Lecture 19 Developing New Products and Services Part 1
Welcome to Introduction to Marketing Essentials
we have covered the first three parts of this course, today we will start with the part
four that is Satisfying Marketing Opportunities . Now module from module nineteen to module
forty all these modules are dedicated to this part four and the first topic in this part
four is about Developing New Products and Services and this will be covered in three
modules. So, that is module nineteen, twenty and twenty-one
Now, let us start with module nineteen that is on developing new products and services
and these are the things that will be covered in this module. So, we will recognize the
various terms that pertain to products and services, then we will understand different
product levels representing customer value hierarchy .
So, we will talk about this customer value hierarchy and then we will identify the ways
in which consumers and business products and services can be classified .
So, these are
the important three important things that we will talk about in this module nineteen
. Now to begin with this marketing planning
begins with formulating an offering to meet target customers' needs and want . So, this
is the very important thing that this marketing planning , what does this marketing planning
do, it it is about formulating an offering how, so that it meets the target customer's
wants and needs. Now new products are at the core of an offering
. So, these new products they are the core of this offering and crucial for delivering
customer value, earning profits and enhancing shareholder wealth. So, all these things can
be had if we make an offering that will meet target customer's needs and want and this
offering is to be based on a new product. So, life of an organization depends on how
it conceives, produces and markets new products. So, when we talk of new products when we are
saying new products it will cover these three things broadly that is goods, services and
ideas .
As globalization pressures drive increasing
competition innovation success is even more important. So, globalization is there everywhere
and because of this the competition has increased and now how to deal with competition. So,
innovation success has become more important in this twenty first century.
So, success of an organization in this twenty-first century depends on innovation, developing
and launching new products and providing customers with new and improved product choices, as
we will see in case of Apple Incorporated .
Whether developed internally, whether these products are developed internally acquired
from someone else or generated from an strategic alliance, successful new products beat competitors
and drive growth . So, that is the idea of having new products because in this in this
era of globalization and competition it is a new product that will sail the company through
through the competition. Now, let us look at how Apple has become a
new product innovation machine. Since its foundation in nineteen seventy six Apple has
developed itself from a mere computer manufacturer to a successful all – rounder.
It has conceived,
produced and marketed some of the worlds' most creative and innovative products. Apple
Inc innovation revolutionized six industries. Personal computers, animated movies, music,
phones, tablet computing and digital publishing .
Now one such innovation was the introduction of iCloud. So, in addition to all other innovations
let us for the time being talk about iCloud, because many consumers now use multiple devices
that is a smartphone like iPhones and PCs like iMac and tablet devices like iPads and
all of them need a way to share the music, photos, videos, files and various other apps
that reside on any one device.
So, there may be different apps residing on
different devices that a a consumer may have, but with the introduction of iCloud consumers
would not have to worry about syncing their devices any longer to transfer their data.
So, it is not that there are only two apps on on one device, another two two apps on
another device. So, as soon as they connect to they the consumer connect to iCloud all
of them will sync and every device will have all the apps.
Now, let us look at what are products and services. So, many people think a product
is tangible, but technically a product is anything that can be offered to a market.
So, product is anything that can be offered to a market it may not necessarily be tangible
for doing what to satisfy a want or need including physical goods, services, experiences, events,
persons, places, properties, organizations, information and idea.
So, these are all the
things that can be provided to a target market either in isolation or in combination to satisfy
their wants and needs. So, a product is a good, service or idea consisting
of a bundle of tangible and intangible attributes or features . So, this when we when we say
good service or idea they are a bundle of both the tangible and intangible attributes
. It is not either tangible or intangible, but a bundle of a tangible and intangible
attributes or features that satisfy consumer needs and is received in exchange for money
or something else of value . Now what are products and services? Now let
us look at goods, services or ideas.
A good has tangible attributes and intangible attributes.
So, a good has two kind of attributes, tangible and intangible. Now, what are tangible attributes?
Tangible attributes are those that a consumer's five senses can perceive. For example, Apple's
iPad can be touched and it features can be seen and heard. So, these are the tangible
attribute. Now, a good may also have some intangible
attributes consisting of its delivery or warranties and embody more abstract concepts such as
becoming healthier or wealthier . Now a good can have or a a good can have tangible and
intangible attributes that is one, another categorization is that this goods can be divided
into non-durable goods and durable goods .
