Tangible objects that a company sells to customers for their use or consumption
Services
Intangible products that are directly delivered to customers by a company's employees
Products and services contribute to the customer's overall experience with a company
Levels of a product
Core product (benefit)
Actual product (tangible characteristics)
Augmented product (service-based add-ons)
Types of products
Consumer goods
Industrial goods
New product development
1. Idea generation
2. Idea screening
3. Concept development and testing
4. Market and business planning
5. Product development
6. Test marketing
7. Commercialization or full product launch
The 4Ps of the marketing mix was introduced by E. Jerome McCarthy in 1960
4Ps
Product, price, placement, and promotion
4Es
Experience, everyplace, exchange, and evangelism
Experience (4Es)
Paying attention to the overall customer journey and consumption experience
Everyplace (4Es)
Making products available anytime and anywhere at the customers' convenience
Exchange (4Es)
Considering the overall value that the product can provide to customers
Evangelism (4Es)
Associating products with a mission or an ideal to inspire customers
Product development
1. Concept developed into product prototype
2. Marketing and research departments collaborate
3. Months or years to create prototype and ensure it passes technical and commercial standards
Test marketing
1. Product prototype tested with particular group of customers in specific location
2. Reactions of customers gathered and analyzed
3. Helps address any problems with marketability before official launch
Commercialization
1. Soft launch - Product tested with limited customers, marketability and usability tested, limited 4Ps components used, price discounts and low-budget promotion
2. Full-scale launch - Official launch, extensive 4Ps components used, sold at official price, heavily marketed
Product line
Group of similar products offered by the same company under the same brand, may differ in sizes, variants, flavors, or types but all under a general class
Marketing a product line attracts more customers as they have varying preferences and needs
Marketers are expected to closely monitor the performance of each product in the product line, unprofitable ones are dropped to avoid losses and protect brand image
Product line can be extended by adding additional sizes and variants of the same product
Product life cycle
Period of time a product is introduced, sold, and eventually removed from the market, composed of 4 stages: introduction, growth, maturity, decline
Introduction stage
Product is launched in the market, companies spend to develop and introduce the product
Growth stage
Product gains acceptance in the market, profits increase, product may be sold under different brands
Maturity stage
Product has been in the market for a long time, competition increases, marketers face challenge of declining sales, attempt to address through improving features or cutting price
Decline stage
Profits and sales continue to decrease, consumers favor new products, company may have to drop the product to avoid costs and low profits
Apple II product life cycle
Introduction - Launched in 1977, marketed for color monitor and graphics
Growth - Surge in sales with VisiCalc spreadsheet program, faced competition from TRS-80 and Commodore PET
Maturity - Faced tough competition from IBM PC, Apple introduced more advanced but less expensive versions
Decline - Sales steadily decreased, production discontinued as Apple focused on Macintosh
Services
Involve contact between customer and employee providing the service, sold differently than other products
Strategies for service firms
1. Select and train employees to deliver excellent service
2. Associate effective customer service with employee motivation
3. Deliver high quality service to satisfy customers
4. Build strong and loyal customer base through satisfied customers recommending the service
Price
The set amount customers have to pay to purchase a product
Setting the price for a product
1. Consider marketing objectives
2. Consider research and development costs
3. Consider market structure
4. Consider elasticity of demand
5. Consider laws
Cost-based pricing
Fixed and variable costs are determined as the basis of the selling price
A mark-up is then added based on the target sales volume
Perceived value pricing
Product's prices are set based on the customer's perceived value or the value the customer feels he or she will attain from the good
Competitive pricing
Prices of goods are set based on the competitors' prices on the same goods
Elastic demand
Consumers respond to a change in price
Inelastic demand
Consumers do not respond much to a change in price
Perfectly elastic demand
A small change in price can significantly decrease the demand for a product
Perfectly inelastic demand
Goods that experienced increased prices but can still elicit the same demand from consumers
Product bundle pricing
Individual products are put together to create one whole bundle or set which is then offered to customers
The resulting bundle is usually priced lower than the sum of the prices of the individual goods
By-product pricing
Utilizes the by-product of the main product and is priced along with or separate from the latter
Purpose is to either maximize the profit from the raw materials or to augment the price of the main product
Main or captive product pricing
The main product is charged a lower price but additional charges go with it