What is the total product offer? Recall that a product is any good or service that might satisfy a want or a need. An Apple iPhone, a college education, a doctor’s advice, and even a Caribbean vacation package are all products. Consumers buy products for a number of tangible and intangible benefits. The total product offer consists of all the benefits associated with a product that affect a consumer’s purchasing decision. For example, when you buy a car, you’re not just buying a mode of transportation; you’re also buying some intangible benefits, such as style or image. Marketers know this. So, when they plan a total product offering, they think about the product on three levels: the core product, the actual product, and the augmented product. Each level adds more value to a product. Figure 13.3 summarizes the three levels of a product. The three levels of a product define the benefits to be derived from the total product offering.

Figure 13.3

The Three Levels of a Product

What is the core product? The core product is the primary benefit or service that satisfies the basic need or want that motivates a consumer’s purchase. For a car, the core product is convenient transportation. For a soft drink, it is the thirst-quenching capability. For a camera, it is the ability to capture memories. Notice that the core product is intangible. You cannot touch it. Companies use the benefits of their products to lure customers. Think about Coke’s “Have a Coke and a smile” campaign. What core benefit is it trying to convey?

What is the actual product? The actual product is the tangible aspect of the product that you can touch, see, hear, smell, or taste. It provides core benefits when it is used. Consumers often assess the tangible benefits of actual products by comparing brands, their quality (often associated with a brand’s reputation), features, styling, or packaging. For a car, the actual product is the automobile itself. The core benefits of an automobile could be its numerous safety features, leather seats, or entertainment system. For a soft drink, the actual product is a refreshing taste or a caffeine buzz that consumers are looking for when they purchase some sodas.

What is the augmented product? The augmented product consists of the core product and the actual product plus other real or perceived benefits that provide additional value to a customer’s purchase. These benefits might include customer service and support, delivery, installation, a warranty, or favorable credit terms. The value-enhancing elements of an actual product are an important part of the total product offering because they help provide a more satisfying customer experience. For a car, the augmented benefits might include a reasonable price, an easy payment plan, a 10-year warranty, or just the feeling of safety you get from owning a brand-new car.

How important is product differentiation? Product differ­entiation is critical for a product’s success. Product differentiation is the process of distinguishing a product from its competition in real or perceived terms to attract or retain customers. Products are differentiated by establishing concrete or intangible differences among similar products. For example, Southwest Airlines sets itself apart from other airlines with its low-cost fares and fun and friendly service. The company’s “bags fly free” campaign also distinguishes it from its competitors. If a product does not stand out, there is no motivation for customers to buy it rather than a competing product.

How does consumer input affect product development? Companies rely on customer input to help shape their products. Listening to customers and incorporating their suggestions are effective ways to foster good customer relationships, which is critical for getting repeat business and achieving long-term success. In fact, using customer feedback is one of the most important elements of sound customer relationship management. You have to know what your customers want to tailor a product offering to their needs.

Many a company has found that searching social media sites is a great way to learn what is on their customers’ minds as well as the minds of those using competing products. Consumer input often provides information that prompts companies to divide a large market and focus on narrowly defined, targeted customers. For example, if a breakfast cereal company learns that most consumers buy its cereal because it is high in fiber, to target health-conscious adults and distinguish the cereal from other products, the company might run an ad campaign highlighting this fact.

What are a product line and a product mix? Customer feedback can also lead to the creation of a product line, a group of similar products marketed to one general market. For example, Honda offers a number of different product lines: automotive products, plane and boat motors, and power equipment. Each product line is marketed to a group of consumers with similar needs. A product mix is the combination of all product lines offered by a company. All of Honda’s combined product lines constitute its product mix.

Does it matter how many products are in a product line? An important marketing decision involves product line length. Product line length is the number of items in any given product line. The addition or removal of items from a product line affects a company’s profits. The Coca-Cola Company has found it very profitable to pursue a long product line length given the huge variety of drinks it offers for sale. The company offers hundreds of regular, diet, caffeine-free, and flavored varieties of Coca-Cola worldwide. People who do not want a soft drink can choose from the wide variety of non-soft drink beverages made by Coca-Cola, including fruit juice drinks, waters, sports and energy drinks, teas and coffees, and milk and soy-based beverages.4

Product mix width refers to the number of different product lines a company offers. This, too, is determined by profitability. General Electric (GE) has hundreds of product lines, ranging from light bulbs and home appliances to jet engines and medical machinery.5 GE aims to achieve maximum profitability by stretching its capabilities across multiple markets. Product line length and product mix width are the result of companies striving to offer differentiated products to satisfy targeted customers. Figure 13.4 shows a small sample of Coca-Cola’s product line lengths and product mix widths.

Figure 13.4

Coca-Cola’s Product Mix Width and Product Line Length

What’s the difference between consumer products and business-to-business products? In Chapter 12, we explored the differences between consumer markets and business-to-business markets. Similarly, there are differences between consumer products, goods and services purchased by households for personal consumption, and business-to-business (B2B) products (sometimes called industrial products), goods and services that are purchased by businesses for further processing or resale or for use in facilitating business operations. The distinction between consumer and B2B products depends on whether the product is used for personal use or for business use. For example, if a home owner purchases a lawn mower for personal use, then it would be a consumer product. If a landscaper purchases the same lawn mower but uses it in his business, then it would be a B2B product.

