Lesson 1:

Defining a Product and

Differentiating Product,
Services, and Experiences

Prepared by: Ms. Yasmin Joy P. Balla

 Learning Objectives:

01 02 03
Identify the Determine the Explain the usefulness
differences characteristics of product, service,
among of a product and experience in
products, analyzing situation as
services, and part of the decision
making of consumers
experiences
and marketers
 What is a Product?
Product is anything that can be offered in a
market for attention, acquisition, use, or
consumption that might satisfy a need or
want.
 Includes:
Physical object
Services
Events
Person
Places
Organization
Ideas
● For Kotler, the definition of a product goes way
beyond being a physical object or a service. He
defines a product as anything that can meet a need
or a want. This means that even a retail store or a
customer service representative is considered a
product.
● Products or goods are physically tangible items.
As such, they are generally perceivable by the
human senses and can therefore, be inspected prior
to purchase.
Customers will choose a product based on
their perceived value of it. The customer is
satisfied if the product’s actual value meets or
exceeds their expectations. If the product’s
actual value falls below their expectations they
will be dissatisfied.
 1. Core Benefit
● The core benefit is the fundamental need or want that
the customer satisfies when they buy the product.
● For example, the core benefit of a hotel is to provide
somewhere to rest or sleep when away from home.
 2. Generic Product
● The generic product is a basic version of the
product made up of only those features necessary
for it to function.
● In a hotel example, this could mean a bed, towels, a
bathroom, a mirror, and a wardrobe.
 3. Expected Product
● The expected product is the set of features that the
customers expect when they buy the product.
● In a hotel example, this would include clean
sheets, some clean towels, Wi-fi, and a clean
bathroom.
 4. Augmented Product
● The augmented product refers to any product
variations, extra features, or services that help
differentiate the product from its competitors.
● In a hotel example, this could be the inclusion of a
concierge service or a free map of the town in every
room.
 5. Potential Product
● The potential product includes all augmentations and
transformations the product might undergo in the future. In
simple language, this means that to continue to surprise
and delight customers the product must be augmented.
Example:
● In a hotel, this could mean a different gift placed in the room
each time a customer stays. For example, it could be some
chocolates on one occasion, and some luxury water on
another. By continuing to augment its product in this way the
hotel will continue to delight and surprise the customer.
 Product
Classification
WE WILL TALK
ABOUT THIS
FIRST.
Add a brief introduction of your section here: Let’s dive in and get to
know some interesting facts about animals!
1. According to use : Consumer and Industrial Goods
1. Consumer goods are goods that are purchased for personal
consumption and/or household use.
● Examples: Instant noodles, biscuits, milk, detergent soap, shampoo,
and other similar items

2. Industrial goods are purchased in order to make other goods,

to serve as a raw material or input in the production of other goods.
● Examples: Aluminum (used to manufacture kitchen equipment and
cans); electronic cables and wires (serve as electrical conduits for
home appliances)
2. According to Differentiation: Undifferentiated and
Differentiated Goods
1. Undifferentiated goods are products whose physical characteristics are so identical,
that it would be difficult, if not impossible, to distinguish one purchased from one
vendor or another. Most undifferentiated goods are products that are sourced from
nature.
● Examples: salt bought from the two different vendors’ looks, feels, and tastes
identical.

2. Differentiated goods are varied in their characteristics and features that make them
distinguishable from one another.
● Examples: Car, the appearance and the features vary because of the ability of
the manufacturers to successfully distinguish their products from competitors
which is called branding.
3. According to durability: Consumable, Semi-Durable, and
Durable Goods
● Durability refers to the length of time a consumer can derive
benefit from the product or good purchased.

