PRESENTATION REPORT

OF
MARKETING
TOPIC: PRDUCT CHARACTERISTICS & CLASSIFICATION

SUBMITTED TO:
SIR. ZAHID ALI

SUBMITTED BY:
GHULAM YASEEN 03

UZAIR MEHMOOD 24

DILSHAD ARSHAD 31

ZEESHAN ALYAS 32

M.COM 2nd (MORNING)

SESSION 2010-2012

DEPARTMENT OF COMMERCE
 CONTENTS
What is product?

What is service?

Product levels: customer value hierarchy

 Core benefit
 Basic product
 Expected product
 Augmented product
 Potential product

Product classification:

 Degree of tangibility
 Nondurable goods
 Durable goods
 Services
 Type of user
 Consumer goods
 Convenience goods
 Staples
 Impulse goods
 Emergency goods
 Shopping goods
 Homogeneous shopping goods
 Heterogeneous shopping goods
 Specialty goods
 Unsought goods
 Industrial goods
 Installations
 Accessory equipment
 Component parts and materials
 Raw materials
 Supplies
 Business services
What is product?
A narrow definition of word product focuses on the physical or functional characteristics
of a good or services. For example, a VCR is a regular container of metal and plastic connected
via wires to a television set with equipment for recording and replaying video signals on special
tapes. But the purchase has much broader view of the VCR. Some buyers may want is so they
can soap operas they recorded during their work hours; others may be interested in recording
home movies from camcorders for viewing later; still others may want to rent movies for home
reviewing.

Markets must acknowledge this broader conception of product; they must realize that
people by want satisfaction rather than objects. For example, most buyers know little about the
gasoline they buy. In fact many view it not as a product but as price they must pay for r the
privilege of driving their cars.

A broader view of product extends beyond physical or functional attributes. This total
production concept includes package design and labeling, symbols such as trademarks and brand
names, warranties , and customer-service activates that add value for the customer.
Consequently, a product is a bundle of physical, service and symbolic attributes designed to
enhance a customer’s want satisfaction.

What is service?
The term service covers a wide range of product. A general definition identifies service
as intangible tasks that needs of consumer and business users. Most service providers cannot
transport or store their producers; customers simultaneously buy and consume these product.

One way to distinguish service from goods employs a product spectrum, or a good
service continuum. This device helps marketers to visualize the difference and similarities
between goods and services. A car is a pure good, but the dealer may also offer repair and
maintenance services or includes the services in a price of the lease. Movie theaters provide pure
services, but they also sell goods such as soft drinks and popcorn. The car falls at the pure –good
extreme of the continuum because the customer values the repair service less than the car itself,
just as movie patrons consider refreshment less important than the entertainment that the theater
provides. In the middle range of the continuum, dinner at the exclusive restaurant has equally
important good and services components. Customer derives satisfaction not only from the food
and beverages but also from services rendered by the establishment’s staff.
 The discussion so far hints at a diverse market for services .This diversity which
exceeds the diversity of the goods market, results from several characteristics that distinguish
services from goods;

1- Services are intangible. Unlike goods, they lack physical features that buyers can
see, hear smell, taste or touch prior to purchase. Service firms essential ask their
customers to buy a promise.
2- Service is inseparable from the service providers. Customer perceptions of a
service provider become their perceptions of the service itself.
3- Services are perishable .Provider cannot maintain inventories of their services.
During times of peak demand, prices may rise, only to fall drastically when
demanded declines. For instance, hotels often raise room during special events
and lover them to normal levels after the end of the events.
4- Companies cannot easily standardize services. For example, Atlanta-based
concierge service 2 Places are 1 Time assists busy clients by handling a variety of
variety of errands. These tasks range from the standard—picking up dry cleaning
—to the specialized-timely delivery of chilled fertility injections from doctors
offices to patience at their jobs.
5- Byers often play roles in the development and distribution of services. Services
transactions frequently require interaction between buyer and seller at the
production and distribution stages. For instance, a hair stylus’s customer may
describe the desired look and make suggestions before, during and after the
styling process.
6- Service quality shows wide variations. Posh Le Cirque in New York and your
local pizza Hut are both restaurants. Their customers, however, experience
considerably different cuisine, physical surroundings, and services standard and
pricing.

Keep in mind that sometimes a product blurs the distinction between services and goods
as when a service provides a good. Consider the retail sector, for example. While all retailers
provide services, a further distinction divides them into services retailer and goods retailers.

