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Marketing: Readings and Lectures Summary (FINAL EXAM!)
- Instelling
- Universiteit Van Amsterdam (UvA)
Readings and Lectures Summary (2020/21) FOR THE FINAL EXAM
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MARKETING EXAM SUMMARYWeek 4 - Chapters summary
Chapter 9 - Product Mix and New Offerings (p. 163-170)
Product characteristic and classifications
- Product: anything that can be offered to a market to satisfy a want or need, including physical
goods, services, experiences, events, persons, places, properties, organizations, information
and ideas
- Customer-value hierarchy: five product levels addressed when market offering is planned, each
level adds more customer value
- Fundamental level: core benefit; service or benefit the customer is really buying (e.g. hotel
guest buys rest and sleep), marketers as benefit providers
- Second level: basic product; core benefit turned into basic product (e.g. hotel room includes
bed, bathroom, towels)
- Third level: expected product; set of attributes and conditions users normally expect when
they purchase this product (e.g. hotel guests expect clean bed, fresh towels, etc.), POP
- Fourth level: augmented product; exceeds customer expectations (brand positioning and
competition take place at this level), POD
- Fifth level: potential product; all possible augmentations and transformations the product or
offering might undergo in the future
- Differentiation arises and competition increasingly occurs on the basis of product
augmentation, however augmented benefits can become expected benefits in the category
- Product classifications: marketers classify products on the basis of durability, tangibility, use
- Durability and tangibility
- Nondurable goods: are tangible, normally consumed in one or few uses, purchased
frequently; strategy is to make them available in many locations, charge small markup,
advertise to induce trial and build preference (e.g. shampoo)
- Durable goods: are tangible, survive many uses, require more personal selling and service,
command a higher margin; require
more seller guarantees (e.g.
refrigerator)
- Services: are intangible, inseparable,
variable, perishable; require more
quality control, supplier credibility and
adaptability (e.g. haircuts)
- Consumer-goods classification: classified
on basis of shopping habits
- Convenience goods: purchased
frequently, immediately, with minimal effort (e.g. soft drink)
, - Shopping goods: consumers compare on bases of sustainability, quality, price, style (e.g.
furniture)
- Speciality goods: unique characteristics or brand identification for which enough buyers
are willing to make a special purchasing effort (e.g. cars)
- Unsought goods: consumer doesn’t know about or normally think of buying (e.g. smoke
detectors)
- Industrial-goods classification
- Materials and parts: goods that enter the manufacturer’s product completely
- Raw materials: can be either farm products (e.g. wheat) or natural products (e.g. iron one)
- Manufactured materials and parts: component materials (e.g. wires) and component parts
(e.g. small motors)
- Capital items: long-lasting goods that facilitate developing or managing the finished
product includes installations (factories) and equipment (tools=
- Supplies and business services: short-term goods and services that facilitate developing
or managing the finished product
Differentiation
- To be branded product offerings must be differentiated
- At one extreme products that allow little variation (e.g. chicken), some differentiation still
possible with distinct identities
- At other extreme: products capable of high differentiation (e.g. cars, furniture)
- Product differentiation
- Form: refers to size, shape or physical structure of product
- Features: most products are offered with features that supplement their basic function
- Performance quality: level at which product’s primary characteristics operate
- Conformance quality: degree to which all produced units are identical and meet promised
specifications, consumers expect it to be high
- Durability: measure of the product’s expected operating life under natural or stressful
conditions, extra price for durability must not be excessive, product must not be subject to
rapid technological obsolescence
- Reliability: measure of the probability that a product will not malfunction or fail within a
specified period, consumers will pay a premium for reliability
- Repairability: measures the ease of fixing a product when it malfunctions or fails, ideal
repairability if consumers can fix product themselves with little cost in money or time
- Style: product’s look and feel to consumers, creates distinctiveness that is hard to copy
- Customization: differentiating by finding out exactly what a person wants and delivering on
that, allows companies to be highly relevant
- Services differentiation (when physical product cannot easily be differentiates, key to
competitive success may lie in adding valued services)
- Ordering ease: How easy is it for the customer to place an order?
- Delivery: How well is the product/service brought to the customer? (speed, accuracy, care)
, - Installation: How is the product made operational in planned location?
