This article covers:
Product Levels: The Customer Value Hierarchy
DURABILITY AND TANGIBILITY
- Non-durable goods
- Durable goods
- Convenience goods:
- Shopping goods:
- Specialty goods:
- Unsought goods:
- Materials and parts:
- Capital items:
- Supplies and business services:
Categories Of Service Mix
Many people think that a product is a tangible offering, but a product can be more than that. A product is anything that can be offered to a market to satisfy a want or need. Products that are marketed include physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.
In planning its market offering, the marketer needs to address five product levels (see Figure 12.2). Each level adds more customer value, and the five constitute a customer value hierarchy. The fundamental level is the core benefit: the service or benefit the customer is really buying. A hotel guest is buying “rest and sleep.” The purchaser of a drill is buying “holes.” Marketers must see themselves as benefit providers.
At the second level, the marketer has to-turn the core benefit into a basic product. Thus a hotel room includes a bed, bathroom, towels, desk, dresser, and closet. At the third level, the marketer prepares an expected product, a set of attributes and conditions buyers normally expect when they purchase this product. Hotel guests expect a clean bed, fresh towels, working lamps, and a relative degree of quiet. Because most hotels can meet this minimum expectation, the traveler normally will settle for whichever hotel is convenient or least expensive.
At the fourth level, the marketer prepares an augmented product that exceeds - expectations. In developed countries, brand positioning and competition take place at this level. In developing countries and emerging markets such as China and India, however competition takes place mostly at the expected product level.
Differentiation arises on the basis of product augmentation. Product augmentation also leads the marketer to look at the user’s total consumption system: the way the user performs the tasks of getting and using products and related services. As Levitt observed long ago.
Figure 12: Various Levels of Products
Figure 12.2: Five Product Levels
Figure 12.3: Three Levels of Product
Marketers have traditionally classified products on the basis of characteristics: durability, tangibility, and use (consumer or industrial). Each product type has an appropriate marketing-mix strategy.
Products can be classified into three groups, according to durability and tangibility:
are tangible goods normally consumed in one or a few uses, like beer and soap. Because these goods are consumed quickly and purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference.
are tangible goods that normally survive many uses: refrigerators, machine tools, and clothing. Durable products normally require more personal selling, and service, command a higher margin, and require more seller guarantees.
are intangible, inseparable, variable, and perishable products. As a result, they normally require more quality control, supplier credibility, and adaptability. Examples include haircuts, legal advice, and appliance repairs.
The vast array of goods consumers buy can classified on the basis of shopping habits. We can distinguish among convenience, shopping, specialty, and unsought goods.
The consumer usually purchases convenience goods frequently, immediately, and with minimum of effort. Examples include tobacco products, soaps, and newspapers. Convenience goods can be further divided.
1. Staples are goods consumers purchase on a regular basis. A buyer might routinely purchase Clinic Clear, Colgate tooth paste, and Ritz crackers.
2. Impulse goods are purchased without any planning or search effort. Candy bars and magazines are impulse goods.
3. Emergency goods are purchased when a need is urgent -- umbrellas during a rainstorm, boots and shovels during the first winter snowstorm. Manufacturers of impulse and emergency goods will place them in those outlets where consumers are likely to experience an urge or compelling need to make a purchase.
Shopping goods are goods that the consumer, in the process of selection and purchase, characteristically compares on such bases as suitability, quality, price, and style. Examples include furniture, Clothing, used cars, and major appliances. Shopping goods can be further divided:
1. Homogeneous shopping goods are similar in quality but different enough in price to justify shopping comparisons.
2. Heterogeneous shopping goods differ in product features and services that may be more important than price. The seller of heterogeneous shopping goods carries a wide assortment to satisfy individual taste and must have well-trained salespeople to inform and advise customers.
Specialty goods have unique characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. Examples include cars, stereo components, photographic equipment, and men’s suites. A Mercedes is a specialty goods, because an interested buyers will travel far to buy one. Specialty goods do not involve making comparisons; buyers invest time only to reach dealers carrying the wanted products. Dealers do not need convenient location ,although they must let prospective buyers know their locations.
