Group III Kristel Alvarez Gladys Perez Angelo Torres Nataniel Umandap

Situation
Imagine that there are no X-ray machines on airports. You are travelling to several destinations and you have to open all your luggage in every transit point. Wouldnt

you feel irritated in having to continuously open and repack your bags? Wouldnt you feel embarrassed that everybody near you can see the type and color of the underwear that you have? And wouldnt you feel impatient having to fall in long line to wait for your turn in the inspection of your baggage?

An X-ray machine, like any good product, exists to satisfy the needs and wants of the target market. It is very important for marketers to ask two fundamental product strategy questions:
Who are my target market (or target

customers)? What are their needs and wants?

In our X-Ray example, the needs and wants are varied to different users. Passengers will save time to enjoy a more pleasant trip. Prospective travelers would not have negative impressions associated with travelling. The airport, on the other hand would not have negative impressions associated with travelling. The airport or airlines, on the other hand, will be more assured of the safety of their passengers as well as their assets.

The X-ray machine is a classic example of good product serving genuine needs and wants of customers. A product on the other hand, developed using trial and error without a specific market in mind will spell disaster for a company in any highly competitive marketplace. If a product does not move in the marketplace, it is a nuisance product, which means it may not be providing the benefits desired by the target market.

Consumption
Single/Few Users Many Users

Tangible Tangibility
Intangible

Non-Durable Service

Durable

Types of Product According to Consumption and Tangibility

Examples of Non-Durable Products

Products whose repeat purchases are usually strong
Detergents like Sunlight and SuperWheel Ice cream like Magnolia and Selecta

Audio/video cassette tapes like Sony, TDK

and Maxell.

Examples of Durables
Products that have long intervals of repeat purchases
Floor polishers like Wilson and GE

Cars like Toyota or Nissan

Television sets like Sony and Goldstar

Examples of Services
Essentially intangible because there are no physical products involved. Services do not result in the ownership of anything.
Auto service center with the likes of

Ambassador Inmogo or Zafra Motors Haircut services like beauty parlors of Ricky Reyes and James Cooper

Professors Murphy and Enis (1986)

Proposed that since customer

satisfaction is evaluated in terms of benefits expected minus costs incurred, these costs should be conceptualized on two independent dimensions where product can further be distinguished - effort and risk.

Effort
Amount of money, time and energy the buyer is

willing to spend to purchase a product. It is an objective measure of the value of the consumer places on the product.

Since there is an expectation of the future value, there is also risk that the product will not deliver the benefits sought.

Risk
The buyers subjective feeling about

the consequences purchasing mistake

of

making

The end result is a four category classification of product:

Convenience Products Preference Products

Shopping Products
Specialty Products

Melvin Copeland
First

classified product categories into convenience, shopping and specialty goods

Morris Holbrook & John Howard

Proposed the fourth category preference

goods in recognition of the impact of advertising in influencing consumer attitude in their 1977 article Frequently Purchased NonDurable Goods and Services

Four Types of Products according to customers effort and risk

Risk

Specialty

Shopping

Preference

Convenience

Low

Effort

Convenience Products
Lowest risk, lowest effort products. Consumers will not spend a lot of time and money in buying these products. They do not also perceive high levels of risk. Can also be divided into:
1. Staple Goods rice, sugar and other commodities 2. Impulse Goods candies and junk foods where either none or very small decision making is made by consumers to buy the

product.

Since there is no buyer loyalty involved, and prices are mostly stagnant because of no perceived product differentiation, marketers can either try to upgrade their product into preference products or follow Harvard professor Michael Porters Low-Cost strategy by being the lowest cost-highest volume. It is important not only to have complete distribution saturation for convenience products but also to place utility which plays an important role in consumer buying behavior.

The distinction between convenience products and preference products is mainly the perceived risk by the consumer. Branding and advertising efforts are usually responsible for this perception which aims to build brand loyalty. The strategy of preference goods is that marketers involved acknowledge the risk of consumers when buying the product, and then assure the buyer that the risk can be minimized by buying their particular brand.