- Customer training: How does the supplier teach a customer’s employees to use new
equipment properly and efficiently?
- Customer consulting: What data, information systems, and advice services can companies
sell to buyers?
- Maintenance and repair: How can companies help customers keep purchased products in
gapped working order?
- Design differentiation (design often potent way to differentiate and position company’s products
and services as competition intensifies)
- Design: totality of features that affect the way a product looks, feels and functions to
consume; offers functional and aesthetic benefits and appeals to both rational and emotional
sides
Product and brand relationships
- Each product can be related to other products to ensure that a company is offering and
marketing the optimal set of products
- Product hierarchy: stretches from basic needs to particular items that satisfy those needs
- Product system: group of diverse but related items that function in a compatible manner
- Product mix: product assortment; set of all products and items a particular company offers for
sale, consists of various product lines
- Company’s product mix has certain width, length, depth, and consistency
- Width: how many different product lines the company carries
- Length: total number of items in the mix
- Depth: how many variants are offered of each product in the line
- Consistency: how closely related the various product lines are in end use, production
requirements, distribution channels or some other way
- Product mix dimensions allow company to expand its business in four ways: add new product
lines (widening product mix); lengthen each product line; add more product variants (deepen
product mix); pursue more product line consistency
- Product line analysis: product line managers need to know sales and profits of each item in
each line to determine which ones to build, maintain, harvest or divest; also need to understand
each line’s market profile and image; use product map to see which competitor’s items are
competing against their own items
- Product line lengths differ
- Companies seeking high market share and growth will generally carry longer product lines
- Companies emphasizing high profitability will carry shorter lines of carefully chosen items
- Consumers are increasingly weary of: dense product lines, overextended brands, feature-
laden products
- Company lengthens product line in two ways
- Line stretching: company lengthens product line beyond current range, down-market stretch
(introducing lower-priced line to attract shoppers who want value-priced goods, battle low-
, end competitors, avoid stagnating middle market) or up-market stretch (company aims to
achieve more growth, realize higher margins, position itself a full-line manufacturer)
- Line filling: company lengthens product line by adding more items within the present range;
goals are to reach for incremental profits, satisfy dealers who complain about lost sales due
to items missing form line, utilize excess capacity, try to become leading full-line company,
plug holes to keep out competitors
- Product lines need to be modernized, in rapidly changing markets modernization is continuous,
improvements have to be timed to not appear too early (damaging sales of current one) or too
late (giving competition time to establish strong reputation)
- Product mix pricing: company looks for set of prices that maximizes profits on total mix, price-
setting logic must be modified when product is part of product mix
- Six situations calling for product mix pricing
- (1) Product line pricing: seller introduces price steps within product line, strives to establish
perceived quality differences that justify price differences
- (2) Optional-feature pricing: seller offers optional products, features, and services with main
product, challenge which offers to include in standard price and which to offer separately
- (3) Captive-product pricing: some products require the use of ancillary or captive products
(e.g. razors prices low, high markups on razor blades (captive product))
- (4) Two-part pricing: many service companies charge a fixed fee plus a variable usage fee
(e.g. cellphone users pay monthly fee plus charges for calls that exceed their minutes)
- (5) By-product pricing: production of certain goods often yields by-products that should be
priced on their value, income from by-products allows to charge less for main product
- (6) Product-bundling pricing: pure bundling (products offered only as bundle), mixed bundling
(products offered both individually and in bundles, normally charging less for the bundle than
for the items purchased separately, savings must be enough to induce customers to buy it)
- Marketers often combine their products with products from other companies
- Co-branding
- Also called dual branding or brand building
- Two or more well-known brands are combines into a joint product or marketed together
- Same-company co-branding, joint-venture co-branding, multiple-sponsor co-branding,
retail co-branding
- To succeed brands must separately have brand equity, adequate brand awareness,
sufficiently positive brand image
- Advantages: product can be convincingly positioned by virtue of multiple brands
generating greater sales from existing market and opening opportunities, can reduce cost
of product introduction, may be valuable means to learn about consumers and how other
companies approach them
- Disadvantages: risks and lack of control in booming aligned with another brand, consumer
expectations of co-brands are likely to be high so unsatisfactory performance could have
negative repercussions for both brands, consumers may feel less sure of what they know
about the brand
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