So, on the one hand every good will have tangible
and intangible attribute and on the other hand goods can be non-durable
and durable a non-durable good is an item consumed in one or a few uses such as food
products and fuel. While a durable good is one that usually last over many years such
as appliances like your refrigerators and a washing machines, cars and mobile phones
. Now, this classification method also provides
direction for marketing actions. For example, non-durable goods rely heavily on consumer
advertising because they have limited shelf life because they survive only few uses so
that is why they rely heavily on consumer advertising while, costly durable goods generally
emphasize personal selling. Now, let us look at what are services? Services
are intangible activities or benefits these are intangible activities or benefits that
an organization provides to satisfy consumer needs in exchange for money or something else
of value. Services are intangible, inseparable, variable and perishable products .
So, these are the four things that are there in services that normally requires more quality
control, supplier credibility and adaptability. For example that includes haircuts, legal
advices and appliance repairs.
Services have become a significant part of Indian economy,
exceeding forty percent of its Gross Domestic Product that is GDP.
Finally, in marketing, an idea is a thought that leads to a product or action such as
a concept for a new invention or getting people out to vote. Now, through throughout our discussion,
products generally include not only physical goods, but services and ideas also . When
product is used in its narrower meaning of "goods" it should be clear from the example
or the sentence . So, now let us look at the product level the
various products level from the perspective of the customer value hierarchy. In planning
its market offerings so an offering is anything that is tangible and intangible that can be
offered to the target segments for for satisfying their needs and wants .
So, in planning its market offering a marketers need to address five product levels.
So, that
we will see in in in one of the upcoming slides that is figure nineteen point one , now these
are the five levels are the core benefit, the basic product, expected product, augmented
product and the potential product. So, these are the five products product levels these
are the five product levels . Each level adds more customer value and together
the five constitute a customer value hierarchy . So, these are various levels they starting
from core benefits and going up to potential product and this is called as a customer value
hierarchy at each level some kind of value customer value is being added .
The fundamental level is the core benefit, the service or benefit the customer is really
buying for example, a hotel guest is buying rest and sleep, the purchaser of a drill machine
is buying holes. So, marketers must see themselves as benefit providers .
At the next the second level the marketers must turn the core benefit into some basic
products. Thus a hotel room includes a bed, a bathroom, a towel, desk, dresser and a closet
.
At the third level the marketers prepare an expected product, a set of attributes and
conditions buyer normally expects when they purchase this product .
So, in the case of hotel guests they minimally expect a clean bed, fresh towels, working
lamps and a relative degree of quiet quiet or quietness so that they can easily sleep
. At the next that is the fourth level , the marketers prepare an augmented product that
exceeds customer expectations. So, at this level we are talking of customer expectations
, at the next level now the marketers prepares prepare an augmented product that exceeds
customer expectations . So, in developed countries brand positioning
and competition takes place at this level . In developing and emerging markets such
as India and Brazil competition takes place mostly at the expected product level.
At the fifth level stands the potential product which encompasses all the possible augmentation
and transformation the product or offering might undergo in the future. Here companies
search for new ways to satisfy customers and distinguish their offerings . Differentiation
arises and competition increasingly occurs on the basis of product augmentation. Each
augmentation adds cost; however, an augmented benefits soon become expected benefits and
necessary point – of – parity in this category .
Now, these are the five levels that we were talking about.
That is the core benefit, then
company makes a basic product, then someone comes up with an expected product, augmented
product and the potential product. So, these are the five levels of a customer value hierarchy
. Another classification of product is that,
there are two broad categories of product widely used in marketing related to the type
of user who is using this product. So, according to this there are two categories, the first
is consumer product and the second is the business products .
Now, let us look at what are the these different types of products. So, consumer products are
products purchased by the ultimate consumer who is buying it to consume . What are business
products, they are also called as BtoB products or industrial products these are products
organizations buy that assist in providing other products for resale .
So, here the idea is to resale here the idea is to consume . But some products can be considered
both consumer and business items. For example, an Apple iMac computer can be sold to consumers
for personal use or to business firms for office use.
So, it is not that only consumers
will buy it or only businesses will buy it both the both of them can buy it. Each classification
results in different marketing actions . As a consumer product the iMac would be sold
through Apple's retail stores or directly from its website, but as a business product
an Apple salesman or salesperson might contact a firm's purchasing department directly and
offer discounts for multiple purchases . So, now, this is this tells us how selling in
both these cases is different from each other .
And now let us look at how to classify consumer products. So, there are four types of consumer
products, one is convenience product, second is the shopping products, followed by a specialty
products and unsought products . So, these are the four category of consumer products
. Now, they differ in terms of these four types
of consumer products, they differ in terms of one is the efforts the consumer spends
on making this purchase decision , the second is the attributes used in making the purchase
decision and the third is the frequency of this purchase .
