What Are the Four Types of Consumer Products - Assignment Example

11th March, 2016

Principles of Marketing: Essay Questions

Question 1: Products

What are the four types of consumer products? How do they differ?

Product can be classified into two categories; business products and consumer products. Unlike business products which are bought for resale purposes, consumer products are bought with the intention of meeting the needs of the final consumer. Consumer products are divided into four categories which are convenience products, shopping products, specialty products and unsought products. Convenience products are those consumer items that a consumer purchase frequently, immediately and with little considerations or comparisons. Convenience products are usually low priced and their examples include items such as beverages, sugar or bread. Shopping products are a type of consumer product and these are purchased by the customer after they have made some considerations and they are not purchased frequently. The considerations made could include aspects of quality, price and trend. An example of a shopping product is a mobile phone. Specialty products are consumer products that appeal to certain group of consumers and they are willing to make an extra effort to acquire them. Examples of specialty products are luxury goods such as high price clothes and supercars. Unsought products are those products that consumers have no knowledge about and they gain knowledge about them when they intend to acquire them . Examples include new items that come with new technologies.

Explain why so many new products fail and provide some ideas for a company to improve its odds of new product success

The survival of new products in markets is determined by several factors. One in every four new products makes it to the market while the other three are failures or they never even get to launch. One of the major causes of new product failure is inadequate market analysis. This can result in either producing a product that does not meet the needs of the target market or one which will have no demand. The other major cause of new product failure is inherent flaws in the product which consequently make it difficult to market. The other major is uncompetitive pricing due to high costs of production.

In order for a company to improve its odds of new product success, it is important that it conducts thorough and relevant research on the market needs and the product itself. This will determine if the product will directly meet the markets needs and at a competitive price that will be informed by low product costs.

Identify and describe the stages of the generalized product life cycle

A new product in any market goes through a product life cycle which involves four stages. These are introduction stage, growth stage, maturity stage and decline stage. During the introduction stage, the product is promoted actively through different activities. All these activities are aimed at creating awareness of the product to the market and encouraging more customers to make a trial purchase. The growth stage is where there is increased sales of the product as more and more customers purchase it. The early customers are making repurchases and the producer experience increased profits from the growth in sales. The maturity stage is where the product becomes saturated in the market and there is no more growth in sales. The company could still be making profits but at zero growth. It is also at this stage that the producer cold think of re-inventing or making improvements to the product so as to maintain sales and avoid the decline stage. The decline stage is characterised by a decrease in sales and profits because the not as many customers are purchasing the product.

Question 2: Services

Marketing services incorporate the 4Ps of product marketing (Product, price, place (distribution) and promotion. What additional elements are included in the 8Ps of services marketing?

There exists a services marketing mix that includes 8 Ps. The basic ones for the product mix are product, price, place and promotion. The additional ones for service marketing mix are people, productivity and quality, process and physical environment. Product refers to the actual item or service being offered to a consumer so as to meet a need. Price refers to the consideration for the product that is offered and it is determined using different pricing strategies that are informed by production costs, quality and profitability. Place refers to the actual location where the service or product can be purchased by the customer. It also refers to the channels that are used to convey the services or products to customers. Promotion refers to the methods that are used to communicate to the consumer about a service or a product. Promotion is also meant to encourage customers to make a purchase. People can be used to refer to customers or the business. People are involved in developing a product, marketing it and selling it to other people. Process refers to the activities that people have to undertake in order to access services. Processes could involve service management and order processing. Physical environment in the marketing mix refers to the surroundings under which a service is consumed by a customer. The physical environment significantly determines customer satisfaction levels in the case of service delivery. Productivity and quality in service delivery are concerned with management of costs. Services have significantly higher variable costs than products and in order to achieve market excellence, cost management is necessary. The level of quality also affects the cost of service delivery and this makes it a key consideration for the service marketing mix.

How would each of these four elements apply to a service of your choice?

The four additional elements of a marketing mix would apply to air travel services. When passenger are inside an aircraft, the facilities and features inside the aircraft constitute the physical environment element. The comfort of the aircraft cabins and the features for passenger use also constitute the physical environment. Process element involves the cities and processes that the passengers had to go through before they could access the flying services. These include ticket booking and clearing with different authorities. The element of people can be regarded as the airline company. These include company employees, company management team as well as the organizational culture. Productivity and quality in air travel refers to how well the company can offer its services to passengers cost-effectively. Quality of the service offered on-board the flight and at the reception also matters.

Question 3: Pricing

What are the six major steps involved in setting prices?

