CHAPTER 5PRODUCT CLASSIFICATION AND SERVICES MARKETING

PRODUCT CLASSIFICATION Convenience Products Shopping Products Specialty Brands Unsought Products

MARKETING OF PRODUCT CLASSES Marketing of Convenience Products Marketing of Shopping Products Marketing of Specialty Brands Marketing of Unsought Products

SERVICES MARKETING CHARACTERISTICS OF SERVICES

Intangibility Variability Perishability (and inseparability)

01. PRODUCT CLASSIFICATION

It is important to classify products because different types of products require different marketing strategies. For instance, the marketing strategy for shampoo (a convenience good) is obviously very different from that used for the selling of an expensive motor vehicle (a shopping good). The marketing of hotel accommodation (a service) is even more different.

1.1 Convenience Products (Fast Moving Consumer Goods - FMCGs)They are convenience products because consumers buy them on a convenience basis & low‐

involvement products. They are:1. Frequently purchased and consumed 2. Purchased with minimal time and effort 3. Usually low priced4. Associated with low brand loyalty (unless specialty brands)

Staples are convenience products that are consumed very regularly like bread, milk, meat, vegetables.Impulse products are items that are bought impulsively, immediately or without planning. (Take‐away or fast food restaurants)Emergency products are convenience products that are bought quickly because of some urgency (medicine, medical treatment, tyre repair)

1.2 Shopping Products (consumer durables)Medium to high involvement products. They are shopping products because buyers shop ‐ ‐

around for them. They are:1. Infrequently purchased because they last longer (durable) 2. Purchased, after spending some effort in comparing brands on performance, features and price

— the willingness of consumers to shop around confirms the importance attached to these products.

3. Normally higher priced than convenience goods 4. Associated with relatively low brand loyalty (unless specialty brands) — Most consumers have

a set of acceptable brands at any given price point. ‐

1.3 Specialty BrandsThese are brands of convenience or shopping products that are highly sought after by their

respective target markets because:1. They have some unique or highly desirable attributes— these brands can stand out not only

because of a tangible technical uniqueness but also a perceived advantage. Apple computers are physically different from PCs — check out the iMac’s or MacBook design. It even has its own operating system, (Mac OS) — substantially different. PC users can choose among scores of brands, but Apple fans have only Apple!

2. Buyers insist on these brands — brand insistence is the highest form of brand loyalty where customers normally do not accept any substitutes. A brand that is owned for life — constantly upgraded and traded in. So too are Harley Davidson motorcycles.‐ ‐

3. Buyers are willing to expend considerable time and effort in obtaining such product — these are must have brands that buyers are only happy to make special trips to buy or even be on a‐ wait list. Limited edition luxury cars have a 2 year wait. ‐ ‐

1.4 Unsought ProductsThere are some products that consumers do not think of buying generally because of the

particular nature of the product. In many cases, these are important products but “human nature” placed them low on the priority list. (Personal alarms, burglar alarms, home fire extinguishers, first‐aid kits, life insurance). Products that are very new to the market are also unsought. The public may lack knowledge about these products or have little confidence or perceived (Apparent) need in them. This situation is only temporary and eventually, the product will make it to the mainstream. Thumb‐sized USB flash drives (to replace the floppy disks) and the portable MP3 players.

02. MARKETING OF PRODUCT CLASSES

Products are classified because different types of products require different marketing strategies. The following are the “rule of‐ ‐thumb” marketing strategies for each of the four classes of products.

2.1 Marketing of Convenience Products

Product Brand and packaging familiarity is important in the marketing of convenience products because of the speed of purchase. These are bought without much effort and on a self‐service basis. Simply by scanning the shelves and selecting items on familiarity. Where would Coke be without the trademarked?

Place Marketing these products also involves intensive distribution, i.e., making the product available in as many appropriate outlets as possible. Sales are lost when the product is unavailable (In Australia, Coke outsells Pepsi 5 to 1 because Coke is available in more outlets) ‐ ‐

Price The key is to maintain a low competitive price through economies of scale in production and distribution. Buyers can switch brands over a difference of a few cents.

Promotion Advertising is used extensively to remind consumers of the brand, i.e., reinforce brand familiarity or top of mind awareness. ‐ ‐ ‐

2.2 Marketing of Shopping Products

Product In addition to the brand name, the product’s features and performance are emphasized because consumers can spend a considerable amount of time and effort going from shop to shop and making product comparisons.

Price Obviously the price is higher than convenience goods. Price can also be secondary. (Higher price may suggest better quality, like durability and reliability)

Place Because most “shopping around” and advice seeking are done at retail outlets, it is important for the supplier to select these stores carefully. This is selective distribution. Some retail outlets are more supportive of a particular brand by giving it more display prominence and in store support. Notice the biased retail support given to the HP and Canon brands of‐ printers? Suppliers must have something to do with that — it’s not by chance.

Promotion Advertising is usually intended to create awareness and interest among buyers. Again, this reinforces the importance of selective distribution — select only those retail outlets that are committed to the in store promotion and support of the brand.‐

2.3 Marketing of Specialty Brands

Product uniqueness or exoticness is protected at all cost for sustained competitive advantage. Some brands like Rolex, largely hand made — definitely not mass produced.‐ ‐

Price higher than the average price of competing brands. High price not only enhances the prestige of the brand but also differentiates it from the rest.

