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10.2: Products and Marketing Mix

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  • What you’ll learn to do: explain what a product is and the importance of products in the marketing mix

    We’ll start this module by defining what a product is and seeing how it fits in the marketing mix. When thinking about the target customer’s perspective, it’s useful to have an “expansive” view of product and keep in mind that the customer experience is not only about the tangible aspects of a good.

    For example, imagine that you stop at a fast-food restaurant for a quick sandwich. The sandwich is fresh and delicious and is exactly what you wanted to eat. However, the wait for the sandwich was exceptionally long, the restaurant was filthy, and the sales clerk was rude. Does that change your level of satisfaction?

    Or, have you ever been excited to get a bargain on an airline ticket and then been surprised by additional fees for what seem like basic services, such as checking your luggage? Do the fees change your level of satisfaction with the product?

    As we explore products and product marketing, you will find that most products include a broader range of components than you might first expect.

    The specific things you’ll learn in this section include:

    • Define a product
    • Identify difference between products that offer goods versus services
    • Explain how to augment a product with services
    • Define product marketing
    • Explain the role of product marketing in the marketing mix

    Defining Product

    A product is a bundle of attributes (features, functions, benefits, and uses) that a person receives in an exchange. In essence, the term “product” refers to anything offered by a firm to provide customer satisfaction, tangible or intangible. Thus, a product may be an idea (recycling), a physical good (a pair of jeans), a service (banking), or any combination of the three.[1]

    Broadly speaking, products fall into one of two categories: consumer products and business products (also called industrial products and B2B products). Consumer products are purchased by the final consumer. Business products are purchased by other industries or firms and can be classified as production goods—i.e., raw materials or component parts used in the production of the final product—or support goods—such as machinery, fixed equipment, software systems, and tools that assist in the production process.[2] Some products, like computers, for instance, may be both consumer products and business products, depending on who purchases and uses them.

    The product fills an important role in the marketing mix because it is the core of the exchange. Does the product provide the features, functions, benefits, and uses that the target customer expects and desires? Throughout our discussion of product we will focus on the target customer. Often companies become excited about their capabilities, technologies, and ideas and forget the perspective of the customer. This leads to investments in product enhancements or new products that don’t provide value to the customer—and, as a result, are unsuccessful.

    Four Levels of the Product

    There are four levels of a product (shown in the figure below): core, tangible, augmented, and promised. Each is important to understand in order to address the customer needs and offer the customer a complete experience.

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    The Core Product

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    The core product satisfies the most basic need of the customer. For example, a consumer who purchases a healthy snack bar may be seeking health, convenience, or simply hunger relief. A student who buys low-priced, sturdy sneakers may just be seeking footwear. A student on a tight budget who buys top-of-the-line sneakers might be hoping to achieve status. Or, the student might be seeking a sense of freedom by splurging on an item that represents a true sense of style, even though he can’t really afford it. Footwear, status, and freedom are all legitimate core products. The core product is complex because it is so individualized, and, often, vague. The marketer must have a strong understanding of the target customer (and the different segments of target customers) in order to accurately identify the core product.

    The Tangible Product

    Once the core product has been identified, the tangible product becomes important. Tangible means “perceptible by touch,” so the tangible aspects of a product are those that can be touched and held. This idea can be expanded to also include the characteristics of the product that directly touch the buyer in the buying decision. These are the product elements that the customer will use to evaluate and make choices: the product features, quality level, brand name, styling, and packaging. Every product contains these components to a greater or lesser extent, and they are what the consumer uses when evaluating alternatives.

    The importance of each aspect of the tangible product will vary across products, situations, and individuals. For example, at age twenty, a consumer might choose a particular brand of new car (core product=transportation) based on features such as gas mileage, styling, and price (choice=Toyota Yaris); at age forty-five, the core product remains the same, while the tangible components such as quality level, power, features, and brand prestige become important (choice=Audi A6).

    The Augmented Product

    Every product is backed up by a host of supporting services. The augmented product includes the tangible product and all of the services that support it. Often, the buyer expects these services and would reject the tangible product if they were not available. For example, if you shop at a department store, you are likely focused on a core and tangible product that centers on the merchandise, but you will still expect the store to have restrooms, escalators, and elevators. Dow Chemical has earned a reputation as a company that will bend over backward in order to service an account. It means that a Dow sales representative will visit a troubled farmer after hours in order to solve a serious problem. This extra service is an integral part of the augmented product and a key to their success.

