CHAPTER 5 Product

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CONTENTS OF THIS CHAPTER

Definition of Product
Product Levels,
Product Classifications,
Product Differentiation,
Service Differentiation,
Categories of Service Mix,
Distinctive Characteristics of Service.

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 PRODUCT

Product is anything that can be offered in a

market for attention, acquisition, use, or
consumption that might satisfy a need or want.
Product may be tangible (smart phone) and
intangible (banking services) in characteristics.

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 .2
1 2
gu r e FIVE PRODUCT LEVELS
Fi

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 PRODUCT LEVELS
Core Benefit
(Rest and sleep)

Basic Product
(Bed, bathroom, towels)

Expected Product Customer-value

(Clean bed, fresh towels)
Hierarchy
Augmented
Product
(Free Internet; free breakfast)

Potential Product
(Future augmentations)
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 FI V E PR O D U CT LEV ELS

Products are comprised of 5 levels. Each level adds

more customer value. Here are the product levels
using a hotel as an example.
Core benefit: service or benefit the customer is really
buying.
Basic product: marketers turn core benefit into a
basic product at this level.
Expected product: attributes and conditions buyers
expect when they purchase this product. Competition
takes place at this level in developing countries.

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 FI V E PR O D U CT LEV ELS

Products are comprised of 5 levels. Each level adds

more customer value. Here are the product levels
using a hotel as an example.
Augmented product: : attributes and conditions
exceed customer expectations. Competition takes
place at this level in developed countries.
Potential product: various augmentations that
could be incorporated in the future. Here is where
companies search for new ways to satisfy customers
and distinguish their offering.

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 PRODUCT
CLASSIFICATIONS
Durability and Tangibility

Nondurable goods

Durable goods

Services
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 PRODUCT CLASSIFICATIONS USES)

• Staples
Consumer-Goods
• Impulse goods
• Emergency goods
Specialty goods

Convenience goods

Unsought goods
Shopping goods

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 PRODUCT
CLASSIFICATIONS (USES)
Consumers purchase convenience goods frequently,
immediately, and with minimal effort. (Rice, Oil)
Consumers compare shopping goods based on suitability,
quality, price, and style. (Sofa set, TV)
Consumer make special purchasing effort to buy specialty
goods due to their unique characteristics or brand
identification. (Car)
Consumer does not normally know or buy unsought
goods. As such these goods require advertising and
personal-selling support. (Insurance Policy)

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 PRODUCT CLASSIFICATIONS
Materials and Parts Industrial-Goods
Manufactured
materials

Raw materials
Capital Items
Installations

Supplies and
business Services Equipment

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PRODUCT CLASSIFICATIONS
Materials and parts are goods that enter the
manufacturer’s product completely.
Capital items are long-lasting goods that facilitate
developing or managing the finished product.
Supplies and business services are short-term goods
and services that facilitate developing or managing the
finished product.

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PRODUCT DIFFERENTIATION

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PRODUCT DIFFERENTIATION

Form Features

Customization Durability

Performance Conformance

Reliability Repairability

Style
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 PRODUCT
DIFFERENTIATION
FORM Many products can be differentiated in form—the size,
shape, or physical structure of a product.
FEATURES Most products can be offered with varying features
that supplement their basic function. A company can identify
and select appropriate new features by surveying recent buyers
and then calculating customer value versus company cost for
each potential feature.
PERFORMANCE QUALITY Most products occupy one of four
performance levels: low, average, high, or superior.
Performance quality is the level at which the product’s primary
characteristics operate. Quality is growing increasingly
important for differentiation as companies adopt a value model
and provide higher quality for less money.

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 PRODUCT
DIFFERENTIATION
CONFORMANCE QUALITY Buyers expect a high conformance
quality, the degree to which all produced units are identical and
meet promised specifications.
DURABILITY Durability, a measure of the product’s expected
operating life under natural or stressful conditions, is a valued
attribute for vehicles, kitchen appliances, and other durable
goods. The extra price for durability must not be excessive,
however, and the product must not be subject to rapid
technological obsolescence, as personal computers, televisions,
and cell phones have sometimes been.
RELIABILITY Buyers normally will pay a premium for more
reliable products. Reliability is a measure of the probability that
a product will not malfunction or fail within a specified time
period.
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 PRODUCT
DIFFERENTIATION
REPAIRABILITY Repairability measures the ease of fixing a
product when it malfunctions or fails. Ideal repairability would
exist if users could fix the product themselves with little cost in
money or time. Some products include a diagnostic feature that
allows service people to correct a problem over the telephone
or advise the user how to correct it.
STYLE Style describes the product’s look and feel to the buyer
and creates distinctiveness that is hard to copy. Car buyers pay
a premium for Jaguars because of their extraordinary looks.
CUSTOMIZATION Customized products and marketing allow
firms to be highly relevant and differentiating by finding out
exactly what a person wants—and doesn’t want—and
delivering on that.

