11.6 What Is a Product?
- What is a product, and how is it classified?
The goal of marketing research is to create products that are desired by the target market(s) chosen as strategic markets in line with the organization’s goals. In marketing, a product (a good, service, or idea), along with its perceived attributes and benefits, creates value for the customer. Attributes can be tangible or intangible. Among the tangible attributes are packaging and warranties as illustrated in Exhibit 11.5. Intangible attributes are symbolic, such as brand image. Intangible attributes can include things like image as well as the depth of the relationship between a service provider and a customer. People make decisions about which products to buy after considering both tangible and intangible attributes of a product. For example, when a consumer buys a pair of jeans, they consider price, brand, store image, and style before making the purchase. These factors are all part of the marketing mix.
Classifying Consumer Products
Consumers are really buying packages of benefits that deliver value, which always includes some tangible aspects and some intangible aspects. The person who flies with a regional airline is looking for a quick way to get from one city to another relatively close by (the benefit). Providing this benefit requires a tangible part of the product (the plane) and the intangible part of the service (accessibility, convenience, on-time arrival). A firm that purchases accounting services buys the benefit of having their taxes completed correctly (tangible benefit) and having the expertise of the accounting professional offering recommendation to reduce the firm's costs and taxes the following year (intangible benefit).
Marketers must know how consumers view the types of products their companies sell so that they can design the marketing mix to appeal to the selected target market. To help them define target markets, marketers have devised product categories. Products that are bought by the end user are called consumer products. They include personal care items, food, cars, clothing, furniture, and electronics. Purchasing habits differ significantly based on demographic factors such as generation and/or gender. For example, globally, women account for $40 trillion in spending on consumer goods. Women are the leading purchaser of health-related items such as vitamins and gym memberships, whereas men gravitate toward high-tech electronics and gadgets at a much greater rate than women. Consumer products that get used up—such as soaps and shampoos, snack items like chips and pretzels, or paper products like towels or tissues—are called consumer nondurables. Those that last for a long time, such as laundry machines, laptops, or furniture, are consumer durables.
Another way to classify consumer products is by the amount of effort consumers are willing to make to acquire them. The four major categories of consumer products are unsought products, convenience products, shopping products, and specialty products, as summarized in Table 11.4. Unsought products are products unplanned by the potential buyer or known products that the buyer does not actively seek.
Convenience products are relatively inexpensive items that require little shopping effort. Energy drinks, candy, snacks, and small hardware items are examples. Consumers buy them routinely without much planning. This does not mean that such products are unimportant or obscure. Many, in fact, are well known by their brand names—such as Celsius Energy drinks, Irish Spring deodorant, and 3M Command Strips.
In contrast to convenience products, shopping products are bought only after some deliberation and thought including comparing brands or prices. Examples are furniture, cars, vacation destinations, or even some high-end clothing items. Convenience products are bought with little planning, but shopping products may be purchased after months or even years of search and evaluation.
Specialty products are products for which consumers search long and hard and for which they refuse to accept substitutes. Custom-designed jewelery, high-end electronics, limited-release products, and five-star restaurants fall into this category. Because consumers are willing to spend much time and effort to find specialty products, distribution is often offered within a limited distribution network that could include online exclusive sales, or one or two sellers in a given region, such a Porsche dealer or a Prada store.
| Classification of Consumer Products by the Effort Expended to Buy Them | ||
|---|---|---|
| Consumer | Product Examples | Degree of Effort Expended by Consumer |
| Unsought products | Life insurance | Minimum effort |
| Burial plots | Some to considerable effort | |
| Specialized medical supplies | Some to considerable effort | |
| Convenience products | Soft drinks | Very little or minimum effort |
| Bread | Very little or minimum effort | |
| Milk | Very little or minimum effort | |
| Coffee | Very little or minimum effort | |
| Shopping products | Automobiles | Considerable effort |
| Homes | Considerable effort | |
| Vacations | Considerable effort | |
| Specialty products | Expensive jewelry | Maximum effort |
| Gourmet restaurants | Maximum effort | |
| Limited-production automobiles | Maximum effort | |
Customer Satisfaction and Quality
Ferrari Targets Successful Consumers
Kevin Crowder walked onto the famed Monza, Italy, race track, climbed into a Ferrari F2000 racer, and circled the course with a Grand Prix champion. Crowder, founding partner of Intelis Capital, who earned millions when he sold a software company he cofounded, isn’t himself a professional driver. He’s a customer of one of Ferrari’s marketing programs: the F-1 Clienti program, through which Ferrari maintains and preserves historic F1 cars. Then, it sells them for $1 million or more, along with the chance to drive them with a professional pit crew’s help.