Marketers classify consumer and B2B products differently because the buying behaviors of businesses and consumers are different. As a result, the products in consumer and B2B markets are priced, promoted, and distributed differently. The distinction between consumer and B2B products can also help a firm expand its product lines by crossing over from one category to the other. For example, the Cascade brand of dishwashing detergent is sold in consumer markets, and another version of Cascade is made with phosphates for use in businesses such as restaurants.

What are the different consumer product classifications? The shopping patterns of consumers help to establish classifications of consumer products. Industrial products are classified by how they are used in the production of other goods.

Consumer products can be divided into four categories, as shown in Figure 13.5:

• Convenience goods and services

• Shopping goods and services

• Specialty goods and services

• Unsought goods and services

Figure 13.5

Consumer Product Classifications

What constitutes a convenience product? Products that are purchased frequently, immediately, and without much deliberation are considered convenience goods and services. Because they are normally consumed quickly, they are also referred to as nondurable goods. Milk, soap, and newspapers are all considered convenience goods. A car wash is an example of a convenience service. These purchases are usually based on habitual behavior, meaning consumers routinely purchase particular brands with which they are familiar and comfortable. Convenience goods and services are also relatively low-priced items. They are usually promoted through brand awareness and image (which we will discuss shortly) and are widely distributed through conveniently located stores or in high-traffic areas.

How are less frequently purchased products classi­fied? Some products require more effort and time to compare and are typically purchased less frequently than consumer goods. These products are referred to as shopping goods and services. Shopping goods are typically durable goods—goods that can be used repeatedly over a long period of time. Examples of shopping goods include automobiles, clothes, furniture, and major appliances. Examples of shopping services include hotels, airlines, and other travel services. Consumers usually compare shopping products based on attributes such as their suitability, quality, price, style, and brand image.

What if a consumer is very particular about the type of product he or she wants? Sometimes buyers are willing to spend a considerable amount of time and effort searching for particular brands or styles. These customers know exactly what they want, and they will not accept substitutes. These types of unique or specialized products are specialty goods and services. Examples of specialty goods and services include Ferrari sports cars, Rolex watches, high-fashion designer clothing, and the services of prestigious medical and legal experts. Because there are no suitable substitutes, buyers of specialty products do not comparison shop. They already know the specific good or service they want, and they are willing to seek it out regardless of its price and location. Businesses that successfully differentiate their products to the point that they are considered specialty goods or services can charge higher prices for them than similar products that are considered shopping goods or services.

What about products that are purchased only when a special need arises? Unsought goods and services are products buyers don’t usually think about buying, don’t know exist, or buy only when a specific need arises. We don’t usually think about or want to think about buying some products, such as life insurance or cemetery plots. Other unsought goods and services are products that are completely new to consumers. New and innovative products, such as pharmaceutical drugs, must be introduced to consumers through promotional advertising before they will actively seek them out for purchase. Emergency medical services and automobile repairs are also unsought purchases made without much pre-purchase planning. In these cases, resolving the immediate problem is more important than comparison shopping. Sales of unsought products require personal selling or promotional advertising, and the price may not be an important consideration if the good or service is urgently needed.

What are the different B2B product classifications? B2B products can be divided into five categories, as shown in Figure 13.6:

Figure 13.6

B2B Product Classifications

• Equipment

• Maintenance, repair, and operating (MRO) products

• Raw and processed materials

• Component parts

• Specialized professional services

Each of these types of products requires different pricing, promotion, and distribution strategies.

What is considered equipment? Equipment, also known as capital items, includes all the physical items of a business. These physical items are further defined as production goods (factories, warehouses, and office buildings and heavy equipment) or support goods (computers, printers, and copiers). Many capital items are expensive, unique, and are intended to last for a long time. Therefore, selling them often requires long negotiations that stretch out over many months or even years and involve a firm’s top managers. Marketers frequently offer a variety of services to help sell this type of equipment, including financial packages to ease the large price associated with the purchase, maintenance, and repairs after the sale.

How do you classify operating supplies? Products that facilitate production and operations but do not become a part of the finished product are classified as maintenance, repair, and operating products. These products include paper, pens, and cleaning materials. They are often marketed based on convenience, just like consumer convenience goods and services.

How are products that are used to make other products classified? Materials sold in their original form before being processed for use in other products, such as crops, crude oil, iron ore, and logs, are examples of raw and processed materials. These products are the basic inputs that become part of a finished good. Raw and processed materials are usually purchased in large quantities at prices that are based on the quality of the materials.

How are parts used in an assembly process classified? Component parts are assembled portions of the finished product. Examples include brakes and engines for a car or drywall and electrical wire for a house. Businesses purchasing component parts make their decisions based on quality and brand-name recognition because, ultimately, the quality of a final product will be based on the quality of its component parts.

Do specialized services have a separate classification? Businesses often require the use of services, just as individuals do. Specialized professional services help support a firm’s operations. These services include advertising, management consulting, legal, accounting, and information technology services. Managers compare the costs and the quality of these specialized services with their in-house operations before deciding whether to outsource these activities. For example, a local grocery store owner might assess his or her ability to handle the business’s financial records before hiring an outside accounting firm.