We define a product as anything that can be offered to a market for attention,

acquisition, use, or consumption that might satisfy a want or need.

Products include more than just tangible objects, such as cars, clothing, or
mobile phones. Broadly defined, products also include services, events, persons,
places, organizations, and ideas or a mixture of these.

Throughout this course, we use the term product broadly to include any or all of these entities.
Thus, an Apple iPhone, a Toyota Camry, and a Caffe Mocha at Starbucks are products.

Products and services fall into two broad classes based on the types of consumers who use
them:
1) Consumer products and
2) Industrial products

Consumer product: products and services bought by final consumers for personal consumption

Marketers usually classify these products and services further based on how consumers
go about buying them. Consumer products include:
1) convenience products,
2) shopping products,
3) specialty products, and
4) unsought products

5) Convenience product: A consumer product that customers usually buy

frequently, immediately, and with minimal comparison and buying effort
(Examples include laundry detergent, candy, magazines, and fast food)
6) Shopping product: A consumer product that the customer, in the process of
selecting and purchasing, usually compares on such attributes as suitability,
quality, price, and style (Examples include furniture, clothing, major appliances,
and hotel services)
3) Specialty product: A consumer product with unique characteristics or brand
identification for which a significant group of buyers is willing to make a special
purchase effort (Examples include specific brands of cars, high-priced photography
equipment, designer clothes, gourmet foods, and the services of medical or legal
specialists). Buyers normally do not compare specialty products. They invest only the
time needed to reach dealers carrying the wanted brands.
4) Unsought product: A consumer product that the consumer either does not know
about or knows about but does not normally consider buying (Examples include life
insurance, preplanned funeral services, and blood donations to the Red Cross).
Industrial product: A product bought by individuals and organizations for further processing or
for use in conducting a business.
Thus, the distinction between a consumer product and an industrial product is based on the
purpose for which the product is purchased.

The three groups of industrial products and services are:

1) materials and parts (raw materials as well as manufactured materials and

parts)
2) capital items (industrial products that aid in the buyer’s production or
operations, including installations and accessory equipment
3) supplies and services (include operating supplies (lubricants, coal, paper,
pencils) and repair and maintenance items (paint, nails, brooms) and
maintenance and repair services (window cleaning, computer repair) and
business advisory services (legal, management consulting, advertising)

Organization marketing consists of activities undertaken to create, maintain, or change the attitudes
and behavior of target consumers toward an organization. Both profit and not-for-profit organizations
practice organization marketing (e.g., public relations or corporate image marketing campaigns)
Person marketing consists of activities undertaken to create, maintain, or change attitudes or
behavior toward particular people. People ranging from presidents, entertainers, and sports figures to
professionals such as doctors, lawyers, and architects use person marketing to build their reputations.
And businesses, charities, and other organizations use well-known personalities to help sell their
products or causes.

Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior
toward particular places. Cities, states, regions, and even entire nations compete to attract tourists,
new residents, conventions, and company offices and factories.

Social ideas or social marketing consists of using traditional business marketing

concepts and tools to encourage behaviors that will create individual and societal well-
being.

Product attributes: quality, features, and style and design.

Product quality is one of the marketer’s major positioning tools.

Branding: A name, term, sign, symbol, or design, or a combination of these, that

identifies the products or services of one seller or group of sellers and differentiates them
from those of competitors.
Brand vs. Product
 Brand
 Exists in consumer’s mind
 Evokes emotions
 Builds based on the experience
 Unique
 Hard to copy
 High customer loyalty
 Price increase insensitive
 Timeless
 Protected as intellectual property
 Differentiated
Has a value for consumer
Product
 Created in the factory
 Intended for sale
 Has functions
 Replacable
 Has expiration date
 Low customer loyalty
Price increase sensitive

The most successful companies don't sell their products. They brand

Services marketing

Services are “products,” too, however intangible ones

Services are growing even faster in the world economy, making up almost 63
percent of the gross world product

Service industries vary greatly. Governments offer services through courts, employ- ment
services, hospitals, military services, police and fire departments, the postal service, and schools.
Private not-for-profit organizations offer services through museums, charities, churches,
colleges, foundations, and hospitals.

