entrepreneurs can select the period of time for protection in
order to commercialize designs and to realize the benefits of their ingenuity. The benefit

5
of a design patent is that the ornamental nature of the patent may be a distinguishing
feature that allows an individual to have exclusive use of visual imagery, thus enhancing
sales or creating brand identification.
c) Plant Patents
In botanical terms, any new variety of plant that has been asexually reproduced can be
granted a plant patent. The new plant must not exist in nature or in an uncultivated state.
Therefore, new plants, mutants, hybrids, the seedlings may be patented. Provided the
inventor can satisfy the patent office that the new plant did not evolve from nature. A
plant provides the same protection as a utility patent for specific period.
Types of Patents
Utility patents Granted for new processes, machines, manufactures, and
compositions not including botanical creations, with a protected
for specific period.
Design patents Granted for any original ornamental design for an article of
manufacture with protected specific period.
Plant patents Granted for botanical creations that have been a sexually
reproduced and do not exist in nature with a protected for specific
period
4.3.2. Trademarks
A trademark “includes any word, name, symbol, or distinguishing device, or nay
combination there of adopted and used by a manufacturer or merchant to identify his
goods and distinguish them from those manufactured or sold by others
An important qualification for a trademark is that the mark, name, or insignia must be
used commercially. Consequently, a logo not actually used in trade may be denied
registration and one that was registered out of use for an extended period may loss
registration protection. In addition, a company name cannot be registered as a
trademark but it can be registered as a service mark. To be eligible for registration, a
distinguishing mark must be used in commerce on a continuous basis. For example,
the trade marked name “Coke” has been in continuous use since its inception.

6
 A service mark is similar to and can be registered in the same way with the same
protection. A service mark can be a name, wording used in advertising symbols, or
artistic figures that create a distinctive service concept. Therefore, the unique lettering
of the abbreviation “IBM” for International Business Machines coupled with a design
and a specific blue color cannot be replicated by another firm.
4.3.3. Copyrights
A copyright is distinct from patents and trademarks in that intellectual property is
protected for the life of the originator. This protection affords an extraordinary property
right and a substantial estate.
A copyright extends protection to authors, composers, and artists, and it relates to the
form of expression rather than the subject matter. This distinction is important because
most intellectual property has proprietary information in terms of subject or using the
original material. This prohibition does not prevent another person from using the
“subject matter” and then rewriting the material.
Visual materials under copyright protection are photographs, paintings, sculptures,
poems, articles, stories, books, music, sound recordings, motion pictures audiovisual
works, periodicals, computer punch cards, microfilm, pantomimes, and choreographic
works. These can be accurately differentiated from similar works. Copyright law extends
to literary and dramatic efforts, so that performances and recording rights also can be
protected.