MGTA05 – Foundations – Week 2

What People Need and Want:

Products
Please read chapter 2
(this week to page 31)

last update: September 10 2021

5:30 pm
Review: What is a Business?
A business is an organised effort
to produce or provide something
that people (customers) want
and are willing to pay for
in order to make a profit

 
2
 Review: Profit
Profit: The difference between:
$$$ in (revenues)
$$$ out (expenses)

If revenue is greater than expenses

owners of business become wealthier
A businesses tries to make a profit
other organisations (e.g. hospitals) do not
3
 Review: The Profit Motive
People give up their time and energy
if there is incentive to do so

A businesses tries to make a profit

Other kinds of organisation do not

Profit
(chance for owners to become wealthier)
is the incentive behind a business
4
MGTA05 – Chapter 2 (to page 31)

What People Need and Want

Goods vs. Services

“Value Package”
 Product: Key Learning Points
1. Two kinds of product
Goods } characteristics
Services } and differences

2. Product as Value Package

(function + features + benefits)
 Product: Definition
What purchaser hopes to get, or
believes to be getting, when they
purchase a good or service

A good or service that fills

buyer’s need or satisfies a want
 Goods Vs. Services

Good: A product you can see and touch

(it is “tangible”)

Service: A product that is intangible

A product that you “experience”
 Examples of Goods
Soap Jeans Toothpaste

You can see and touch these products

You can carry them around
 Examples of Services
Banking and
Legal advice Taxi Rides Tourism

We are willing to pay for these products

We benefit from purchasing these products
We have nothing to show for buying them
We experience services
 Canadian GDP by Sector - 2016
Services
>75%
other
ser-
vices

food and
accommodation
retail
finance

educa-
tion

health Goods
Source: professions care
<25%
Statistics Canada
Services: More Difficult to Provide

Services more difficult

to provide than goods

Because of 3 attributes:
Immediacy
Customer involvement
Customization
 Services: Immediacy
Most services can’t be stored
(customer wants them there and then)
A book can
be stored

Meal in a restaurant
can not
The business must work harder at
planning and scheduling
 Services: Customer Involvement
Services often need customer to be there

Most goods (a book) can

be made without customer

Most services
(math tutoring) can not

Service providers need people skills

High & Low Contact Services
Not all service require customer
involvement but most do
 Services: Customisation
each service customer
wants something different
Most goods (pair of jeans)
should be identical
Most services (hair cuts)
should be different

Service providers must be more versatile

 Goods and Services

The concept of "goods" vs "services"

is an artificial distinction
intended to help us to understand
the nature of a “product”
 Goods vs Services
This is a good This is a service

You are paying You are paying for the

for the pizza waiter, decor, atmosphere
 Product: Definition
(You’ve seen this definition before)

What purchaser hopes to get, or

believes to be getting, when they
purchase a good or service
A good or service that fills
buyer’s need or satisfies a want
When a consumer needs or wants
something, he places a value on it
 Product: The Value Package
The combination of three attributes that
determine a product’s value
(how much customers will pay)

Function

Benefits Features
 Function

What product is intended to do:

• Car provides transportation
• Restaurant provides a meal
 Features
Specific, additional attributes
which contribute improved usefulness or
enhanced experience:
• Car has convertible roof
• Car has air conditioning

• Restaurant has attractive décor

• Restaurant has live music
 Benefits
Advantages derived from purchase
Frequently these are intangible
(status, image, reputation)
• Car gives you independence
• Car gives you status with friends
• Restaurant is trendy
• Dining out allows you to meet people
 Value Pakage

function + features + benefits

= “value package”

The bundle of tangible and intangible

functions, features and benefits that a
business offers its customers

Determines the “value” to customer

 Value Package
You can get a hotel room in London, UK
during Reading Week
for Cdn $20 per night.

Here’s what the room looks like:

.
 Value Package
You can get a hotel room in London, UK
during Reading Week
for Cdn $250 per night.

Here’s what the room looks like:

.
 Value Package
You can get a hotel room in London, UK
during Reading Week
for Cdn $600 per night.

Here’s what the room looks like:

.
 Value Package: Why It’s Important
Business managers must understand
what customers need and want
and
what customers are willing to pay for

Some customers want function only

Some customers want function + features
Some want function + features + benefits
(and are willing to pay for it!)