A company must consider four special service characteristics when designing marketing
programs: intangibility, inseparability, variability, and perishability
 Services marketing requires more than just traditional external marketing using the
four Ps.

Brand equity is the differential effect that knowing the brand name has on customer response to
the product and its marketing. It’s a measure of the brand’s ability to capture consumer
preference and loyalty.
Brand value is the total financial value of the brand
A firm can obtain new products through (Strategies):
Acquisition

New-product development

By new products we mean original products, product improvements, product modifications,

and new brands that the firm develops through its own product development.

Acquisition refers to the buying of a whole company, a patent, or a license to produce someone
else’s product.

New product development refers to original products, product improvements, product

modifications, and new brands developed from the firm’s own research and development.
Idea generation—the systematic search for new product ideas. A company typically generates
hundreds—even thousands—of ideas to find a few good ones.

Crowdsourcing involves inviting broad communities of people—customers, employees,

independent scientists, and researchers, and even the public at large—into the new product
innovation process.

The first idea-reducing stage is idea screening, which helps spot good ideas and drop poor ones
as soon as possible. Product development costs rise greatly in later stages, so the company
wants to go ahead only with those product ideas that will turn into profitable products.

Product idea is an idea for a possible product that the company can see itself offering to the
market.

Product concept is a detailed version of the idea stated in meaningful consumer terms.

Product image is the way consumers perceive an actual or potential product.

Concept testing: Testing new product concepts with a group of target consumers to find out if
the concepts have strong consumer appeal.

Marketing strategy development is designing an initial marketing strategy for a new product
based on the product concept.

Marketing strategy statement consists of:

Target market description

Value proposition planned.

Sales, market-share, and marketing mix

Business analysis is a review of the sales, costs, and profit projections for a new product to find
out whether these factors satisfy the company’s objectives.
Product development is developing the product concept into a physical product to ensure that
the product idea can be turned into a workable market offering.

Test marketing is the stage of new product development in which the product and its proposed
marketing program are tested in realistic market settings.

Commercialization involves introducing a new product into the market.

Product life cycle (PLC) is the course that a product’s sales and profits take over its lifetime and
involves:

Product development

Introduction

Growth

Maturity

Decline

Introduction stage is when the new product is first launched.

Growth stage is when the new product satisfies the market.

Maturity stage is a long-lasting stage of a product that has gained consumer acceptance.

Decline stage is when sales decline or level off for an extended time, creating a weak product.

Market modifying is when a company tries to increase consumption of the current product.

New users

Increased usage of existing users

New market segments

Product modifying

Marketing mix modifying is when a company changes one or more of the marketing mix
elements

Price

Promotion
Distribution channels

Price is the amount of money charged for a product or service. It is the sum of all the values
that consumers give up to gain the benefits of having or using a product or service.

