Chapter - Four

Product & Service

Concept
 What Is Product?
• A product is anything that is offered in the market
place for consumption that can satisfy the need or a
want.
• Anything whether good or service offered in the
market is a product.
• Products that can be marketed:
 Physical goods, services, experiences, events, persons,
places, properties, organizations, information, and
ideas.
 Classification of a product
• Basis of product classification:
1.Durability
2.Consumer behavior
On the basis of durability:
 Durable and non-durable goods
On the basis of consumer behavior:
 Consumer and industrial goods
1. Non-durable goods: Are products that last
for a short period of time.
• They are consumed quickly and purchased
frequently.
• Examples are beer, soap and salt.
2. Durable goods: Are products that last for
long period of time.
• Examples include refrigerators, machine
tools, and clothing.
 Consumer Products
• A products bought by final consumers for personal
consumption.
A. Convenience products - purchases with a minimum of
effort.
• Usually buys frequently, immediately, & with A minimum
of comparison & buying effort. Ex. Soap, biscuit
B. Shopping goods - also known as comparison product.
• The customer compares the product of one business with its
competitors on basis as quality, style, price and suitability.
• Purchased less frequently than convenience goods.
Examples include furniture, clothing.
C. Specialty goods: with unique brands in which customers
are loyal and willing to take a special purchase effort .
 Consumers know the attribute of the product prior to
their purchase decision.
• They are prepared to make effort, pay a high price and
do not accept a substitute. Ex. High-priced photographic
equipment.
D. Unsought goods: are goods that the consumer does not
know about & does not normally think of buying under
normal condition. Ex. Life insurance, preplanned
funeral service, gravestones.
 Industrial Products
A. Materials and parts - are goods that enter
the manufactures product completely.
B. Capital items - they are long lasting items
that do not go completely in to the
production of the product. Radiator,
battery.
C. Supplies and business service - are short
lasting goods and services that facilitate the
finished product. Ex. Lubricant oil
 Product Life Cycle
1.Introduction: new product is first distributed and
made available for purchase.
• A period of slow sales growth. High expenses incurred
with product introduction. Customers are like to take
the status of being first.
2. Growth: marked by a rapid climb in sales.
• New competitors enter in to the market attracted by
the opportunities for large-scale production & profit.
• It is a period of rapid market acceptance and
substantial profit improvement.
3. Maturity: sales increase reaching its highest
peak. Reduction in prices may occur in this stage.
Failing profits because of high promotional
expenditure.
4. Decline: the product sales declines as substitutes
enter the market or customers become
dissatisfied or shift to other products.
As sales and profit decline, some firms
withdraw from the market.
 Product Development Process
A product may be developed by the following three
methods:
Imitation: it is done by copying the other popular or
best-selling products already existing in the market.
Product improvement: it consists of modification in
the existing quality, size, design of the existing
product it may look almost a new product.
Product innovation: it is the development of a new
product which has been unknown so far.
 Stages of New Product Development
1.Idea Generations- This is the continuous &
Systematic search few new product
opportunities.
• It involves outlining the sources of new ideas &
methods for generating them.
• Internal sources: employees, top management,
etc.
• External sources: include customers,
competitors, and suppliers.
 2. Idea Screening
• Filtering ideas to pick out good ones.
• Not all ideas are used in new product development
• Purpose: is to reduce the number of ideas.
• After the firm has identified a set of potential product
idea, it must screen them.
• Poor, unsuitable or unattractive ideas are weeded out
form further considerations.
• Product ideas that do not fulfill the criteria will be
rejected.
 3. Concept Development &Testing-
• This stage involves asking potential consumers
to react to the picture, written statement, or
oral description of the product.
• 4. Marketing strategy development- after
concept development and testing, the new
product manager must developing a
preliminary marketing strategy plan for
introducing the new product into the market.
 5. Business Analysis-
• Management needs to prepare sales, cost, and profit
projections to determine whether they can satisfy the
company’s objectives.
• The stage requires the study of the attractiveness of the
business such as the extent of demand for the product;
sales, cost and profit estimates.
• 6. Product development- this stage converts a product
idea in to a physical form and identifies a basic
marketing strategy.
• This stage is the actual product development stage.
 7. Market Testing-
• The product is ready to be dressed up with a brand name,
packaging and preliminary marketing program.
• It is the stage at which the product and the marketing
program are introduced to more realistic market settings.
8. Commercialization (launching) –
• It involves introducing (launching) a new product in to
the market.
• At this stage production starts, marketing program begins
to operate and products flow to the market for sale.
• Aspects to considered : when (timing), where
(geographical strategy), to whom (target market
prospects), and how (introductory market strategy).
 Why New Products Fail?
• The main reason is when the product is not
based on customer need & wants.
Inadequate product superiority and uniqueness.
 Failure to conduct proper marketing research.
Failure of realistic forecast regarding the
acceptable level of a product.
Lack of allocation of adequate resource.
Poor timing i.e. When the product enters the
market early or late.
 Concept and Nature of Service
• Service is any activity or benefit
that one party can offer to
another; intangible & does not
result in the ownership of
anything.
 Unique Characteristics
1. Intangibility: they cannot be seen, felt, tasted, or touched.
2. Inseparability: Service cannot be separated from the
person or firm providing it. Services are typically
produced and consumed at the same time.
3. Heterogeneity (variability): no two services will be
precisely alike. The quality of service may vary greatly,
depending on who provides them and when and where
they are provided. Example, quality of service varied
from banks to banks, airlines to airlines etc .
4. Perishability: services cannot be saved, stored, resold, or
returned.
• Service can’t be stored for the future. Services if not

