MARKETING MANAGEMENT: A

SOUTH AFRICAN PERSPECTIVE

4th EDITION

MC CANT & CH VAN HEERDEN (EDITORS)

M MAKHITHA (CONSULTING EDITIOR)

INSPIRING
POSSIBILITIES
TOGETHER
 CHAPTER 6

Product decisions

MARKETING MANAGEMENT: A SOUTH AFRICAN PERSPECTIVE 2

INSPIRING POSSIBILITIES 4th EDITION

TOGETHER
Learning objectives
After studying this chapter, you should be able to:
• Discuss and explain fundamental product concepts
• Discuss classification of products based on different criteria
• Explain different product line and product mix decisions
• Discuss and illustrate brand and packaging decisions
• Explain what is meant by product support services
• Identify different types of new products
• Describe the new product development process
• Describe the consumer adoption process and the different categories
of adopters
• Describe the characteristics of the different phases of the product
lifecycle
• Describe the integrated marketing strategies that can be adopted
during each phase of the product lifecycle
What is a product?
• A product is a physical good or service which is obtained by the
consumer and which has the aim of satisfying the needs of the
consumer as a result of the product’s direct use, with additional
factors, services and perceptions of the product such as being
useful, desirable or convenient.’
• A product includes everything that a customer receives in an
exchange.
• There are four distinct layers to a product.
• These are the core product, the tangible (actual) product, the
augmented product and the potential product.
 Core product:
• The first layer of the product is the core product.
• This is the dominant benefit that a customer expects when
purchasing a product or service and represents the heart of the
product, the main reason for its existence and purchase.
• It is the essential benefit or need satisfaction that the consumer
expects to obtain from the product.
Tangible product:
• The second layer of the product, the tangible product (also called the
actual, physical or formal product) is the physical object (product) or
service offered to the consumers.
• A tangible product is the manner in which the core product is
converted into something ‘real’ for the customer, in terms of how
the customer can interact with it, including the design, quality,
branding and product features.
Augmented product:
• The third layer of a product is the augmented product, that is, a
product that has both the primary physical attributes and the non-
physical attributes that add to the product’s value.
• Non-physical attributes may include product guarantees, installation,
additional services, compilation and delivery of the product, and so
forth.
Potential product:
• The next layer, the potential product, includes all potentially viable
components to be added to the product in terms of development
and adjustments.
• In essence, the potential product reflects high levels of added value
and is so different that it is better protected against competitors and
substitutes.
Product image:
• The last layer of the product concept is the product image
which encompasses all the previous layers and relates to how
the product is perceived by consumers.
Classifying products
• Products vary greatly in terms of price, complexity, importance
and frequency of purchase.
• Differences in product characteristics cause both consumers
and business customers to behave differently when making the
purchase, in terms of how much time they spend making the
decision, how long they spend searching for information, what
attributes are important to them, and so on.
• By classifying products according to certain criteria, marketers
take decisions that are more closely attuned to specific
customer needs and wants or that can even change
preconceived ideas that customers may have about certain
products.
Tangible physical characteristics:
• Products may, first of all, be classified by the extent to which
they represent tangible physical characteristics.
• Consumer products can be classified as durable or non-
durable, depending on how long the product will normally last.
Durable products:
• The most tangible product offerings, durable products, are
consumer products that are used or consumed over a long
period of time, usually over at least three years.
Non-durable products:
• Non-durable products are used or consumed over a short
period of time, or after one or a few uses.
Services:
• Services are intangible and thus do not have a tangible nature.
 Consumer products
• Consumer products are those products bought by individual
consumers for their personal or family use.
• Marketers in the consumer sector find it useful to classify
products and services by the amount of time, money and risk
involved in the purchase decision.
 Consumer products are commonly categorised into three
categories:
– Convenience products
– Shopping products
– Specialty products
Product classification contd.
Convenience products:
• Items that consumers purchase on a regular basis, which are
inexpensive and do not require much thought and effort for
the buying process.
• For example, bread, milk, cool drinks and taking a taxi are all
convenience products that are purchased without much effort
or comparison.
• Convenience products may be further classified as:
– Staple products: bought on a regular basis and include products
such as milk, bread, toothpaste and petrol.
– Impulse products: bought without much preplanning and effort.
– Emergency products: purchased when there is an immediate
and urgent need for a product that will help in the current,
possibly desperate, situation.
Shopping products:
• Usually more expensive than convenience products and are
not as widely distributed as convenience products.
• Shopping products are usually those products the customer is
prepared to go to a little more effort to purchase and will
compare prices and brands before making a final decision.
Specialty products:
• Products that consumers want for their personal satisfaction.
• They have unique characteristics so the consumer is willing to
go the extra mile to obtain the product.
• Specialty products are often branded products that serve as a
symbol of the consumer’s self-image.
Industrial products
• Sales to organisations account for much more than sales to
final consumers.
• This means that industrial products represent more sales in
our economy than consumer goods.
• Industrial products are those products or services that are
purchased for the purpose of producing of other products or
services, in the operation of an organisation or to be sold to
the end user.
• Industrial products can be classified in three ways: as
production goods, as installations and accessories, and as
supplies and services, as reflected in Figure 6.3.
Product classification contd.
Production goods:
• Production goods are products used to manufacture a final
product.
• They enter the manufacturer’s product completely, either
through further processing or as components.
• They fall into two classes:
– Raw materials (farm products & natural products)
– Manufactured materials and parts (component materials &
component parts)
Installations and accessories:
• Installations and accessories are industrial products that support the
manufacturing process.
• Installations consist of buildings and fixed equipment.
• Accessories include portable factory equipment and tools and office
equipment.
Supplies and services:
• Supplies and services are products that support the manufacturing
process but are not part of it – they do not enter the finished
product at all.
• Supplies include operating supplies and maintenance and repair
items.
• Business services include maintenance and repair services and
business advisory services
Product line decisions