1. Consumable is a product whose benefit can only be used by

a consumer for a short period of time, sometimes only a few
minutes. Examples such as food and drinks.
3. According to durability: Consumable, Semi-Durable, and
Durable Goods
2. Semi-durables provide benefits to the consumer for a longer period of
time, usually spanning several months. Semi-durables are manufactured for
long-term use by consumer. Examples of semi-durables are clothes, shoes,
belts, jackets, etc.
3. Durables are products that are manufactured to last a long time. They are
capable of providing consumers with years of beneficial use. Durables are
usually expensive, and many, therefore, require an augmented product to
market them effectively. Examples of durable goods are automobiles,
houses, home appliances, customer electronics, furniture, sports equipment,
and toys.
4. According to Type: Convenience, Shopping, Specialty, and
Unsought Goods
1. Convenience goods are products that are purchased
frequently, usually inexpensive, and do not require much
purchase effort and evaluation. Examples are newspapers, gum,
and candy.
● They key to the successful marketing of convenience
goods is its availability in as many retail outlets as
possible, catering to consumer need where and when it arises.
4. According to Type: Convenience, Shopping, Specialty, and
Unsought Goods
2. Shopping goods are purchased less frequently than convenience
goods, are relatively more expensive, and require some amount
of information search and evaluation prior to purchase.
Consumers of shopping goods consider features, evaluate attributes,
and compare prices. Examples of shopping goods are shoes, clothes,
and handbags.
● The successful marketing of shopping goods depends on intensive
advertising, well-trained salespersons, and positioning company
products as superior alternatives to competitors’ products.
4. According to Type: Convenience, Shopping,
Specialty, and Unsought Goods
3. Specialty goods are goods that require an unusually
large effort on the part of consumers to acquire. Consumers
are usually willing to travel great distances to where these
goods can be purchased. Examples are branded luxury
merchandise, works of art, automobiles, and homes.
● The successful marketing of specialty goods requires the
promotion of strong brand image and identities.
4. According to Type: Convenience, Shopping, Specialty, and
Unsought Goods
4. Unsought goods are goods that consumers seldom actively
look for, and are usually purchased for extraordinary reasons,
such as fear or adversity, rather than desire. Examples are
investments, memorial plans, and life insurance. These
goods require advertising and aggressive selling efforts and
are usually marketed using highly-trained and persuasive
salespersons.
 What is Service?
● Services are form of product that consist of activities,
benefits, or satisfaction offered for sale that are
essentially intangible and do not result in the
ownership of anything
 Services are generally considered more difficult to market
due to its four major attributes:
1. Intangibility
Physical products are tangible. As such, they can be inspected
by consumers prior to purchase. On the other hand, services are
intangible. It would, therefore, not be possible to “sample” a
lawyer’s legal skills, or a doctor’s ability to handle a surgical
operation before one decides to retain a lawyer or a doctor.
This is the first reason that makes the marketing of services
difficult.
 Services are generally considered more difficult to
market due to its four major attributes:
2. Variability
Because services are performed by human beings, no
service provider can render the same service in exactly
the same way every single time. A college professor,
when giving the same lecture in two separate sessions,
cannot use the exact words and gestures for both
sessions.
 Services are generally considered more difficult to market
due to its four major attributes:
3. Inseparability
Because services are rendered by people, the service provider
must be present each and every time the service is provided.
Services are rendered and consumed simultaneously. As a lawyer
gives legal advice to a client, legal services are being
“produced” and simultaneously “consumed” by the client. This
limits the ability to render the service to a large number of
people, as the service provider’s presence is always a necessary
component in the rendering of the service.
 Services are generally considered more difficult to market
due to its four major attributes:
4. Perishability
Unconsumed services cannot be stored or warehoused. When a 40-
room boutique hotel with a restaurant on its ground floor operates on
a particular day, unconsumed or unused ingredients for food production,
unsold bottles of soda, or unused coffee beans can be stored, available for
use or sale the following day. However, if on the same day, only 32 of its
40 rooms are occupied by guests, the eight unsold, unoccupied rooms
cannot be stored and added to its 40-room availability the next day.
The eight unsold, unoccupied rooms have “perished.” they represent
lost revenues for the day that can never be recovered.
 What is Experience?
● A product which involves experiential aspects of consumption
rather than utilitarian ones. This type of product allows
consumers to engage in fantasies, feelings and fun and
often carries subjective meanings and characteristics
(Hirschman and Holbrook, 1982).
 Product Experience
● Product experience is the overall value of a product or service to
customers. This is defined in terms of customer perceptions as
they use the product or service in a variety of contexts.
Product experience is a component of customer experience, a
broader concept that includes all interactions between your firm
and the customer. Product experience is mainly achieved
through design and quality control.
Customer experience
● Customer experience is the impression your customers have of
your brand as a whole throughout all aspects of the buyer's
journey. It results in their view of your brand and impacts
factors related to your bottom-line including revenue.
● The two primary touch points that create the customer
experience are people and product.
 Lesson 2:
Factors to Consider When
Setting Prices and its General
Pricing Approaches

Prepared by: Ms. Yasmin Joy P. Balla

When setting prices for products or services,
several factors need to be taken into consideration
to ensure a successful pricing strategy.
Understanding these factors is crucial for
businesses to make informed decisions about
pricing. Some key factors to consider include:
 Costs
• Understanding the costs involved in producing,
marketing, and distributing the product is essential. Price
should cover these costs while allowing for a profit
margin.
Example: A software company calculates the production,
marketing, and distribution costs for its new application.
After analyzing these costs, they determine that the price
of the software should be set at Php 3,000 to cover
expenses and generate a profit margin.
 Demand
Analyzing the demand for the product in the market helps
in setting prices that align with customer willingness to pay.