Unsought goods are those the consumer does not know about or does not normally think of buying, like smoke detectors. The classic examples of known but unsought goods are life insurance, cemetery plots, gravestones, and encyclopedias. Unsought goods require advertising and personal-selling supports.
Industrial goods can be classified in terms of how they enter the production process and their relative costliness. We can distinguish three groups of industrial goods: materials and parts, capital items, and supplies and business services.
Materials and parts are goods that enter the manufacturer’s product completely. They fall into two classes: Raw Materials and manufactured materials and parts.
1. Raw materials fall into two major groups: farm products and natural products
a. Farm products (e. g., wheat, cotton, livestock, fruits , and vegetable): Farm products are supplied by many producers, who turn them over to marketing intermediaries, who provide assembly, grading, storage, transportation, and selling services. Their perishable and seasonal nature gives rise to special marketing practices. Their commodity character result in relatively little advertising and promotional activity, with some exceptions. At times, commodity groups will launch campaigns to promote their product -- potatoes, cheese, and beef. Some producers brand their products- Dole salads, Mott's apples, and Chiquita bananas.
b. Natural products (e.g., fish, lumber, crude petroleum, iron ore): Natural products are limited in supply. They usually have great bulk and low unit value and must be moved from producer to user. Fewer and larger producers often market them directly to industrial users. Because the users depend on these materials, long-term supply contracts are common. The homogeneity of natural materials, limits the amount of demand creation activity. Price and delivery reliability are the major factors influencing the selection of suppliers.
2. Manufactured materials and parts fall into two categories: component materials ( Iron, yarn, cement, wires) and component parts (small motors, tires, castings).
a. Component materials are usually fabricated further -- pig iron is made into steel, and yarn is woven into cloth. The standardized nature of component materials usually means that price and supplier reliability are key purchase factors.
b. Component parts enter the finished product with no further change in form, as when small motors are put into vacuum cleaners, and tires are put on automobile .
Most manufactured materials and parts are sold directly to industrial users. Price and service are major marketing considerations, and branding and advertising tend to be less important.
Capital items are long-lasting goods that facilitate developing or managing the finished product. They include two groups: installations and equipment.
1. Installations consist of buildings (factories, offices) and heavy equipment (generators, drill presses, mainframe computers, elevators). Installations are major purchases. They are usually bought directly from the producer, with the typical sale preceded by a long negotiation period. The producer’s sales force includes technical personnel. Producers have to be willing to design to specification and to supply post sale services. Advertising is much less important than personal selling
2. Equipment comprises portable factory equipment and tools (hand tools, lift trucks) and office equipment (personal computers, desks) . These types of equipment do not become parts of a finished product. They have a shorter life than installations but a longer life than operating supplies. Although some equipment manufacturers sell direct, more often they use intermediaries, because the market is geographically dispersed; the buyers are numerous the orders are small. Quality, features, price, and service are major considerations. The sale force tends to be more important than advertising, although the latter can be used effectively.
3. Supplies and business services are short-term goods and services that facilitate developing and managing the finished product. Supplies are of two kinds: maintenance and repair items (paint, nails, brooms), and operating supplies (lubricants, coal, writing paper, pencils). Together, they go under the name of MRO goods. Supplies are the equivalent of convenience goods; they are usually purchased with minimum effort on a straight rebuy basis. They are normally marketed through intermediaries because of their low unit value and the great number and geographic dispersion of customers. Price and services are important considerations, because supplies are standardized and brand preference is not high. Business services include:
a. Maintenance and repair services (window cleaning, copier repair) Maintenance and repair services are usually supplied under contract by small producers or are available from the manufacturers of the original equipment; and
b. Business advisory services (legal, management consulting, advertising). Business advisory services are usually purchased on the basis of the supplier's reputation and staff.