consumed simply perish away.

• A hotel room or an airline seat that is not occupied today

represents lost income that cannot be gained tomorrow.

5. No transfer of ownership: when we buy a product, we
become its owner.
• In the case of a service, we may pay for its use, but we
never own it. Transfer of ownership does not take place.
 Service Quality and Its Dimensions
• Quality is defined
as conformance to standards.
• Service quality is the delivery of excellent or
superior service relative to customer
expectations.
Dimensions of Service Quality
1. Reliability: the ability to perform the
promised service dependably and accurately.
2.Responsiveness: is the willingness of the
service providers to help customers and to
provide prompt service.
3. Assurance: employees’ knowledge and
courtesy and the ability of the firm and its
employees to inspire trust and confidence.
4. Empathy: the caring, individualized
attention the firm provides to its customers.
5. Tangibles: the appearance of physical
facilities, equipment, personnel, and
communication materials.
 Product Protection
• Intellectual property (IP) refers to creations
of the mind: inventions, literary and artistic
works, and symbols, names, images, and
designs used in commerce.
• Legal ways to protect intellectual property
1. Patents
2. Copyrights
3. Trademarks
4. Trade Secrets
 1. Patents
• An entrepreneur who invents a new thing or
improves an existing invention needs to get legal
protection for his/her invention through a patent
right.
• A patent is a contract between inventor and
government in which in exchange for disclosure
of the invention, grants the inventor, the
exclusive right to enjoy the benefits resulting'
from the possession of the patent.
 Types of Patent
1. Utility patent(how it works): it protects any new invention
or functional improvements on existing inventions.
2. Design patent(how it looks): it protects the appearance of
an object and covers new, original, ornamental, and
unobvious designs for articles of manufacture.
• It covers only the appearance of the product, not the idea,
underlying concept, or functionality of the product.
• Appropriate when the basic product already exists in the
marketplace and is not being improved in function but only
in style.
 What can be patented?
 Processes: methods of production, research,
testing, analysis, technologies with new
applications.
 Machines: products, instruments, physical
objects.
 Manufactures: combinations of physical matter
not naturally found.
 Composition of matter: chemical compounds,
medicines, etc.
.
 2. Trade Marks
• It may be a word, symbol, design that
identifies the source of certain goods
or services.
• Are distinctive names, marks, symbols
or motto identified with a company’s
product or service and registered by
government offices.
TM
.
 3. Copyrights:
• Copyright is a right given to prevent others from printing,
copying, or publishing any original works of authorship.
• It covers all manner of writings.
• It provide exclusive rights to creative individuals for the
protection of literary or artistic productions.
• It protects original works of authorship including literary,
dramatic, musical, and artistic works, such as poetry, novels,
movies, songs.
• A copyright is distinct from patents and trademarks; in that,
intellectual property is protected for the life of the originator.
.
 4. Trade Secrets
• It is defined as business or technical knowledge, that
is kept secret for the purpose of gaining an advantage
in business over one’s competitors.
• It is a formula, process, device, or other business
information that is kept confidential to maintain an
advantage over competitors.
• Customer lists, sources of supplies of scarce materials,
faster delivery or lower prices may be trade secrets.
• Any confidential business information which provides
an enterprise a competitive edge.
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