Shopping Products
Products which consumers feel are worth the

time and effort to compare with other competing products. Examples are automobiles and appliances which require some form of comparison with alternatives. Examples of consumer services under shopping products are insurance and housing rental while an example of Industrial shopping services is the accounting audit services offered by companies like SGV and Carlos J. Valdez.

 Decision making for shopping products may

either be rational (quality, warranty, etc) or emotional (colors, design) depending on the specific product. Marketers have more alternatives in formulating their strategy as the higher price normally expected of shopping products afford them to come up with more features, or more models.

Specialty Products
Are unique, customized products which have

their own riches and at times are without any substitutes since they are what consumers really want and are willing to make a special purchasing effort to acquire such. They command the highest level of effort and risk in buying and therefore, specialty products suppliers command an almost loyalty from their buyers.

 The distinction between shopping products and

specialty products is on the basis of effort. Marketers can therefore consciously move their shopping products into specialty products with the consumer no longer willing to shop alternatives but will accept only one brand or supplier. Examples of specialty products are vintage cars and paintings by well known painters like Cesar Legaspi and Fernando Amorsolo. Specialty services may be those offered by noted research-based marketing consultant Dr. Eduardo Roberto of the Asian Institute of Management.

 Exceptions

exist in categorizing products according to effort and risk. For instance, a billionaire may not perceive products as specialty because of his unique financial standing. In terms of levels of product, there are actually different components that make up a product that will be shown in the figure on the next slide.

3 Levels of Product
Core
Augmented

Formal

Formal Product Augmented Product

Core Product
productivity computers
Physical or tangible product such as a computer extra built-in to the formal product such as

warranty, service, delivery, installation, training, etc.

Generic benefit that each product gives such as

improvement

in

the

case

of

 It

is important that marketers realize the benefits desired or the purchase decision criteria of their customers as customers do not buy products but the benefits of these products. For instance, pharmaceutical companies must pass the purchase criteria requirements of the therapeutic committee of hospitals and industrial clinics to be included in their Formulary, a list of therapeutic products officially authorized and endorsed to be bought and carried by their pharmacies. Products included in the formulary have the built-in advantage versus competition as doctors will prescribe these medicines carried in their hospital pharmacies to their in-patients.

Customer-Oriented Product Framework

Companys Differentiation Low
Customer Purchase Decision Criteria

High
Maintain Possible Overkill

High Low

Improve or Change Gear Low Priority

Change Gear
Is a salesmanship technique that highlights the

major capabilities of a product and dwarfs the lesser differentiated features in the hope that the customer may be convinced of the advantages of its major capabilities. Trade-off decision between a customer need for high quality at low price is an example. Change Gear is also used to sue for time in case developing more features is possible in the short term to meet the customer decision criteria.

Under our customer oriented product framework, emphasis must be given on the benefits desired by different market segments. For instance, the feeling of macho or being co-equal with men may be the main benefit sought by the woman segment of beer drinkers. Social acceptance, on the other hand, would be the main benefit for the blue collar workers. The yuppies may drink beer because they simple want to feel good and have a good time.

Emphasis must also be given in meeting the changing customer purchase decision criteria over time to ensure that the companys products will not become obsolete. This call for constant product innovation and business development as pre-requisites for continuous growth in sales, market shares and profit. To be able to build sustainable businesses, products developed must match customer purchase decision criteria (also called needs and wants) at all time. This gives rise to two methods of satisfying customer needs and wants.

1. Problem Solving Method

This method identifies an actual or existing need

and want of a customer. A key question to ask is: What problems or needs can our product solve?

2. Creating Dissatisfaction Method

This method introduces new ways of doing

things to the customers by converting customers existing satisfaction level to a dissatisfaction level. A key question to ask is Could our product enable customers to do what they could do or could not do ass well?. This method enables the firm to take advantage of their unique capabilities and resources in addressing unclear explicit needs of customers.