Product levels: the customer-value hierarchy

In planning its market offering the marketer needs to address five product levels. 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 must 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.
 At the fourth level, the marketer prepares an augmented product that exceeds
customer expectations. In developed countries, brand positioning and competition
take place at this level. In developing and emerging markets such as India and
Brazil, however, competition takes place mostly at the expected product level.
 At the fifth level stands the potential product, which encompasses all the
possible augmentations and transformations the product or offering might
undergo in the future. Here is where companies search for new ways to satisfy
customers and distinguish their offering.

Product classification
Both the federal government and companies classify products, but for different purposes.
The government’s classification method helps it collect information on industrial activity.
Companies classify products to help develop similar marketing strategies for the wide range of
products offered. Two major ways to classify products are by type of user and degree of product
tangibility.

Degree of tangibility:
Marketers classify products into three groups according to durability and tangibility:

Nondurable goods are tangible goods normally consumed in one or a few uses, such as
soft drinks and soap. Because these goods are 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.
 Durable goods 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.

Services 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.

Consumer goods:
We classify the vast array of goods consumers buy on the basis of shopping habits. We
distinguish among convenience, shopping, specialty, and unsought goods.

Convenience goods:
A tangible product that the consumer feels comfortable purchasing without gathering
additional information and then actually buys with a minimum of effort is termed a convenience
good. Examples include soft drinks, soaps, and newspapers. Convenience goods can be further
divided:

 Staples are goods consumers purchase on a regular basis. A buyer might routinely
purchase Colgate toothpaste, Mysore sandalwood, toilet soap, and Britannia
marry biscuits.
 Impulse goods are purchased without any planning or search effort. Chocolates,
candy bars, and potato chips are impulse goods.
 Emergency goods are purchased when a need is urgent- umbrellas and rain coats
with the advent of monsoons, pullovers, sweaters, and shawls with the advent of
winter. Consumers are likely to experience an urge or compelling need to make a
purchase.

Shopping goods:
A tangible product for which a consumer wants to compare quality, price, and perhaps
style in several stores before making a purchase is considered shopping goods. Examples include
furniture, clothing, used cars, and major appliances. We further divide this category:

 Homogenous shopping goods are similar in quality but different enough in price
to justify shopping comparisons.
 Heterogeneous shopping goods differ in product features and services that may
be more important than price. The seller of heterogeneous shopping goods carries
 U
.H
fk
V
)l(N
:b
d
y
g
w
T
L
IA
E
P
rh
a
C
S
D
O
G
n
p
q
e
m
o
it,c
su
'&
Y
a wide assortment to satisfy individual tastes and must have well-trained
salespeople to inform and advise customers.

Specialty goods:
A tangible product for which a consumer has a strong brand preference and is willing to
expend substantial time and effort in locating the desired brand is called a specialty good.
Examples include card, stereo components, photographic equipment, and men’s suits. A
Mercedes is a specialty good because interested buyers will travel far to buy one. Specialty
goods don’t require comparisons; buyers invest tome only to reach dealers carrying the wanted
products. Dealers don’t need convenient locations, although they must let prospective buyers
know their locations.

Unsought goods:
Unsought goods are those the consumer does not know about or does not normally think
of buying, such as smoke detectors. The classic examples of known but unsought goods require
advertising and personal-selling support.

Types of business products

Classification of consumer products

 Business buyers are professional’s customers; their job duties require rational,
cost-effective purchase decisions. For instance, General Mills applies much of the same purchase
decision process to buy flour that Pillsbury does.

The classification system for the business products emphasizes products uses rather than
the customer buying behavior. Business products generally fall into one of six categories for
products uses: installations, accessory equipment, component parts and materials, raw materials,
supplies, and business services.

Installations:
The specialty products of the business market are called installations. This includes major
capital investments for new factories and heavy machinery and for telecommunications systems.

Since installations last for long periods of time and their purchase involve large sums of
money, they represent major decisions for organizations. Price typically does not dominate
purchasers. Effective operations may also require considerable training of the buyers workforce
along with significant after-sale services. As a result marketers of these systems typically
emphasize highly trained sales representatives, often with technical backgrounds.

Most installations are marketed directly from manufacturers to users. Even a one
time scale may require continuing contracts for regular products servicing. Some manufacturers
prefer to lease extremely expensive installations to customers rather than selling the items
outright and assign personnel directly to the lessee’s sites to operate or maintain the equipment.