Ferrari limits production to maintain exclusivity, delivering approximately 13,500–14,000 cars annually, with models starting around $240,000 and ranging well into the hundreds of thousands of dollars. Some customers purchase purpose-built Ferrari Challenge race cars and pay entry fees to compete against fellow owners at company-sponsored Ferrari Challenge racing events held worldwide. The F-1 Clienti program adds a super-premium service by giving people a chance to drive the same Ferraris used in Formula One, a premier global racing series with particularly strong followings in Europe, the Americas, and Asia.
The program gives customers “an experience they can’t get elsewhere,” says Ferrari regional executive (CEO/president of Ferrari Far East and Middle East) Dieter Knechtel. Mr. Knechtel says that the “brand experience is very much related to the ownership experience: It’s about driving and the experience of the car while doing it in a community of like-minded people. This is why, we organise track days and tours in Italy with road tours in different countries, we can organise almost any experience with the car—what we offer to our customers is often a ‘money can’t buy’ experience.”
- For Crowder, the Ferrari is a specialty good. What kind of product would it be for you? Why?
- Do you think that Ferrari has done a good job of building brand loyalty? Could another automaker do the same thing?
Sources: “Corse Clienti: Overview,” https://races.ferrari.com, accessed October 8, 2017; James Allen, “Ferrari’s F1 Clienti Is the World’s Ultimate Used Car Buying Program,” Car Buzz, https://www.carbuzz.com, accessed October 8, 2017; Jonathan Ho, “Ferrari Celebrates 70 Years,” Luxuo, https://www.luxuo.com, July 13, 2017; Jonathan Welsh, “Checkered-Flag Past Helps Ferrari Unload a Fleet of Used Cars,” The Wall Street Journal, January 11, 2005, pp. A1, A10.
Classifying Business Products
Products bought by businesses or institutions for use in making other products are called business products. These products can be commercial, industrial, or services products. A commercial product would be industrial equipment, such as a crane or software used for inventory management. An industrial product is used in the manufacturing process of goods, such as robotic equipment in an automotive plant. A services product (for business) might be a networking consulting firm helping a large corporation set up offices abroad. Business products are classified as either capital products or expense items. Capital products are usually large, expensive items with a long life span. Examples are buildings, large machines, and airplanes. Expense items are typically smaller, less expensive items that usually have a life span of less than a year. Examples are general office supplies and cleaning products. Industrial products are sometimes further classified in the following categories:
- Installations: These are large, expensive capital items that determine the nature, scope, and efficiency of a company. Capital products such as General Motors’ truck assembly plant in Fort Wayne, Indiana, represent a big commitment against future earnings and profitability. Buying an installation requires longer negotiations, more planning, and the judgments of more people than buying any other type of product.
- Accessories: Accessories do not have the same long-run impact on the firm as installations, and they are less expensive and more standardized. But they are still capital products. Projectors for virtual meetings, tablets, and smaller machines such as tools are typical accessories. Marketers of accessories often rely on well-known brand names and extensive advertising as well as personal selling.
- Component parts and materials: These are expense items that are built into the end product. Some component parts are custom-made, such as navigation equipment in cars, an external keyboard for a tablet, or custom artwork for product packaging; others are standardized for sale to many industrial users. Microprocessors for electronics and insulation in the construction industry are examples of standardized component parts and materials.
- Raw materials: Raw materials are expense items that have undergone little or no processing and are used to create a final product. Examples include lumber, water, chemicals, and metals.
- Supplies: Supplies do not become part of the final product. They are bought routinely and in fairly large quantities. Supply items can vary but include items such as office supplies, cleaning products, and gasoline. Supplies, if not managed properly, can have an impact on the firm's long-run profits.
- Services. These are expense items used to plan or support company operations—for example, janitorial cleaning and management consulting services.
Concept Check
- What is a product?
- What are the classes of consumer products?
- Explain how business products are classified.