Example: A fashion retailer reviews market demand for a new

clothing line before setting prices. Based on customer surveys
and focus groups, they find high demand for sustainable fashion
products and price their eco-friendly collection slightly higher
to align with customers' willingness to pay for environmentally
conscious items.
 Competition
Studying competitors' pricing strategies provides insights
into market positioning and helps in setting competitive
prices.

Example: : A smartphone manufacturer monitors competitors'

pricing strategies in the market. After observing that a rival
company has reduced prices on a similar model, they decide to
offer a promotional discount to match the competition and
maintain market share.
 Market Conditions
External factors like economic conditions, consumer trends,
and market saturation influence pricing decisions.

Example: A restaurant chain considers economic conditions and

consumer trends when adjusting menu prices. In response to a
downturn in the economy, they introduce value meal bundles to
cater to budget-conscious customers while still maintaining
profitability.
 Value Perception
The perceived value of the product by customers plays a
significant role in determining the pricing strategy.

Example: An electronics company introduces a new smart

home device with advanced features. Recognizing the high
perceived value of convenience and efficiency by customers,
they price the product higher than competitors' basic models to
reflect the enhanced benefits provided.
 Brand Image
Brand reputation and positioning impact the pricing
strategy, especially for premium or luxury products.

Example: A luxury car manufacturer leverages its prestigious

brand image when pricing its latest model. Due to the brand's
reputation for quality and exclusivity, they set the price at a
premium level to maintain the luxury positioning in the market.
 Target Market
Understanding the preferences, behavior, and price
sensitivity of the target market is crucial for setting prices
that resonate with customers.

Example: A coffee chain customizes pricing based on the

preferences of its target market. In urban areas with higher price
sensitivity, they offer competitive pricing on regular coffee but
introduce premium pricing for specialty drinks to cater to
customers seeking unique and indulgent beverages.
General Pricing Approaches
 There are several pricing approaches
that businesses can adopt based on their
goals, target market, and the
competitive landscape. Some general
pricing approaches include:
 Cost-Plus Pricing
Setting prices based on production costs and adding a mark-
up for profit.

Example: A furniture manufacturer determines that the

production cost of a dining table is ₱10,000. They apply a 50%
markup for profit, setting the selling price at ₱15,000 based on
cost-plus pricing.
 Market-Oriented Pricing
Aligning prices with market demand and competitors'
pricing strategies.

Example: A smartphone company analyzes competitors' pricing

and market demand for a new model. They price their phone at
a similar level to competitors, setting the price at ₱25,000 to
align with market expectations and meet customer demand
effectively.
 Skimming Pricing
Setting high initial prices to target early adopters or
customers willing to pay a premium.

Example: A tech company launches a cutting-edge smartwatch

with advanced features. They initially price the smartwatch at
₱30,000 to target early adopters and tech enthusiasts willing to
pay a premium for the latest technology.
 Penetration Pricing
Introducing products at low prices to gain market share
quickly.

Example: A new ice cream brand enters the market and offers
their products at a lower price point compared to established
competitors. By pricing their ice cream cones at ₱20 each, they
aim to quickly gain market share and attract price-sensitive
customers.
 Value-Based Pricing
Pricing based on the perceived value of the product to the
customer rather than just production costs.

Example: A skincare company introduces a new anti-aging

serum with premium ingredients. Recognizing the high
perceived value of the product among customers seeking
effective skincare solutions, they price the serum at ₱1,500
based on its superior quality and benefits.
 Psychological Pricing
Using pricing techniques to influence consumer perception,
such as setting prices just below a round number.

Example: A clothing retailer prices a t-shirt at ₱499.99 instead

of ₱500 to create the perception of a lower price point in
consumers' minds. This psychological pricing technique aims to
make the product appear more affordable and attract price-
conscious shoppers.
 Bundle Pricing
Offering products or services together at a reduced price
compared to purchasing them separately.

Example: A streaming service offers a bundle package that

includes access to movies, TV shows, and exclusive content at
₱750 per month. Individually, these services would cost ₱500
each, but by bundling them together, customers save ₱250,
encouraging them to purchase the package deal.