• Product line is a group of products that are closely related

because they function in a similar manner, are sold to the
same customer groups, are marketed through the same types
of outlets, or fall within given price ranges.
• The length of the product line can be increased by stretching
the line.
• Product line stretching occurs when a company lengthens its
product line beyond its current range, by trading down, trading
up or trading both ways.
Trading down:
• The company may add a low-end product to plug a market
hole that would otherwise attract a new competitor, or it may
be attacked at the high end and respond by invading the low
end.
Trading up:
• Companies at the lower end of the market may want to enter
the higher end.
Trading both ways:
• Companies may decide to stretch their lines in both directions.
Product mix decisions
• Product mix refers to the number of products carried by a firm at a
given time is called a product mix.
• A company’s product mix can be described as having a certain breadth,
depth and consistency.
Breadth:
• The breadth of the product mix refers to the number of product lines a
company offers
Depth:
• Product depth refers to the number of items in a product line and the
variations thereof.
Consistency:
• The consistency of the product mix refers to how closely related the
various product lines are .
Meaning of brands
• Consumers view a brand as an important part of the product,
and branding can add value to the product.
• A brand is the promise that the organisation makes to the
customer by indicating what the customer can expect from the
organisation’s product and by differentiating the product from
that of the competition.
• The brand achieves the promise, expectations and
differentiation by means of a name, term, design, symbol or
any other feature that identifies your product as different from
those of the competitors.
Benefits of branding:
• Branding carries benefits for all parties involved in the
exchange process and, in theory at least, makes it easier to buy
or sell products.
Branding from the consumer’s perspective:
• It facilitates product identification.
• It communicates features and benefits.
• It helps product evaluation.
• It reduces risk in purchasing.
• It creates interest and character for the product image.
Branding from the manufacturer’s perspective:
• It helps create brand loyalty.
• It creates differential advantage.
• It allows premium pricing.
• It facilitates product diversification in certain respects.
Branding from the retailer’s perspective:
• The retailer also benefits from branding to a certain extent; the
retailer often does not want the consumer to be too brand
loyal.
• Branded products are well supported by advertising and other
marketing activities, and so the retailer has some assurance
that they will sell.
Types of brands

Manufacturer versus private brands:

• Manufacturer brands: designated, owned and used by the
manufacturer or producer.
• Private brands: designated, owned and used by a wholesaler or
retailer.
Generic brands:
• Generic brands: a non-branded product that is identified only
by its product category.
Individual brands, family brands and company names:
• Marketers preferring national brands have at least three
branding options, namely, individual brands, family brands or
company names with a brand.
– Individual brands: a separate brand assigned to an individual
product item within a product line. e.g. SABMiller has various
brands to its product line/beers, Castle lager, Carling black label,
etc.
– Family brand: this brand is assigned to an entire line or mix of
product items.
– Company name with brand: some manufacturers want to use
their company names along with an individual brand name for
each product. Adds the firm’s reputation to the product. e.g.
Kellogs cornflakes, ellogs all bran, Kellogs raisin bran,etc.
Brand extension:
• Using the leverage of a well-known brand name in one
category to launch a new product in a different category.
• Any effort to use a successful brand name to launch new
modified products.
Brand equity:
• The worth of the brand in terms of value and strength.
• Brand equity exists as a function of consumer choice in the
marketplace.
Selecting a brand name:
• Position the brand name strongly in the mind of the consumer.
• Don’t be too generic or too limiting.
• They should be as short as possible.
• The names must not have negative connotations in any language.
• They must be easy to pronounce.
• Ensure the name is available.
• Ensure that you are able to register the brand name as a domain
name.
• The name must tell something about the product’s benefits.
• It must be original and distinctive.
• It must translate into foreign languages if it is possible that it will be
marketed internationally.
Packaging
• Packaging is those activities in the product decision which pertain to the
design, manufacturing and filling of the container or wrapper with the
product item, in such a way that the product item can be protected,
sorted, handled, transported and identified effectively, and marketed
successfully’.
• The primary function of packaging is to protect the product, other
functions include:
– Protective function.
– Storage function
– Loading and transport function
– Sales function
– Promotional function
– Service function
– Guarantee function
– Reusability function
Types of packaging:
• Family or individual packaging
• Speciality packaging
• Reusable or collectable packaging
• Multiple packaging
• Kaleidoscopic packaging
• Labelling
Product support services
• Customer service:
– The assistance provided to help a customer with the purchase or
use of a product – a service that augments the actual product.
– Customer service, a major component of relationship marketing,
applies to both products and services.
New product development
• Product development refers to the process of developing a
product, from the design and creation stages right up to the
marketing of new products and the final stage of introducing
the product to the market.
Types of new products:
• New-to-the-world products
• New-to-the-marketer products
• Line extensions
• Repositioned products
• Improved products
The process of developing new products
• The new product development process:
– Step 1: Idea generation
• Customers
• Competitors
• Employees and R&D staff
• Top management
– Step 2: Idea screening
• Screening methods
• Mistakes during product screening
– Step 3: Concept testing
– Step 4: Business analysis
– Step 5: Product development
• Functional tests
• Consumer testing
– Step 6: Test marketing
• When to use test marketing
– Step 7: Commercialisation
• The immediate national launch
• A rolling launch
– Step 8: Review of market performance
• Review product in the market
• Repeat sales is an indication of adoption
The consumer adoption process
• Any innovation takes some time to spread through the
marketplace.
• Marketers must consider those factors that influence the
adoption process and try to understand them in order to make
the introduction of new products or services more effective.
• Refers to the mental processes through which an individual
moves from first hearing about an innovation through to final
adoption.
Differences in people’s readiness to try a new product:
• The different categories:
– Innovators, who are venturesome and willing to try new ideas at
some risk (2.5 per cent of the population).
– Early adopters, who are guided by respect, are opinion leaders in
their communities, and who adopt new ideas early but carefully
(13.5 per cent of the population).
– Early majority, who are very deliberate and adopt new ideas
before the average person, though they are rarely the leaders (34
per cent of the population).
– Late majority, who tend to be skeptical and adopt an innovation
only after the majority of people have tried it (34 per cent of the
population).
– Laggards, who are tradition bound, suspicious of change and
adopt an innovation only when it takes on a measure of tradition
itself (16 per cent of the population).
Consumer product lifecycle
• A product lifecycle plots the volume or value of sales of a
product from its launch to its decline and withdrawal.
• There are only four phases namely:
– The introductory phase: when a new product is offered on the
market for the first time
– The growth phase: during which product sales gradually increase
– The maturity phase: when product sales reach their peak
– The declining phase: when stagnation and decreasing sales
unavoidably set in
Integrated marketing strategy for different
product lifecycle phases
• Marketing strategy refers to marketing management’s (and
thus the entire business’s) plan to achieve specific objectives.
• The main objective is to maximise profit in the long term.
• The plan consists of a set of tactical actions, which are
integrated as a unit and are in line with the main objective.