Marketing for Engineers

Dr. Karim Kobeissi

Chapter 8: Products, Services and Brands: Building Customer Value

W h a t i s a P r o d u c t ?

• Anything that can be offered to a market for attention, acquisition,

use, or consumption that might satisfy a want or need.

• Includes:

-Goods

- Services

- Persons

- Places

- Organizations

- Ideas

- Combinations of the above

Three Levels Of Product

1.Core benefit level; the customers purchase a product because of the functional benefit the product offers.

2. Actual Product level; they take into account how the product’s attributes, features, quality, styling, packaging.

3. Augmented Product level; customers consider the value they receive from a vendor after sales support, warranty, promise of free delivery or installation.

Product as a Good

• Goods are items that can

be seen and touched, such

as books, shoes, cars, and

drills.

• Goods result in ownership.

Product as a Service

• Although services are ‘products’ in a general sense, they have special

characteristics and marketing needs. The biggest differences come from

the fact that they are created through direct interaction with customers.

• A SERVICE DOES NOT RESULT IN OWNERSHIP.

The Nature and Characteristics of a Service

A company must consider four special service characteristics

when designing marketing programs:

1) Intangibility

2) Inseparability

3) Variability

4) Perishability

The Nature & Characteristics of a Service1) Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before they are bought.

For example, people undergoing cosmetic surgery cannot see the result before the purchase. Airline passengers have nothing but a ticket and a promise that they and their luggage will arrive safely at the intended destination, hopefully at the same time. To reduce uncertainty, buyers look for “signals” of service quality. They draw conclusions about quality from the place, people, price, equipment, and communications that they can see.

Therefore, the service provider’s task is to make the service tangible in one or more ways and send the right signals about quality. One analyst calls this evidence management, in which the service organization presents its customers with organized, honest evidence of its capabilities.

Evidence Management at Atlantis Hotel- Dubai

The Nature & Characteristics of a Service

2) Service inseparability means that services cannot be separated from

their providers, whether the providers are people or machines. If a

service employee provides the service, then the employee becomes a

part of the service. Because the customer is also present as the service

is produced, provider-customer interaction is a special feature of

services marketing. Both the provider and the customer affect the

service outcome.

Service Inseparability

The Nature & Characteristics of a Service

3) Service variability means that the quality of services depends on

who provides them as well as when, where, and how they are

provided.

For example, some hotels—say, Marriott—have reputations for

providing better service than others. Still, within a given Marriott hotel,

one registration-counter employee may be cheerful and efficient,

whereas another standing just a few feet away may be unpleasant and

slow. Even the quality of a single Marriott employee’s service varies

according to his or her energy and frame of mind at the time of each

customer encounter.

The Nature & Characteristics of a Service

4) Service perishability means that services cannot be stored for later

sale or use.

The perishability of services is not a problem when demand is steady.

However, when demand fluctuates, service firms often have difficult

problems. For example, because of rush-hour demand, public

transportation companies have to own much more equipment than they

would if demand were even throughout the day. Thus, service firms often

design strategies for producing a better match between demand and

supply. Hotels and resorts charge lower prices in the off-season to attract

more guests. And restaurants hire part-time employees to serve during

peak periods.

Service Perishability

T y p e s o f P r o d u c t s

The classification of products is essential to business because

it provides one of the factors for determining the strategies

needed to move them through the marketing system. The

two major classes are (I) consumer products and (II)

business products.

I. Consumer Products

Consumer products are products purchased for personal,

family, or household use. They are often grouped into four

subcategories on the basis of consumer buying habits:

1) Convenience products

2) Shopping products

3) Specialty products

4) Unsought products

Consumer Products

II. Business / Industrial ProductsBusiness products are products that companies purchase to

produce their own products or to operate their business. Unlike consumer products, business products are classified on the basis of their use rather than customer buying habits. These products are divided into six subcategories:

1) Installations2) Accessory Equipment3) Raw Materials4) Component Parts and Processed Materials5) Maintenance, Repair, and Operating Supplies6) Business Services

1) Installations

Installations are major capital items that are

typically used directly in the production

process of products. Some installations,

such as conveyor systems, robotics

equipment, and machine tools, are

designed and built for specialized

situations. Other installations, such as

stamping machines, large commercial

ovens, and computerized axial

tomography scan machines, are built to

a standard design but can be modified

to meet individual requirements.

2) Accessory Equipment

Products that fall into the subcategory of

accessory equipment are less expensive

and have shorter lives than installations.

Examples include hand tools,

computers, desk calculators, and

forklifts. While some types of accessory

equipment, such as hand tools, are

involved directly in the production

process, most are only indirectly

involved.