Under any of the two methods on the previous slides, marketers must always consider the costeffective options of the customers in satisfying the needs and wants or in solving their problems.

The marketing training specialist, Mansmith and Fielders, Inc., has adopted two product philosophies. As discussed in Chapter 1, regarding marketing mix, a product can either be superior, at parity with, or inferior to those of competition. Take for instance the canned corned beef market. Swifts launched their all-lean corned beef in the early part of 1992, as a superior product versus competition. This regular corned beef competes with Purefoods, while both the secondary brand of Swifts and Purefoods Rica and Gusto respectively, are their low cost versions for the price conscious market. Yet, between Rica and Gusto brands, they are considered parity brands in the low-priced segment of the market.

Product Philosophy No. 1

No relevant product advantage from competition must be allowed to exist

Note the word relevant as the product may have certain advantages but these advantages may not be meaningful, it should satisfy the following crieria: 1. A real consumer need exist 2. The product offers unique benefit 3. The product actually delivers the benefit.

To stop competition from gaining product advantage, let us look at our Swifts All-lean corned beef example. As the marketer for Purefoods, efforts should immediately be taken to counteract the advertised new all-lean corned beef product of Swifts to prevent the figure-conscious segment of the corned beef market from shifting. By counteracting, it is not necessary, though possible, for Purefoods to also come up with their own version of the all-lean corned beef as there are other factors in the marketing mix such as promotions, price and placement which can be used to neutralize the new product introduction by Swifts.

Some of the many defensive alternatives which can be adopted individually or in combination with other alternatives by the marketer of Purefoods are: Product match product by launching a similar version; or even reverse strategy to one of offense instead of defense thru introducing additional features such as an easy to pull tab cans at the same price. Price decrease retail price of regular corned beef to discourage trial of Swifts new All-lean corned beef

 Promotions -

offer free gift for every can of Purefoods regular corned beef purchase in the retail level Placement improve and increase display by renting island displays at class A supermarkets reinforced with more attractive point-ofpurchase shelf takers and price tags. The adoption of any move or combination of moves will at least decrease motivation of consumers to buy Swifts All-lean corned beef as consumer purchase decision will depend on such variables as the companys marketing mix, competition marketing mix and the consumer background and previous experience as previously discussed

Product Philosophy No. 2

A product advantage should be converted into a market advantage

This can be realized if the following criteria are met: 1. Target customers must be aware of the existence of unique benefits 2. Target customers must be convinced of the merit of its owner.

Assume Swifts launched its All-lean corned beef but did not do any effort in informing its target customers of its existence except shelf displays in the supermarkets. No amount of display alone will create mass awareness as consumers may either not visit his favorite supermarket regularly or overlook the particular display, especially when some major supermarkets carry more than 20,000 items at any one time and the consumer exposure may be limited to some 100 items out of the 20,000 items. Therefore, when consumers are not aware of product existence, they obviously can not buy what they are not aware of.

Chances that your product may not be seen in the supermarket

Display

Exposure

Suppose that consumers are aware of the product, is convinced of the benefit, but is not convinced of its offer as one of the marketing mix such as price is not affordable, specially in a downtrend economy, then, the consumer will still not buy the product and the product will not take off. The bottom line is this: a product can only become a market advantage if consumers are aware and are patronizing the product regularly.

Profit Impact on Marketing Strategies (PIMS) studies have shown that companies with quality scores in the third top outlearn those in the bottom third by a 2-to-1 margin. PIMS co-author Robert Buzzell and Frederik Wiersema (Successful Share-Building Strategies, Harvard Business Review, Jan-Feb 1981) found that companies showing market share gains typically outperformed their competitors in three areas: new product activity, relative product quality and marketing expenditures, specifically:

Share-gaining companies typically developed

and added more new products to their line Companies that increased their product QUALITY relative to competitors enjoyed greater share gains than those quality ratings remained constant or declined. Companies that increased their marketing expenditures faster than the rate of market growth typically achieved share gains. Increases in salesforce expenditures were effective in producing share gains for industrial and consumer markets. Increased advertising expenditures produced share gains mainly for consumer-goods companies. Increased sales promotion expenditures were effective in producing share gains for all kinds of companies.