Accessory Equipment
Only a few decision makers may participate in purchases of accessory equipment
capital items that typically cost less and last for shorter than installations

Although quality and service exert important influences on purchases of accessory

equipment, price mat significantly affect these decisions accessory equipment includes products
such as hand tools portable drills small lashes and laptop computers although these product are
considered capital investments and buyers depreciate their cost over several year< their useful
lives generally are much shorter than those of installations. Advertising an important component
in the marketing mixes for accessory equipment.

Component parts and materials

Whereas business buyers use installations and accessory equipment in the process of
producing their own final products component parts and materials represents finished business
products of one producer that actually became part of the final; products of another producer.
Spark plugs complete new Chevrolets: Harley Davidson motorcycles carry batteries buyer’s
receiver tires with their Dodge pickup trucks. Some fabricate materials such as flour undergoes
further processing before becoming part of finished products. Textiles paper pulp and chemicals
are also example of component parts and materials.

Purchasers of component parts and material need regular, continuous supplies of uniform
quality product. They generally contract to purchase this item for set period of time. Marketers
commonly emphasize direct sales and satisfactory customers often become regular buyer.
Wholesalers sometime supply fill in purchases and handle sales to smaller purchases.

Raw materials:
Farm products, such as beef, eggs, milk, poultry, and soybeans, and natural products such
as coal, copper, iron ore, and lumber, constitute raw materials. These products resemble
component parts and materials in that they actually become part of the buyer’s final products.

Most raw materials carry grades determined according to set criteria, assuring purchases
of the receipt of standardized products of uniform quality. As with components parts and
material, vendors commonly market raw materials directly to buying organizations, typically
according contractual terms. Wholesalers are increasingly involved in purchasing raw materials
from foreign suppliers.

Price is seldom a deciding factor in a raw material purchases since terms set at central
markets, determining virtually identical exchanges among competing suppliers. Purchasers buy
raw materials from the firms they consider best able to deliver the required quantities and
qualities.

Suppliers:
If installation represents the specialty products of the business markets, operating
suppliers are its convenience products. Suppliers constitute the regular expenses that the firms
incur in its daily operations. These expenses do not become part of the buyer’s final products.

Suppliers are sometimes called MRO items because they fall into three
categories;

1- Maintenance items; such as brooms, filters, and light bulbs.

2- Repair items; such as nuts and bolts used in repairing equipments.
3- Operating supplies; such as fax paper, Post-it notes and pencils.

A purchasing manager regularly purchases supplies as a routine job duty. Wholesalers

often facilitate sales of supplies due to low unit price, the small order size and the large number
of potential buyers. Exchanges of product regularly demand simple telephone or EDI orders or
regular purchases from a sales representing of the local wholesalers.

Business services:
P
0
4
3
z
(v
U
)O
g
M
R
E
y
r
A
x
fX
N
h
,B
b
k
c
o
S
m
p
q
w
la
trie
s
u
d
In
-
&
The business services category include the tangible products that firms buy to facilitate
their production and operating processes. Examples of the business services are financial
services, leasing, and rental services that supply equipment and vehicles, insurance, legal
services and consulting. Much service provides sell the same services telephone, gas, and
electric, for example to both consumer and organizational buyers, although services firms may
maintain separate marketing groups for the two consumer segments.

Organization also purchases many adjust services that assist their operations but are not
essentially a part of the final product. Anderson Consulting, for example, provides consulting
services to help business improve the efficiency of their management, finance and technology
programs.

Price often strongly influence purchase decisions for the business services.

They buying firm must decide whether to purchase a service or provide that service
internally. For example, a firm may purchase the services of a public relations agency rather than
assume the costs of maintaining an in-house public relations department. This decision may
depend on how frequently the firm needs the services and the specialized knowledge required to
provide it.

Classification of business products

 FACTOR INTALLATIONS ACCESSORY CONPONENT RAW SUPPLIES BUSINESS
EQUIPMENT PARTS AND MATERIALS SERVICES
MATERIALS
Organizational Factors
Planning time Extensive Less extensive Less extensive Varies Very little varies
Purchase frequency Infrequent More frequent Frequent Infrequent Frequent varies
Comparison of price and Quality very Quality and price Quality Quality Price varies
quality important very important important important important
Marketing mix Factors
Price High Relatively high Low to high Low to high Low varies
Promotion method Personal selling Advertising Personal selling Personal Advertising varies
by producer selling by producer
Distribution channel length Very short Relatively short short short long varies
Marketing impact of business product classification system