Retail Management Lecture # 1

Retail Management: Product Introduction

Economics on the premise that customers attribute

value to a product in three distinct ways:
➢ The allocation of scarce resources to
satisfy man’s unlimited needs and ￫ Customer need - this entails the
desires absence of a fundamental
The Theory of Relative Advantage requirement.
￫ Customer want- this refers to a
Economic efficiency would be optimized specific necessity for a product or
when nations base their production service to address a need.
decisions on the creation of those goods and
￫ Customer demand- it encompasses
services where they enjoy a natural
a collection of wants, coupled with
advantage over other potential producers,
the inclination and financial capacity
and then engage in international trade to
to pay for their fulfillment. `
the mutual benefit of both the importer and
• Customers make product choices based
exporter.
on their perceived value of it.
Mutual Satisfying Exchange Relationship Satisfaction arises when a product’s
actual value meets or surpasses their
When two parties can enter freely into an
expectations. Conversely, if the actual
exchange of products and/or services of
value falls bellow their expectation,
commercial value in such a way that it will
dissatisfaction ensue.
enhance the value for both.

For example, a customer may need a

new car because their old one is not
What is Product?
running well, or they may want a
• According to Kotler the definition of a new car because they want to feel
product extends beyond mere physical more stylish.
objects or services.
o Anything that can fulfill a Customer Need Customer Want Customer
Demand
need or desires
 the customer  The  The
o Even a retail store or a begins with a customer’s customer’s
customer service need, which want is the demand is
representative can be can be either desired the quantity
functional or outcome of of a product
considered products.
emotional. using the that the
The model posits that products serve to For example, product. In customer is
a customer our car willing and
meet various customer need, it is founded may need a example, able to
new car the purchase at
 because their customer a given What are the Five product Levels?
old one is not may want a price. The
running well car that is demand for ➢ The true advantage of the model is
or their may safe, a product it’s capacity to help an organization
want a new reliable, and may be high
car because affordable. at one price identify customers’ needs and
they want to and low at desires. Subsequently, they
feel more another organization can:
stylish. price.
o Align features they develop
with customer preferences.
Business Objectives o Adjust operational processes
to accommodate customer
preference.

Five product Levels

1. Core Benefit – these are the basic products
that a customer needs to satisfy their need
or want

❖ The core benefit represents the

fundamental need or desire that
customers fulfill when purchasing a
Product product. For instances, the core
benefit of a hotel is to offer a place
➢ The objective of the exchange
to rest or sleep when away from
process, the thing which the
home.
producer or supplier offers to a
potential customer in exchange for
2. Generic Product – these are products that
something else which the supplier
are like other products in the market
perceives as of equivalent or greater
value.
❖ The generic product is a basic version
comprised solely of the features
necessary for its functioning. In our
 hotel example, thus encompasses a
bed, towels, a bathroom, a mirror,
and a wardrobe.
3. Expected Product – these are the products
that meet the customer’s expectation
❖ The expected product encompasses
the feature customers anticipate
when acquiring a product. In our
hotel scenario, this encompasses
clean sheets, towels, WI-FI, and a
hygienic bathroom.
4. Augmented Product – these are products
that exceed the customer’s expectation
❖ The augmented product pertains to
product variations, added features,
or services that differentiate it form
competitors. In our hotel example,
this might involve a concierge service
or complementary town maps in
every room.
5. Potential Product – these are products that
the customer has not even thought of yet
❖ The potential product encompasses
all future augmentations and
transformations a product might
undergo. In simpler term, to
continually captivate and satisfy
customers, the product must be
enhanced. In this context of our
hotel, this could involve placing
different gifts in rooms during each
stay, such as chocolates on one
occasion and premium water on
another. Through ongoing
augmentation, the hotel perpetually
delights and surprises its customers.
Competition
• In the realm of business competition,
Philip Kotler emphasizes he significance
of the Augmented product’s
distinctiveness. The focus lies in the
consumer’s perception during product
acquisition, rather than solely on its
value.
• He asserts, “Competition is not so much
determined by what companies
manufacture, but by the enhancements
they incorporate into their product – be
it packaging, services, advertising,
guidance, delivery arrangements
(including financing), and other elements
that can hold value for consumers” ‘
There are several ways marketers can utilize
Kotler’s Model:
• Segment your market – by
comprehending the distinct levels of
customer needs, you can segment your
market and direct your marketing
endeavors accordingly.
• Create products and services to meet
customer needs – by grasping all five
levels of customer needs, you can
develop products and services that align
with the expectations and requirements
of your target consumers.
• Position your products and services in
the marketplace – by understanding how
customers make purchasing decisions
 you can strategically position your mainly through visual attributes of
products and services in the market. the product, it may also be perceived
• Understand the customer’s journey – by through physical interaction (Desmet
comprehending all five levels of et al., 2008; Mugge et al., 2009)
customer needs, you can chart out the
customer’s journey from initial
awareness to eventual purchase. ➢ Personality Congruence Model well
• Utilize Kotler’s model as a framework for explains about why people would like
understanding customer value – by to select a product based on product
comprehensively grasping all five levels personality (Govers and Schoormans,
of customer needs, you can establish a 2005)
framework to comprehend customer
value. ➢ Personality Congruence model state
that product personality influences
product choice due to personality
Product Personality congruence effect of consumers but
not due to user congruence effect.
➢ Product personality assignment is an
approach which was developed by
o According to this model,
Philip design (Jordan, 1997). The
product personality depends
concept of product personality
on product attributes and if
comes from symbolic meaning of the
perceived personality of a
product. The symbolic meaning
product matches with
which refers to physical product itself
personality of the consumer,
can be described by human
then consumer would like to
personality characteristics (Jordan,
choose this product.
1997; Jordan, 2000)
o Approaches taken for product
➢ Consumers not only consider
personality assignment are
products in terms of their
closely related with
functionality but also often thinking
pleasurable product design as
about product’s personality like
highlighted by Jordan (2000)
human beings (Govers et al., 2004)
➢ Role of product personality on
product choice is more prominent 5 Brand Personality Dimensions
that happens when functionality and
usability of products are same. For
example, a person can be happy,
cute, and honest; equivalently a
product may be appearing like happy,
cute, and honest. Although,
personality of a product is reflected
 o A product mix consist of
product lines, which are
Product Line VS. Product Mix
associated items that
➢ A product line refers to a product consumers tend to use
category or brand marketed by a together or think of a similar
company. Products within a product products or services.
line all perform a similar function,
A Product Mix Strategy has four dimensions
offer similar benefits, target similar
customers, are similarly priced, and Width: Total number of product lines a
follow similar distribution channels. company offers
Important product line attributes
Length: Total number od products in a
include line stretching, line filling,
company’s product mix
line modernization, and line
featuring. Depth: Total number of product variations in
➢ A product mix is the total number of a product line.
product lines and individual products
Consistency: Indicates how product lines
or services offered by a company.
relate to one another.
Additionally referred to as product
assortment or product portfolio.
Product mixes vary from company to
company. Some have multiple
product lines with lots of products in
each line. But others are much more
limited.
o Product mix, also known as
product assortment or
product portfolio, refers to
the complete set of products
and/or services offered by a
firm