Companies that cut their prices more deeply

than their competitors did not achieve significant market share gains, contrary to expectation. Presumably enough rivals met the price cuts partly, and others offered other values to the buyers, so that buyers did not switch as much to the price cutter.

Quality therefore is an important competitive weapon that can result in increased market shares for the firm. In the Assembling Market Mix of chapter 3, we defined quality as conforming to customers specifications, measured through customer satisfaction and not self gratification. A product quality is evaluated as high or low depending on its relative excellence or superiority among products or services that are viewed as substitutes by the consumer.

It is critical to note that the specific set of products used for comparison depends on the consumers not the firms assessment of competing products. Quality can be achieved by delivering the right product, satisfying customer needs, meeting customer expectations and treating every customer with integrity, respect and courtesy.

Attributes that signal quality have often been divided into intrinsic and extrinsic cues (Olson and Jacoby 1972). Intrinsic cues involve the physical composition of the product such as flavor, color, and sweetness in an orange drink while extrinsic cues are product-related but not part of the physical product itself such as brand name, price, warranty, product form (fresh versus canned) and level of advertising. Extrinsic cues act as surrogate of intrinsic cues when intrinsic cues are not available at the point of purchase. Packaging could be an intrinsic cue if it is part of the composition of the product.

It could however be classified as an extrinsic cue if it is outside the product such as a protective corrugated box for a computer. Consumers normally would first use intrinsic cues to determine quality at the point of purchase or at the point of consumption. Magnolia Chocolait, for instance, highlighted their real chocolate bits at the bottom of their glass bottle and successfully taught consumers to shake the bottle before using. When intrinsic cues is not possible, consumers would depend on extrinsic cues such as in an initial automotive or haircut service situation.

Exhibit 4-6 presents the summary of a research paper entitled Quality and Customer Satisfaction delivered by a marketing professor Dr. Eduardo Roberto of Asian Institute of Management during the 23rd National Marketing Conference sponsored by the Philippine Marketing Association and held on May 5 to 7, 1992 at the Hotel Nikko Manila Garden. In his research paper, Dr. Roberto outlined ten learning lessons in a set of quality propositions. The author would like to present ten lessons as they are relevant, easy to understand and self explanatory.

Exhibit 4-6: Ten Learning Lessons about Quality and Customer Satisfaction
1. Before

a disappointing experience, consumers take a broad general concept of quality. It is stated almost like the statisticians null hypothesis In a quality product, nothing must go wrong. 2. It is when something goes wrong that consumers are able to go into the specific quality elements. 3. It is also when consumers are able to compare that they are able to say something about specific quality elements.

4. To the consumer, there is such a thing as the right amount of quality. More is not necessarily better. Neither is lesser. Just right is the right amount. 5. When consumers do go into the specific quality elements, they often need to be probed in order that their concept of quality becomes specific. 6. To the consumer, there is such a thing as the right kind of quality. Each kind defines a need segment that must be satisfied or if it is only partially satisfied.

7. It is the products unexpected quality that impresses the consumer the most. The more the quality characteristic is, the deeper the consumers favorable impression and satisfaction. 8. There is a certain kind of customer satisfaction that may be called a lower order because it results in at most a retrial. Once another product offers something a little better than what it provides, the consumer is ready to switch immediately.

9.There is a second kind of customer satisfaction that is longer lasting. It is a satisfaction that brings the consumer to a committed usage of the product. It results in consumer loyalty. 10. For the poor majority, the downscale consumers, the issue in targeting marketing perfection is not product quality. It is simply product. It is not quality of life that matters for them. What matters is simply life. Survival!.

A video tape of Dr. Robertos highly rated presentation is available for viewing at the Philippine Marketing Association headquarters at Hall 5, International Trade Center Building, corner Puyat Avenue and Roxas Boulevard, Pasay City, Metro Manila.