Now, let us look at each one of them in in some detail, convenience products are items
that the consumer purchase frequently, conveniently and with a minimum of shopping efforts for
example, all of us keep on buying soaps and newspapers etcetera .
So, convenience product
can be further classified as staples, impulse or emergency. So, these it will have three
more categorization staples, impulse and emergency. Staples are convenience goods consumer purchase
on a regular basis. For example, a buyer might routinely purchase Heinz ketchup, Oral – B
toothpaste etcetera . While in impulse goods they are purchased without any planning or
such efforts like chocolates and magazines and toffees etcetera etcetera .
The third is the emergency goods they are purchased when a need is urgent. So, manufacturers
of impulse and emergency goods will place them where consumers are likely to experience
an urge or compelling need to purchase those products. So, in both these cases the purchase
is not planned it is at at the spur of the moment.
Another categorization is the is the shopping products, shopping products are items for
which the consumers compares several alternatives on criteria such as price, quality, suitability
or style .
For example, clothings, furnitures and major appliances.
Now, in this we have two two further categorization, one is homogeneous shopping goods they are
similar in quality, but different enough in price to justify shopping comparison . So,
they this homogeneous shopping goods they are similar in quality, but they are they
have different prices. So, because of that a comparison has to be carried out .
Another type of shopping goods are heterogeneous shopping goods they differ in product features
and services that may be more important than price. So, now, the shopping goods are heterogeneous,
heterogeneous on the basis of product features and services. So, that is why and in that
case in this case the prices are not important. The sellers of heterogeneous shopping goods
carries a wide assortment to satisfy individual taste and trains salespeople to inform and
advise customers about which shopping good will be more suitable for their needs and
wants . Another type of consumer product is the specialty
products, they are items that the consumers make a special effort to search out and buy.
These are specialty as the name suggest they they they require some more amount of time
and money in making decision for example, cars and audio visual component etcetera.
Specialty goods have unique characteristics or brand identification for which enough buyers
are willing to make a special purchasing effort.
A Mercedes is an example of specialty good
because interested buyers will travel far to buy one of of Mercedes . Specialty goods
do not require comparisons, buyer invest time only to reach the dealer carrying the wanted
products. Another type of products are called as unsought
products, they are items that the consumer does not know about or knows about, but does
not initially want. Examples of unsought products include life insurance and smoke detectors
and gravestone stones , unsought goods require advertising and personal – selling support.
Now, this classification of a consumer product significantly affects which products consumers
buy and what marketing strategies would be used. Each type of consumer product stresses
different marketing mix actions, degrees of brand loyalty and shopping efforts , but how
a consumer product is classified depends on the individual.
One woman may view a mobile phone as a shopping product and visit several stores before deciding
, whereas her friend may view a phone as a a specialty product and make a special effort
to buy only a One Plus phone . Now, this this picture shows the various types
of consumer products that is the convenience and the shopping and specialty and unsought
products and then on on the left hand side we have the various basis of comparison for
example, product, price, place, promotion, brand loyalty of consumers and purchase behavior
of consumers.
So, let us look at one comparison that is
the product. So, in convenience product the convenience products include toothpaste and
cake, cake mixes and hand soaps, ATM withdrawals, while unsought products are burial insurance
and thesaurus. Now let us look at how does this brand loyalty
of consumers look looks like in convenience product. So, in this case they may be aware
of brand, but will will accept substitutes, while in shopping product is the they prefer
specific brands well , but will accept substitutes . In a specialty products very they are very
brand loyal and will not accept substitutes and in unsought products they will accept
substitutes. Now, let us look at this classification of
business product, a major characteristics of business product is that their sales are
often the results of a derived demand; that is, sales of business products frequently
results or are derived from the sales of consumer products.
For example, as consumer demand for Ford cars a consumer product increases, the company
may increase its demand for paint spraying equipment that is a business product.
So,
business products are also terms termed as industrial goods .
Now, business products are classified in terms of relative cost and the way they enter the
production process. These products may be classified as, one components that is material
in parts and second is support products which could further be classified into capital items
and supplies and business services . Now, let let us look at each one of them.
So, what what are components or material and parts, materials and parts are goods that
enter the manufacture's product completely. Now they fall in two classes, raw materials
and manufactured materials and parts . Raw material in turn fall into two categories,
farm products such as wheat, cotton, livestock, fruits and vegetables while there are natural
products such as fish, lumber, crude, petroleum etcetera .
So, and this manufactured material and part fall into two category one is component material
for example, iron, yarn, cement and wires.
The standardized nature of component material
usually makes price and suppliers reliability key purchase factors .
The second type is the component parts for example, small motors, tires, castings. So,
component parts enter the finish products with no further change in form .