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 SERVICES DIFFERENTIATION

Customer
Consulting
Ordering Ease Delivery &
Returns

Training

Installation Maintenance & Repair

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 SERVICES
An act or performance, deeds, one party can offer
to another that essentially intangible and does not
result in the ownership of anything.

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CATEGORIES OF SERVICE MIX
Major service with minor goods
Air lines ( Meal, snacks, Mineral, Juice),Bus Ticket
(M. Water)
Hybrid ( Food quality, Pure Service (Training, Class Lecture, Doctor
Waiter services) Services, Counseling, Lawyer Advice)

Pure Tangible Good Hybrid Pure Service

Pure Tangible Goods

Tissue paper, Candy Smart Phone (W/G)

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 CATEGORIES OF SERVICE
MIX
Pure tangible good— a tangible good such as soap,
toothpaste, or salt with no accompanying services.
Tangible good with accompanying services— a
tangible good, like a car, computer, or cell phone,
accompanied by one or more services.
Hybrid—an offering, like a restaurant meal, of equal parts
goods and services.
Major service with accompanying minor goods and
services—a major service, like air travel, with additional
services or supporting goods such as snacks and drinks.
Pure service—primarily an intangible service, such as
babysitting, psychotherapy, or massage.
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 SERVICE CHARACTERISTICS
Intangibility

Variability

Empty seats
Perishability Inseparability
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INTANGIBILITY
Unlike physical products, services cannot be seen, tasted,
felt, heard, or smelled before they are bought.
To reduce uncertainty among buyers, firms must
“Manage the evidence,” to “tangibilize the intangible.”
Buyers will look for evidence of quality based on
numerous cues such as the place, people, equipment,
communication materials, symbols, and price.

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 INTANGIBILITY

Physical Evidence & Presentation

• Place
• People
• Equipment
• Communication material
• Symbols
• Price

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INSEPARABILITY
Whereas physical goods are manufactured, then inventoried,
then distributed, and later consumed, services are typically
produced and consumed simultaneously.
Companies can get around the limitations of inseparability
with several strategies. They can work with larger groups.
Some psychotherapists have moved from one-on-one therapy
to small-group therapy to groups of over 300 people in a large
hotel ballroom. The y can work faster—the psychotherapist
can spend 30 more efficient minutes with each patient instead
of 50 less-structured minutes and thus see more patients. The
y can train more service providers and build up client
confidence.
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 INSEPARABILITY
Work Faster

Work with Larger Groups

Add More Service Providers

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VARIABILITY
Because the quality of services depends on who provides
them, when and where, and to whom, services are highly
variable.
Companies can take steps to increase quality control. They
can invest in good hiring and training procedures;
standardize the service-performance process throughout
the organization and monitor customer satisfaction.

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 VARIABILITY

Offer Guarantees

Monitor Satisfaction

Good Hiring and Training

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PERISHABILITY
Services cannot be stored, so their perishability can be a
problem when demand fluctuates.
For example, a flight departing with empty seats can never
be recovered.
Due to its perishability characteristic, demand or yield
management is critical—the right services must be
available to the right customers at the right places at the
right times and right prices to maximize profitability.

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 PERISHABILITY

Empty seats
Nonpeak Demand

Reservation Systems
Complementary Differential Pricing
Services
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QUESTIONS
1. Differentiate between product and service.
2. Explain the levels of a product with examples
3. Classify consumer and industrial product with examples.
4. How an organization can differentiate its product? Explain.
5. How an organization can differentiate its service? Explain.
6. How does a service organization manage the problem of-
i. Intangibility
ii. Inseparability
iii. Perishability
iv. Variability
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