POM Q1 HANDOUT 4

• Today's consumers have significantly more power than ever before due to social media and online reviews
• Power shift has forced companies to become more transparent and responsive to the needs and preferences of their customers
• Entrepreneurs adjust their marketing tactics to effectively match the habits of modern consumers
• Types of customer requirements according to Guillebeau (2023)


  • Service Requirement
  • Output Requirements
• Product and Service Development (PSD) Process

  1. Research

  2. Design

  3. Testing

  4. Improving the product and the service
• Service Requirement


  • An intangible thing or product that provides a sense of fulfillment to the customer
• Elements of service requirements

  • Ordering ease
  • Delivery
  • Installation
  • Customer Training
  • Customer Consulting
  • Maintenance and Repair
  • Returns
• Output Requirements


  • Physical objects or visible entities that consumers expect to have specific characteristics
• Characteristics of output requirements

  • Form
  • Features
  • Performance quality
  • Conformance quality
  • Durability
  • Reliability
  • Repairability
  • Style
  • Customization
• Product and Service Development (PSD) Process involves research, design, testing, and improving the product and the service
• PSD goes beyond the manufacturing process and focuses on understanding customer needs, market trends, and technological advancements to create innovative and compelling offerings
• Product and Service Development Process

  1. Trend analysis and real-world observations

  2. Consumer and market research

  3. Actionable insights

  4. Concept development and refinement (Ideation, Prototyping, Testing, Refinement)

  5. Implementation and launch

  6. Result Assessment
• David: 'These phases serve to validate their potential'
• Entrepreneurs can understand the competition, customer demands, and market changes using PSD with market research data
• This strategic advantage empowers businesses to continually outperform the competition, foster a robust and lucrative customer base, and tailor their products and services to meet customer needs precisely
• In planning market offerings, firms must address the Five (5) Product Levels (FPL) model
• The FPL model helps firms understand their customers, structure market offerings to serve customer needs and wants best, and constitute a customer-value hierarchy
• Core benefit in the FPL model is the fundamental need or wants the customer satisfies when purchasing the product
• Basic Product in the FPL model is turning the core benefit into a basic product with features necessary to function
• Expected Product in the FPL model is the set of attributes and conditions customers usually expect when they purchase a product or service
• Augmented product in the FPL model are any product variations, extra features, or services that help exceed customer expectations and differentiate the product or service from its competitors
• Potential product in the FPL model encompasses all the possible future augmentations and transformations the product or offering might undergo
• Firms classify their market offerings based on durability, tangibility, and use (consumer or industrial)
• Classification of market offerings

  • Non-durable goods
  • Durable goods
  • Services
• Types of goods

  • Durable goods
  • Services
  • Convenience goods
  • Shopping goods
  • Specialty goods
  • Unsought goods
  • Materials and parts
  • Capital items
  • Supplies and business services
• Durable goods


  • Tangible goods with a longer lifetime, requiring more personal selling and service, higher margin, and seller guarantees
• Services


  • Intangible, inseparable, variable, and perishable products requiring quality control, supplier credibility, and adaptability
• Convenience goods


  • Readily available in all markets and require little buyer effort
• Shopping goods


  • Goods of importance where customers devote considerable time before making a purchase, based on suitability, quality, price, and style
• Specialty goods


  • Goods with unique characteristics or brand identification for which customers are willing to make a special purchasing effort
• Unsought goods


  • Goods that consumers do not know about or usually think of buying, requiring advertising and personal selling support
• Materials and parts


  • Goods that become part of a finished product, such as raw materials and components
• Capital items


  • Long-lasting goods facilitating the finished product's development, falling into installations (buildings, heavy equipment) and equipment (portable factory equipment, tools, office equipment)
• Supplies and business services

  • Short-term goods and services facilitating the development or management of the finished product, marketed through intermediaries due to low unit value and great number of customers
• Pricing approach refers to the method or strategy a company uses to determine the price of its products or services
• Pricing approach involves considering factors such as production costs, competition, market demand, and customer perception to set a price affecting the company's profitability and product's value perception
• Step 1: Selecting the Pricing Objective


  1. Competition-Based Objective

  2. Cost-Based Objective

  3. Customer-Value Objective

  4. Market Share Objective

  5. Sales Orientation Objective

  6. Customer-Driven Objective
• Identifying the pricing objective is the primary step toward selecting the right and appropriate price for the product or service
• Step 2: Determining the Demand


  Marketers can analyze market research data, conduct surveys or interviews with customers, track sales data, monitor competitor pricing strategies, analyze economic factors, and implement price experiments or A/B testing to determine customers' price sensitivity and willingness to pay
• Step 3: Estimating the Cost


  Marketers can determine direct costs, calculate indirect costs, consider desired profit margin, and research market demand and competition to determine a competitive price