    When the tangible product is a service, there is still an augmented product that includes support services. Westin hotels offer hotel nights with a specific set of features as their tangible product. The augmented product also includes dry cleaning services, concierge services, and shuttle services, among others.

    In a world with many strong competitors and few unique products, the augmented product is gaining ground, since it creates additional opportunities to differentiate the product from competitive offerings.

    The Promised Product

    The outer ring of the product is referred to as the promised product. Every product has an implied promise, which is a characteristic that is attached to the product over time. The promised product is the long-term result that the customer hopes to achieve by selecting the product. The promised product may be financial—the resale value of a car, home, or property, for example—but it is often more aspirational. The customer hopes to be healthier, happier, more productive, more successful, or enjoy greater status.

    Like the core product, the promised product is highly personal. Generally, marketers find that there will be groupings of customers seeking a similar promise but that there is not a single promised product across all customers.

    Can the core product and the promised product be the same thing? Yes, they can, but often the the core product is more focused on the immediate need and the promised product has a longer-term element.

    Let’s compare two different examples of the same purchase to understand how the product levels might change for different customers.

    Impetus to buy: I need to be in Miami for a meeting next Thursday Impetus to buy: I need a break from my stressful life
    Core product: transportation Core product: escape, peace of mind
    Tangible product: airline ticket from New York to Miami
    • In the first case, the customer’s impetus to buy is transportation, so that is the core product. In the second case, the purchase is more aspirational and less concrete, so the core product and the promised product are quite similar.

      For a marketer, the most important element is to have a holistic view of the product. If I believe that I’m simply selling airline tickets, then I fail to provide the full product offering that will satisfy either of my customers in the example above. And of course, it is always key to truly understand the motivation and perspective of the target customer.

      Consumer Product Categories

      Consumer products are often classified into four groups related to different kinds of buying decisions: convenience, shopping, specialty, and unsought products. These are described below.

      Convenience Products

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      A convenience product is an inexpensive product that requires a minimum amount of effort on the part of the consumer in order to select and purchase it. Examples of convenience products are bread, soft drinks, pain reliever, and coffee. They also include headphones, power cords, and other items that are easily misplaced.

      From the consumer’s perspective, little time, planning, or effort go into buying convenience products. Often product purchases are made on impulse, so availability is important. Consumers have come to expect a wide variety of products to be conveniently located at their local supermarkets. They also expect easy online purchase options and low-cost, quick shipping for those purchases. Convenience items are also found in vending machines and kiosks.

      For convenience products, the primary marketing strategy is extensive distribution. The product must be available in every conceivable outlet and must be easily accessible in these outlets. These products are usually of low unit value, and they are highly standardized. Marketers must establish a high level of brand awareness and recognition. This is accomplished through extensive mass advertising, sales promotion devices such as coupons and point-of-purchase displays, and effective packaging. Yet, the key is to convince resellers (wholesalers and retailers) to carry the product. If the product is not available when, where, and in a form the consumer desires, the convenience product will fail.

      Shopping Products

      In contrast, consumers want to be able to compare products categorized as shopping products. Shopping products are usually more expensive and are purchased occasionally. The consumer is more likely to compare a number of options to assess quality, cost, and features.

      Although many shopping goods are nationally advertised, in the marketing strategy it is often the ability of the retailer to differentiate itself that generates the sale. If you decide to buy a TV at BestBuy, then you are more likely to evaluate the range of options and prices that BestBuy has to offer. It becomes important for BestBuy to provide a knowledgeable and effective sales person and have the right pricing discounts to offer you a competitive deal. BestBuy might also offer you an extended warranty package or in-store service options. While shopping in BestBuy, consumers can easily check prices and options for online retailers, which places even greater pressure on BestBuy to provide the best total value to the shopper. If the retailer can’t make the sale, product turnover is slower, and the retailer will have a great deal of their capital tied up in inventory.

      There is a distinction between heterogeneous and homogeneous shopping products. Heterogeneous shopping products are unique. Think about shopping for clothing or furniture. There are many stylistic differences, and the shopper is trying to find the best stylistic match at the right price. The purchase decision with heterogeneous shopping products is more likely to be based on finding the right fit than on price alone.