3) Raw Materials

Raw materials are products that are

purchased in their raw state for the

purpose of processing them into

consumer or business products.

Examples are iron ore, crude OIL,

diamonds, copper, timber, wheat, and

leather. Some (e.g., wheat) may be

converted directly into another

consumer product (cereal). Others

(e.g., timber) may be converted into an

intermediate product (lumber) to be

resold for use in another industry

(construction).

4) Component Parts and Processed Materials

Component parts are items that are

purchased to be placed in the final

product without further processing.

Processed materials, on the other hand,

require additional processing before

being placed in the end product. Many

industries, including the auto industry,

rely heavily on component parts.

Automakers use such component parts

as batteries, sunroofs, windshields, and

spark plugs. They also use several

processed materials, including steel and

upholstery fabric.

5) Maintenance, Repair, and Operating Supplies

Maintenance, repair, and operating

(MRO) supplies are frequently

purchased expense items. They

contribute indirectly to the

production of the end product or to

the operations of the business. MRO

supplies include computer paper, light

bulbs, lubrication oil, cleaning

supplies, and office supplies.

6) Business Services

Business services refer to the services

purchased by companies to assist in

the operation of the firm. They include

financial, marketing research,

promotional, legal, and janitorial

services. The decision to hire an

outside business to perform needed

services is often predicated on how

frequently the service is needed, the

specialized knowledge required, and

the relative costs of providing the

service internally versus contracting

with an outside firm.

Branding

A brand is a name, term, sign, symbol, design, or a

combination of these, that identifies the products

or services of one seller or group of sellers and

differentiates them from those of competitors.

A brand name carries many associations in people’s

minds that make up its image.

PackagingPackaging refers to the activities of designing and

producing the container or wrapper for a product. Traditionally, the primary function of the package was to hold and protect the product. In recent times, however, numerous factors have made packaging an important marketing tool as well. Increased competition and clutter on retail store shelves means that packages must now perform many sales tasks—from attracting attention, to describing the product, to making the sale.

LabelingLabels range from simple tags attached to products

to complex graphics that are part of the packaging.

They perform several functions. At the very least,

the label identifies the product or brand. The label

might also help to promote the brand, support its

positioning, and connect with customers. For many

companies, labels have become an important

element in broader marketing campaigns.

Product - Support Services

• Step 1. Survey customers to determine satisfaction with current services and any desired new services.

• Step 2. Assess costs of providing desired services.

• Step 3. Develop a package of services to delight customers and yield profits.

Companies should design its support services to profitably meet the needs of target customers.

How?

Brand Strategy

• Line Extension– Existing brand names extended to new forms, sizes,

and flavors of an existing product category.• Brand Extension– Existing brand names extended to new product

categories.• Multibrands– New brand names introduced in the same product

category.• New Brands– New brand names in new product categories.

Product Line LengthNumber of Items in the Product Line

Product Line Decisions

StretchingLengthen beyond

current range

FillingLengthen within

current range

Downward

Upward

Product Line DecisionsA company lengthens its product line in two ways: by line stretching and line

filling.• Line stretching occurs when a company lengthens its product line beyond its current category:

a. Down-market Stretch: a company positioned in the middle market may want to introduce a lower price line i.e.

Mercedes successfully introduced its C-Class cars at $30.000 without injuring its ability to sell other Mercedes cars

for $100.000 and up.

b. Up-market Stretch: a company enters the high social class segment for more market growth, higher margins, as

full line manufacturers .

c. Two-way Stretch: a company serving the middle market might decide to stretch their line in both lower and high

social class i.e. Holiday Inn Worldwide performed five different segments – the upscale Crown Plaza, the

traditional Holiday Inn, the budget Holiday Inn Express, and the business-oriented Holiday Inn Select and Holiday

Inn Suites

• Line filling occurs when a company adds more items within the present category. The motives are to overcome

the missing items in the line, reach the incremental profits, utilize excess capacity, plug holes to keep out

competitors.

Down-market Stretch: Mercedes

S- Class C - Class

Head & Shoulders Line Filling

Product Mix & Product Line

• Product Mix: All the products a given company

produces form the product mix.

• Product Line : A product line would be a group of

these products associated by category (or function).

A company could have one line or several lines, but

all the products within this line or lines would form

the Product Mix.

Product Line Depth & Product Mix Width

• Product Line Depth: the number of products items

in a specific product line.

• Product Mix Width: The number of product lines an

organization offers.

Benefits of Increasing Product Line Depth

Benefits of Increasing Product Mix Width