Most manufactured material and parts are sold directly to industrial users. Price and service
are major marketing consideration while branding and advertising are less important.
The supports is another type of product is the support support products these are items
used to assist in producing other products and services .
So, the first of the that is
the capital items, they are long – lasting goods that facilitate developing or managing
the finished products and they fall into two groups . One is installations and another
is equipment. Installations consist of buildings for example,
factories and offices and heavy equipment for example, generators and drill presses,
mainframe computers, elevators etcetera . Installations are major purchases, they are usually bought
directly from the producer, whose sales force include technical staff and the long negotiation
precedes the typical sales . Producers must be willing to design to specifications
and to supply post-sale services, advertising is much less important than personal selling.
Now, equipment includes portable factory equipments and tools, hand tools, lift trucks and office
equipments desktop computers, desks and chairs etcetera. These types of equipment do not
become part of a finished product. They have a shorter life then installations, but a longer
life then operating supplies . Now, let us look at equipment although some
equipment manufacturers sell directly, more often they use intermediaries because the
market is geographically dispersed, buyers are numerous and orders are small . Quality,
features, price and services are some major consideration.
The sales force tends to be
more important than advertising although advertising although advertising can also be used effectively
. The supplies and business services are short
– term goods and services that facilitate developing or managing the finished products.
Now supplies are of two types, maintenance and repair items for example, paints, nail,
broom etcetera and operating supplies like lubricants, coal, writing paper, pencil. And
together they go under the name of MRO goods, maintenance and repair operating supplies
goods . Supplies are the equivalent of consumer goods
they are usually purchased with minimum effort on a straight – rebuy basis . So, we have
talked about the various types of buying situations earlier in one of those modules . They are
normally marketed through intermediaries because of their low unit value and great number and
geographic dispersion of customers .
Price and services are important considerations
because suppliers are standardized and brand preference is often not high. Business services
include maintenance and repair services for example, window cleaning, copier repair these
are usually supplied under contract by a small producers or from the manufacturers of the
original equipment . Business advisory services for example, legal
services, management consultancies and advertising these services are usually purchased on the
basis of the supplier's reputation and staff .
Now, let us classify services: Services can be classified according to whether they are
delivered by people or equipment. So, there are services that are delivered by people
or equipment , then business firms or nonprofit organizations or the third is a government
agencies. Organization in each of these categories often
use significantly different kinds of market-mix strategies to promote their services .
Now,
these are the various types of services, these are equipment based and these are people based.
Equipment based include automated that is self-service, then operated by a relatively
unskilled operators and then operated by skilled operators while people based can be unskilled
labor, skilled labor and professionals and examples are given here .
Now, let us look at when the delivery of a service is by people or equipment . So, people
based professional services include those offered by advertising agencies or medical
doctors. Urban company earlier known as Urban Clap utilizes skilled labor to offer appliances
and electronic repair, cleaning, salon services salon services at home .
The quality of these people – based services can vary significantly depending on the abilities
of the person delivering the service.
Then there are some equipment – based services
they do not have the market marketing concern of inconsistent quality because employees
do not have direct contact when providing the services to the consumers. Instead, consumers
receive these automated services without interacting with any service employee such as doing self
check-in at Airlines at airports, watching a movie at a local theater or using Karvy's
online stock trading platform.
Now, another classification is when the deliveriy
by business firms or nonprofit organizations. Now, as discussed in one of the earlier modules,
privately owned firms must make profits to survive. On the other hand, nonprofit organizations
seeks to satisfy clients and be efficient .
The kind of services each offer affect the their marketing activities. Recently many
nonprofit organizations, such as The Red Cross organization have used marketing to improve
their communication and better serve those in need .
Delivery by government agencies, like the central, state or the local level they provide
a broad range of services, these organizations also have adopted many marketing practices
used by business firms. For examples, LIC's "Zindagi ke sath bhi zindagi ke baad bhi"
marketing campaign was designed to allow it to compete better with private insurance providers.
To conclude we had started this module by introducing the definition of products and
services and discussing about the terms pertaining to them.
Next we have discussed about five
product levels and how these together constitute a customer value hierarchy .
The discussion then moved to classification of consumers and business products where we
studied different categories of consumers and business products and then we have talked
about consumer products that can be categorized into four groups that is convenience products,
shopping products, specialty products and unsought goods.
Now, business products are further categorized into two groups namely, the components and
support products.
And finally, we had focused on two types of classification of services
on the basis of whether it is delivered by either people or equipment or whether it is
delivered by business firms or non-government organizations or government agencies. These
are the three books from which the material for this module was taken.
Thank you ..