      In contrast, homogeneous shopping products are very similar. Take, for example, refrigerators. Each model has certain features that are available at different price points, but the basic functions of all of the models are very similar. A typical shopper will look for the lowest price available for the features that they desire.

      Speciality Products

      Specialty goods represent the third product classification. From the consumer’s perspective, these products are so unique that it’s worth it to go to great lengths to find and purchase them. Almost without exception, price is not the principle factor affecting the sales of specialty goods. Although these products may be custom-made or one-of-a-kind, it is also possible that the marketer has been very successful in differentiating the product in the mind of the consumer.

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      Blizzcon attendees, 2014

      For example, some consumers feel a strong attachment to their hair stylist or barber. They are more likely to wait for an appointment than schedule time with a different stylist.

      Another example is the annual Blizzcon event produced by Blizzard Entertainment. The $200 tickets sell out minutes after they are released, and they are resold at a premium. At the event, attendees get the chance to learn about new video games and play games that have not yet been released. They can also purchase limited-edition promotional items. From a marketer’s perspective, in Blizzcon the company has succeeded in creating a specialty product that has incredibly high demand. Moreover, Blizzard’s customers are paying for the opportunity to be part of a massive marketing event.

      It is generally desirable for a marketer to lift her product from the shopping to the specialty class—and keep it there. With the exception of price-cutting, the entire range of marketing activities is needed to accomplish this.

      Unsought Products

      Unsought products are those the consumer never plans or hopes to buy. These are either products that the customer is unaware of or products the consumer hopes not to need. For example, most consumers hope never to purchase pest control services and try to avoid purchasing funeral plots. Unsought products have a tendency to draw aggressive sales techniques, as it is difficult to get the attention of a buyer who is not seeking the product.

      Products and Services

      Goods vs. Services

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      In marketing, are services considered products? Should products that are predominately goods be treated differently than products that are predominantly services? Whether or not there are substantial differences between goods, products, and service products has been the source of great debate in marketing. Opponents of the division assert that “products are products,” and just because there are some characteristics associated with service products and not goods products and vice versa, it doesn’t mean that customized strategies are necessary for each. Advocates on the other side offer evidence that the differences are significant indeed.

      You may have noticed that throughout this course we use the term “product” broadly to address the full product offering that is comprised of goods, services, and often a combination of both. We’ve given examples of service products (hotel stays, for instance) and goods products (sneakers and bread, for instance). Thinking inclusively about the tangible and intangible aspects of all products is useful because it creates a more complete view of the customer’s product needs and experience. Still, there are unique characteristics of services that set them apart from goods. It is important to understand the differences and to consider them in the development of strategies, tactics, and objectives.

      Service products are reflected by a wide variety of industries: utilities, restaurants, educational institutions, consulting firms, hotels, medical care providers, and banking, to name but a few. Beyond these traditional industries there is a growing sector of software as a service offered by companies that provide individuals and other companies with hosted and managed access to software systems. In 2013, software as a service was a $22.6 billion industry, it is projected to hit $100 billion in 2019[3]. Services account for nearly 50 percent of the average consumer’s total expenditures, 70 percent of the jobs, and two-thirds of the U.S. Gross National Product (GNP). Clearly, the service sector is large and is growing. While all products share certain common facets, service products tend to differ from goods products in a number of ways.

      Characteristics of Service Products

      As you can see from the examples above, service products are quite diverse. Nonetheless, they tend to have the following characteristics.

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      Leonard Berry offers this useful differentiation: “A good is an object, a device, a thing; a service is a deed, a performance, an effort.”[4]With the purchase of a good, you have something tangible—an item that can be seen, touched, tasted, worn, or displayed. That’s not true of a service, which is intangible (quite literally, “not able to be touched”).

      Although you pay your money and consume the service, there is nothing tangible to show for it. For example, if you attend a professional football game, you spend money for a ticket and spend nearly three hours taking in the entertainment. After the game, you leave. Unless you have purchased a good at the game, you will not take anything tangible to take away (except, perhaps, the ticket stub).

      Simultaneous Production and Consumption

      Service products are consumed at the same time they are being produced. The tourist attraction is producing entertainment or pleasure at the same time it is being consumed. In contrast, goods products are produced, stored, and then consumed. A result of this characteristic is that the provider of the service is often present when consumption takes place. Dentists, hotel staff, hair stylists, and ballet dancers are all present when the product is used.