Place Brand image can be enhanced by limiting distribution to only a few outlets (exclusive distribution). Also, extensive distribution is less important since customers are willing to travel a distance or even get on a waiting list.

Promotion is usually very limited because customers are very well in touch with these special brands. It’s not what to buy but when to buy. Also, if we don’t know about these brands already,

2.4 Marketing of Unsought ProductsThe very nature of unsought goods requires extensive personal selling (face to face. ‐ ‐Conventional retailers usually avoid these hard to sell products, making it necessary for the ‐ ‐suppliers to market direct to the consumers. Life insurance, roof restoration services, etc. are promoted and sold directly to consumers by the suppliers’ own sales representatives.

3. SERVICES MARKETINGThere are several other characteristics of services that distinguish them from physical goods.

We will examine the three most common differences: intangibility, variability and perishability.

4. CHARACTERISTICS OF SERVICES

Intangibility- Services are intangible — they cannot be experienced before they are consumed. - Durability or reliability of the product, on the other hand, can only be determined over time.

Problem. Intangibility is significant because it requires a different marketing approach. Intangibility causes services to be difficult to demonstrate, describe to prospective customers prior to consumption. Will this university provide me with educational excellence and good job prospects? How can we tell? Solution. The answers will only be known when the customer actually experiences those services first hand. However, service providers must find ways of “tangibilising the intangible”. These are only‐ indicators, not the actual service experience. The airline’s service quality during the flight — but before, we may rely on the airline’s brand reputation, politeness of the ground crew, flight attendants’ appearance or presentation of the plane’s interior, as indicators of the service quality that is to come.Service quality indicators include:

1. Brand reputation (Oxford University and even the City of London)2. Appearance of the premises and location. (Hotels spend big on the size and appearance of their

lobbies as indicators of the service quality to come.3. 3 Price. The Canadian based Four Seasons hotel chain very quickly gained a reputation for‐

luxury by charging premium rates. 4. Establishment, past customers and testimonials

Trial use. In addition to the above tangible indicators, the service provider can offer a trial use of the service (if at all possible). A private college may offer a free trial lecture.Service benefits. A service provider can emphasize the service's benefits or end result rather than its‐ many features and facilities. A university promotes the value and recognition of its degrees and high job placement rate rather than showing off its modern facilities and lecture rooms, brilliant teachers and ample car parks.

VariabilityMost services are performed by people with varying temperaments and skill levels. Services are delivered at a particular time, or over a period of time. Customer themselves have different expectations and demand. These many variables are responsible for the varying quality of most services.

Problem. - Variable depending on “who” the service provider is. In this respect, service quality usually comes with experience, skill level and specialization.

- Vary depending on “when” (time) the service is provided. Imagine attending a Friday late evening lecture — where one’s mind could be somewhere else. Dentists are known to perform poorly towards the end of the day.

- Varies with different types of customers. Customers themselves can influence the quality of the service provided. Demanding clients often get better or more service.

Solution. 1. Conducting regular customer feedback in order to identify (and correct) weak operational

areas. Service providers with multiple frequently conduct customer surveys for that reason.2. Investing heavily in recruitment and staff training to ensure high and more consistent service

provisions. 3. Standardizing operating procedures. (over the counter bank transaction) However,‐ ‐

standardization of procedures is no guarantee that the service will actually be delivered as planned.

4. Mechanization. Some service operations can be mechanized or automated to provide a more consistent output. (the use of ATMs)

Perishability (inseparability)

A service cannot exist separately from its provider. Most services require the presence of the customer. Therefore, a service cannot be stored since it is produced and consumed at the same time.

Problem. When the service becomes available (supply), there must be enough customers (demand) to match. Unused supply is lost forever and so is the cost of providing it. Unmet demand is income lost — usually forever. An empty seat is lost revenue for an air lineIf these available services are not used (demanded) at any given time, the potential income is lost forever and the cost, irrecoverable.

Solution: Regulate supply. When the demand cycle is known and largely uncontrollable, the service provider can attempt to regulate supply of service to match the given demand by:

1. Adjusting staff numbers. Restaurants are increasingly using casual staff for more flexibility. 2. Adjusting capacity or availability of facilities. Businesses may vary their business hours, vary

the frequency of operations.3. Automation — the use of mechanical devices to increase service availability in addition to

providing consistent services (availability of ATMs)4. Offering multiple services. Many services are seasonal but by offering a strategic mix of

services, mostly related, the provider could be kept busy most of the time. Hairdressers do ear piercing, and some double as beauticians. Even tax accountants can offer a range of financial services.

Quantity/quality trade off.‐ The practice of increasing the availability of services through higher capacity, or the use of mechanical devices, can lead to a drop in service quality.

Solution: The business can attempt to regulate (adjust) demand to match the given supply by:

1. Taking bookings or reservations. 2. Adjusting price – a higher price reduces demand 3. Cultivating non peak demand. During periods of low demand (winter for hotels and resorts,‐

summer for university, city bound trains during off peak hours), the service provider may‐ ‐ attempt to boost demand without having to substantially reduce prices.