Prices for both products and services are set objectively and strategically. The six steps involved in setting prices are;

• Determining the objectives of pricing- This involves determining what the pricing will achieve. It could be aimed at increasing the market share, introducing a new product and market penetration, undercutting competition and increasing the sales volumes and revenues.
• Cost determination- This involves determining the costs that are involved in producing a product or offering a service. Cost of production have to be determined so that the business can determine the expected or targeted profit margins.
• Demand Estimation- Adequate market analysis can be used to determine the demand for a product. It also helps the business to determine the process that will be acceptable in the market and those which consumers are willing to pay for products and services.
• Competition Analysis- This step is important because it allows the business to determine how its competitors have priced similar products and the difference in between the highest and lowest price for similar products and services. It is from this analysis that the business will determine the range within which their price will fall.
• Pricing strategy- the business decides on the pricing strategy to use at this point. T can decide to use cost-plus strategy, price-discrimination strategy, skimming, market penetration pricing or leader pricing.
• Price setting- this is the final step and it involves fixing of the actual and price for a product or service. This is done after consideration of all the preceding steps.

What factors determine the price elasticity of demand?

The factors affecting price elasticity of demand are:

• The cost of switching between products-If there are switching costs the elasticity of demand is less. Absence of switching costs reduces the coefficient of demand elasticity to price.
• Availability of close substitutes- More substitutes increase the price elasticity od demand since consumers can switch easily in case of price changes.
• The degree of necessity of the product or service- Necessity goods and services tend to have low price elasticity of demand. Luxuries have high price elasticity of demand.
• Period for change- if the period allowed for change is small the price elasticity of demand is low but in the long run it is high due to the increase in time that is allowed for change.
• Consumption- if consumption of the service or good is habitual or it is during peak periods, the price elasticity of demand is low but if it is not a habitual consumption good ad it is during off-peak period, the price elasticity of demand is high.

What are the conditions favouring the use of penetration pricing?

Penetration pricing is a pricing strategy that aims at achieving a larger market share through maintaining high sales volumes at comparatively lower prices. There are some conditions that favour the use of this pricing strategy. The first condition is a high price elasticity of demand. A high price elasticity of demand will make it possible for consumers to shift from other competitor products to the company’s products. The second condition is that the size of the market can sustain sales with low profit margins for the desired period. The third condition is that the business is capable of meeting increased demand due to the low prices and the increased promotional activities.

Question 4: Communication and Promotion

List the key elements of communication process

• Sender
• Message
• Communication channel
• Receiver
• Feedback
• Encoding
• Decoding

Briefly describe each of them

The sender is the person from whom the communication or message originates from. The receiver or recipient is the person whom the communication is untended for. Once they receive the information, they synthesize it and act accordingly. The message represents the ideas that are being communicated from the sender to the recipient. The message could be instructions, ideas, suggestions or feelings. The communication channel refers to the method that is used to convey the message to the recipient. Feedback refers to the reaction of the recipient after they have received the message. It is also a confirmation that the message was received and understood by the recipient. Encoding refers to the method that is used to package the message so that it is suitable for transmission through a selected communication channel. Encoding includes writing, producing pictorials or typing. Decoding refers to the method used by the recipient to un-package the packaged message so that it is comprehendible by them.

What are the strengths and weaknesses of using publicity in promotional mix?

One of the strengths of publicity in promotional mix is that it has greater influence than other elements of the promotional mix since it is believed to be highly credible. The other strength of publicity is that since it uses a third party, it has the potential of wide coverage. A weakness in the use of publicity is that it might not have the desired effect due to interference and mix up with bad publicity. Its second weakness is that it not as specific as other elements in terms of the target market.

Question 5: Personal Selling

Describe the seven steps in the selling process

• Product knowledge- this steps involves the marketer familiarising themselves with the product or service. They determine its features, uses, target market, pricing and its unique selling points.
• Prospecting- this steps involves identifying potential customers. This can be done through attending events which potential clients might attend or general research of their profiles.
• Approach- this step involves establishing the first contact with the potential customer it marks the beginning of a customer-marketer relationship. During this step, the marketer can gather more information about the customer.
• Needs assessment- this step involves a lot of enquiries so as to determine the need of the potential client. The objective of this step is to determine how the potential clients’ needs can be met.
• The presentation- This step involves explaining to the potential customer how the marketer’s product or service can met their needs. Knowledge of the product is very important during this step
• Close- Once the customer is convinced that the product or service presented can meet their needs, they go ahead and purchase it or place an order. This step is called the close.
• Follow-up-This step involves making contact with the customer to know if the order was delivered or to enquire about the product that was sold to them.

What may be the two most difficult steps for most sales people?

The two steps which could be difficult for most sales people are the approach and presentation steps. This is because the approach requires more than just knowledge about a customer. It involves making a good first impression to the right customer which can be challenge to most marketers. Presentation can also be difficult to most marketers because it requires good presentation skills. A marketer could have a perfect knowledge of the product or services but have difficulty in communicating it effectively to a potential customer.

Question 6: Reflection

The course presented marketing concepts which have practical application in today’s marketing world. These include the 8 Ps of service marketing mix, concepts on consumer products, pricing strategies as well as sales process. Professional marketers would find these concepts to be very valuable as they constitute the basic principles of marketing that are practiced every day b markets all over the world. They are also applicable in our personal lives, for instance in job interviews.

The course can be improved b including more of marketing analysis concepts that include quantitative analysis in topics such as pricing and marketing strategy formulation.