      Little Standardization

      Because service products are so closely related to the people providing the service, ensuring the same level of satisfaction every time is very difficult. Dentists have their bad days, not every baseball game is exciting, and the second vacation to Walt Disney World Resort may not be as wonderful as the first.

      High Buyer Involvement

      With many service products, the purchaser may provide a great deal of input into the final form of the product. For example, if you wanted to go on a Caribbean cruise, you would visit a number of websites describing the various cruise locations, review the available options for cabin location and size, islands visited, food, entertainment, prices, and whether they accommodate children. Although the task would be very time consuming, you could, if you wanted, practically design every moment of your vacation.

      It should be noted that the four characteristics associated with service products described above vary in intensity from product to product. In fact, service products are best treated as existing on a continuum, shown in the following figure.

      When marketing a service, it’s important to remember that (a) service products on the right side of the continuum (i.e., those with greater intangibility) are different from goods products on the left side of the continuum, and (b) service products tend to require certain adjustments in their marketing strategy on account of these differences.

      All products, whether they are goods, services, blankets, diapers, or plate glass, possess peculiarities that require adjustments in the marketing effort. However, “pure” goods products and “pure” service products (i.e. those on the extreme ends of the continuum) tend to reflect characteristics and responses from customers that suggest different marketing strategies. Admittedly, offering an exceptional product at the right price, through the most accessible channels, promoted extensively and accurately, should work for any type of product. The goods/services classification provides the same useful insights provided by the B2B/B2C classification discussed earlier.

      Augmenting Products with Services

      Earlier we touched on “augmented products,” which are tangible products, along with all of the services that support them. When companies devise product strategies and decide whether or not to augment their products with additional services, they typically evaluate whether the following criteria will be met:

      1. Services can provide a more complete and satisfying customer experience.
      2. Services can increase the total revenue for each sale.

      Improved Customer Experience

      Relatively speaking, goods tend to be more fixed, and services are more variable. If you’re trying to control the quality of a product, the “fixedness” of goods is obviously problematic—perhaps you’ll need costly new equipment or production methods or a new product design to make improvements. If you’re focused on personalizing the customer experience, though, the variability of services can be a tremendous benefit. A company can provide a range of services around a tangible product—whether that product is a good or a service—thereby providing an enhanced experience for the customer.

      Zappos

      Zappos provides the quintessential example of an augmented product that adds tremendous value by offering an improved customer experience. You’ll recall from the module on corporate strategy that Zappos sells shoes and apparel online. The tangible products are the shoes and clothing items that are delivered to the customer’s doorstep. The company has a broad selection and has invested significant capital and effort to create an online shopping experience that is easy and pleasant. The company’s tangible products are very good.

      3850366833_eb9810558f_o.jpgHowever, Zappos is not the low price leader. In fact, its prices are often 5–10 percent higher than other online shoe retailers. Nor does the company do a lot of national advertising to build its brand. Instead, Zappos has focused on creating a “wow” customer-service experience that not only exceeds customers’ expectations but brings people back again and again. In fact, the company’s goal is to be the company that provides the best service online, period—not just in shoes, but in any category.

      When customers buy shoes online they expect the product to be accurately presented. They expect to receive what they order in a timely fashion. They expect to receive help with any questions and have any problems with orders resolved. These are fairly standard customer-service features that customers expect along with the delivery of their shoes or clothes. Zappos goes a step further, though, to provide an even higher level of service to all its customers—at no extra charge:

      • Zappos has a 100-percent-satisfaction-guaranteed return policy—at no cost to the customer and no complaints about items returned.
      • Customer-service employees encourage customers to order two sizes of shoes to make sure they get a pair that fits, and return the other.
      • The company frequently upgrades orders from valued clients to one-day shipping and sends personal notes expressing appreciation for their business.
      • Zappos posts a support phone number on every page of its Web site. The company has found that only 5 percent of sales come through the phone, but when customers do call, there is an opportunity to create a deeper relationship.

      As a result of these services, Zappos’ augmented product is significantly more valuable and more differentiated than its tangible product, and it’s helped to set Zappos apart as a company that treats its customers well.

      Increased Revenue per Customer

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      It is often the case that augmented services do create new revenue opportunities for the company. Some customers want a different level of service and are willing to pay more for it. By adding services a company can customize its product offering for the segments that desire something more.