Price is the only element in the marketing mix that produces revenue; all other elements
represent costs.
 If customers perceive that the product’s price is greater than its value, they will not buy
the product. Likewise, product costs set the floor for a product’s price. If the company
prices the product below its costs, the company’s profits will suffer.
 three major pricing strategies:
1. customer value–based pricing,
2. cost-based pricing, and
3. competition-based pricing.
Value-based pricing uses the buyers’ perceptions of value, not the seller’s cost, as the key to
pricing. Price is considered before the marketing program is set.
• Value-based pricing is customer driven
• Cost-based pricing is product driven
• Cost-based pricing adds a standard markup to the cost of the product.
• markup price= unit cost
• (1-desired rate of return
Cost-plus pricing adds a standard markup to the cost of the product.
– Benefits
• Sellers are certain about costs.
• Price competition is minimized.
• Buyers feel it is fair.
– Disadvantages
• Ignores demand and competitor prices.
– Competition-based pricing is setting prices based on competitors’ strategies, costs,
prices, and market offerings.
– Marketing channel (distribution channel) is a set of interdependent organizations that
help make a product or service available for use or consumption by the consumer or
business user.
Marketing channel consists of firms that have partnered for their common good with
each member playing a specialized role
Vertical marketing systems (VMSs) provide channel leadership and consist of producers,
wholesalers, and retailers acting as a unified system and consist of:
• Corporate marketing systems
• Contractual marketing systems
• Administered marketing systems.
• Corporate vertical marketing system integrates successive stages of production and
distribution under single ownership.
• Contractual vertical marketing system consists of independent firms at different levels
of production and distribution who join together through contracts to obtain more
economies or sales impact than each could achieve alone. The most common form is the
franchise organization.
• Horizontal marketing systems are when two or more companies at one level join
together to follow a new marketing opportunity. Companies combine financial,
production, or marketing resources to accomplish more than any one company could
alone.
• Example: Omega Swatch watch.
• Hybrid marketing channels are when a single firm sets up two or more marketing
channels to reach one or more customer segments
• (Multichannel distribution systems)
• Advantages
• Increased sales and market coverage
• New opportunities to tailor products and services to specific needs of diverse
customer segments
• Challenges
• Hard to control.
• Create channel conflict.
• Supply chain management is the process of managing upstream and downstream value-
added flows of materials, final goods, and related information among suppliers, the
company, resellers, and final consumers.
• Upstream refers to the material inputs needed for production, while downstream is
the opposite end, where products get produced and distributed.
• Promotion mix (marketing communications mix) is the specific blend of promotion like
advertising, public relations, personal selling, sales promotion, and direct marketing
 tools that the company uses to persuasively communicate customer value and build
customer relationships.
The five major promotion tools are defined as follows:
1) Advertising. Any paid form of nonpersonal presentation and promotion of ideas, goods,
or services by an identified sponsor (Example: broadcast, print, online, mobile, outdoor,
and other forms)
2) Sales promotion. Short-term incentives to encourage the purchase or sale of a product
or service (Example: discounts, coupons, displays, demonstrations, and events)
3) Personal selling. Personal customer interactions by the firm’s sales force for the
purpose of engaging customers, making sales, and building customer relationships
(Example: sales presentations, trade shows, and incentive programs)
4) Public relations (PR). Building good relations with the company’s various publics by
obtaining favourable publicity, building up a good corporate image, and handling or heading off
unfavourable rumours, stories, and events (Examples: press releases, sponsorships, events, and
webpages)
5) Direct and digital marketing. Engaging directly with carefully targeted individual
consumers and customer communities to both obtain an immediate response and build lasting
customer relationships (Examples: direct mail, email, catalogues, online and social media,
mobile marketing, and more).
 The Concept of Integrated Marketing Communications (IMC)
 Under this concept, the company carefully integrates its many communication
channels to deliver a clear, consistent, and compelling message about the organization
and its brands.
 Setting the Total Promotion Budget
 For example, Coca-Cola spends hundreds of millions of dollars annually on advertising,
but is that too little, just right, or too much? Thus, it is not surprising that industries and
companies vary widely in how much they spend on promotion. Promotion spending may
be 10–12 percent of sales for consumer-packaged goods, 20 percent for cosmetics, and
only 1.9 percent for household appliances. Within a given industry, both low and high
spenders can be found.
 Four common methods used to set the total budget for advertising:
 the affordable method,
 the percentage-of- sales method,
 the competitive-parity method, and
 the objective-and-task method.
 Setting the Total Promotion Budget
 1) Some companies use the affordable method: They set the promotion budget at the
level they think the company can afford. Small businesses often use this method,
reasoning that the company cannot spend more on advertising than it has.
2) percentage-of-sales method is setting the promotion budget at a certain percentage of
current or forecasted sales. The method is simple to use and helps management think
about the relationships between promotion spending, selling price, and profit per unit.
3) Competitive-parity method, setting their promotion bud- gets to match competitors’
outlays. They monitor competitors’ advertising or get industry promotion spending
estimates from publications or trade associations and then set their budgets based on
the industry average.
4) objective-and-task method, whereby the company sets its promotion budget based on
what it wants to accomplish with promotion.
 Promotion Mix Strategies
Marketers can choose from two basic promotion mix strategies: push promotion or pull
promotion.
1) A push strategy involves “pushing” the product through marketing channels to final
consumers. The producer directs its marketing activities (primarily personal selling and
trade promotion) toward channel members to induce them to carry the product and
promote it to final consumers.
2) Using a pull strategy, the producer directs its marketing activities (primarily advertising,
consumer promotion, and direct and digital media) toward final consumers to induce
them to buy the product.