Service Industries Are Everywhere. The government sector, with its courts, employment services, hospitals, loan agencies, military services, police and fire departments, postal service, regulatory agencies, and school is in the service business. The private non-profit sector, with its museums, charities, church, colleges, foundations, and hospitals, is in the service business. A good part of the business sector, with its airlines, banks, hotels, insurance companies, law firms, management consulting firms, medical practices, motion picture companies, plumbing repair companies, and real estate firms, is in the service business. Many workers in the manufacturing sector, such as computer operators, accountant, and legal staff, are really service providers. In fact they make up a "service factory" providing services to the “goods factory.” And those in the retail sector, such as cashiers, clerks, salespeople, and customer service representatives, are also providing a service.
We define a service as follows: A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.
Manufacturers, distributors, and retailers can provide value-added services or simply excellent customer service to differentiate themselves.
Many pure service firms are now using the Internet to reach customers. A little surfing on the web will turn up a large number of virtual service providers.
Categories of Service Mix
A company's offerings often include some services. The service component can be a minor or major part of the total offering. The categories of offerings can be distinguished:
1. Pure tangible good - The offering consists primarily of a tangible good such as soap, -toothpaste, or salt. No services accompany the product.
2. Tangible good with accompanying services - The offering consists of a tangible good accompanied by one or more services. Levitt observes that “the more technologically sophisticated the generic product (e.g., cars and computers) , the more dependent are its sales on the quality and availability of its accompanying customer services (e.g., display rooms, delivery, repairs and maintenance, application aids, operator training, installation advice, warranty fulfillment) . In this sense, General Motors is probably more service intensive than manufacturing intensive. Without its services, its sales would shrivel”
3. Hybrid - The offering consists of equal parts of goods and services. For example, people patronize restaurants for both food and service.
4. Major Service with accompanying minor goods and services - The offering consists of a major service along with additional services or supporting goods. For example, airline passengers buy transportation. The trip includes some tangibles, such as food and drinks, a ticket stub, and an airline magazine. The service requires a capital-intensive good -- an airplane -- for its realization, but the primary item is a service.
5. Pure service - The offering consists primarily of a service. Examples include baby-sitting, psychotherapy, and massage.
Because of this varying goods-to-service mix, it is difficult to generalize about services without further distinctions. Here are some additional distinctions that can be helpful:
· Services vary as to whether they are equipment-based (automated car washes, Vending machines) or people-based (wisdom washing, accounting services), People -based services vary by whether they are provided by unskilled, skilled, or professional workers.
· Service companies can choose among different processes to deliver their services. Restaurants have developed such different formats as cafeteria-style, fast -food, buffet, candlelight service.
· Some services require the client's presence and some do not. Brain surgery involves the client’s presence, a car repair does not. If the client must be present, the service provider has to be considerate of his or her needs. Thus beauty salon operators will invest in decor, play background music, and engage in light conversation with the client.
· Services differ as to whether they meet a personal need (personal services) or a business need (business services). Service providers typically develop different marketing program for personal and business markets.
· Service providers differ in their objectives (profit or nonprofit) and ownership (private or public). These two characteristics, when crossed, produce four quite different types of organizations. The marketing programs of a private investor hospital will differ from those of a private charity hospital or a Veteran’s Administration hospitals.
The nature of the service mix also has implications for how consumers evaluate quality. For some services, customers cannot judge the technical quality even after they have received the service. Figure 13.1 shows various products and services according to difficulty of evaluation. At the left are goods high in search qualities -- that is, characteristics the buyer can evaluate before purchase. In the middle are goods and services high in experience qualities – characteristics the buyer can evaluate after purchase. At the right are goods and services high in credence qualities -- characteristics the buyer normally finds hard to evaluate even after consumption.
Figure 13.1: Continuum-of-Evaluation-for-Different-Types-of-Products
Because services are generally high in experience and credence qualities, there is more risk in purchase. This has several consequences. First, service consumers generally rely word of mouth rather than advertising. Second, they rely heavily on price, personnel, and physical cues to judge quality. Third, they are highly loyal to service providers who satisfy them. Fourth, because of the switching costs involved, much consumer inertia can exist. It can be challenging to entice a customer away from a competitor. Wachovia Bank’s slogan, “Let’s Started," was a call to action to new and existing customers alike.