      Many of these services have become so standard that we hardly think about them. Most electronics come with an option to buy an extended warranty or a higher level of customer support. Airlines provide in-flight meals and drinks; many hotel and rental car packages are essentially augmented products. Many online services such as LinkedIn and the Slack team messaging service offer tiered packages, or offer a free version and a version that includes additional services for a fee.

      These services can prove to be highly profitable. Despite LinkedIn’s free offering, 16 percent of its three million users pay for premium services.[5] In 2017, airlines earned $82.2 billion in non-ticket revenue.[6]

      Companies often struggle to determine when it is best to add a fee for additional services and when the augmented services should be a free extension of the tangible product. The question often ties back to the company mission and objectives, as well as to the competitive landscape. If Zappos charged customers for the various services the company provides, customers would probably feel irritated instead of pampered. Also, Zappos’ extensive customer services are core to the company’s mission and strategy. If American Airlines decided not to charge the baggage and change fees that Delta charges, then it would likely need to recoup those costs in higher ticket prices for all customers. Generally when customers purchase tickets, they consider the base ticket price and not the price that includes all fees. As a result, American would struggle to compete on ticket price in a highly price-sensitive market.

      Augmented services give marketers a valuable approach to customizing products and better meeting the needs of all target customers.

      Product Marketing in the Marketing Mix

      The Role of Product Marketing

      Product marketing is the function of understanding the target customer’s needs, and promoting and selling the product to the target customer. In many organizations this is a different function from product management, which is responsible for defining the product that the company will build. Obviously the two functions must interact closely, but each has a different primary focus.

      The product marketer is focused on the market. This includes analyzing and understanding the market, and presenting the product to the market. In other words, product marketers must bring information in and get it out. These activities are summarized in the table below:

      Product Marketing Responsibilities[7]
      Inputs to the company Outputs to the market
      Define market needs or problems that the product should address Define key messages to the communicate product benefits to the target market
      Complete a competitive analysis to understand other offerings in the market Create marketing materials about the product
      Identify which market segments the product will target Define the sales approach
      Define market requirements for the product Create lead generation plans
      Create buyer persona documents that describe the personality, behavior, and desires of buyer types Develop sales materials such as Web site content, brochures, presentations, and product demonstrations
      Determine price Provide training and support to distribution channel partners

      The product management function will use the inputs from product marketing to define detailed product requirements and oversee the development of products that meet those requirements. We will discuss the complexity of this process further when we delve into new-product development.

      Product marketing and product management are both functions that must be managed well, but in different organizations they are managed differently. The specific roles of individuals will vary significantly depending on the company and the types of products. In a very large company there may be teams of individuals in the product marketing function filling very specialized roles. In a very small company, a single individual may fill both the product marketing and product management functions. In general, it is difficult to span both product marketing and product management because the skills needed to understand and translate broad market needs are different from the skills needed to create detailed product requirements.

      The Marketing Mix

      As you can see from the list of responsibilities, the product marketing function is not confined to only one aspect of the marketing mix. Instead, the product marketing function focuses on a single product or product line across the marketing mix. Let’s look at a specific example of the product marketing role and a corporate marketing role, and see how they each use the marketing mix.

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      Apple Watch

      When Apple introduced the Apple Watch, they had a large team responsible for product marketing. The team was following emerging technology, consumer, and societal trends and identifying what would impact customer needs. They became experts in the features and marketing of competitive products. Product marketers defined the target buyer for the watch and identified the key features the buyer would require. They met with distribution partners. The product marketing team developed pricing recommendations. They managed tradeoffs involving features, schedule, cost, and pricing. They also traveled to trade shows, customer briefings, and press visits to talk about the watch. The product marketing team was Apple’s resident expert on the target market for the Apple watch and the marketing strategy for that product.

      Prior to the product launch, product marketing worked with Apple’s marketing communications team to develop the press releases, press strategy, and marketing materials for the launch and ongoing sales. Marketing communications is a corporate function that works across all products. They do not try to become experts in each product but look to the product marketing team to bring that expertise. Instead, the marketing communications team are experts in promotion across all of Apple’s products.

      Product marketing understands the right message for the Apple watch’s target market. The marketing communications team knows how to get a writer at the New York Times to write a story about that message.


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