Products as Service Providers: Understanding the True Value

People satisfy their needs and wants through products. A product is anything that can be offered to fulfill a need or want, whether it's tangible or intangible. Sometimes, we use other terms like offering or solution to describe products. The significance of physical products lies not in ownership but in the services they provide. For instance, we buy a car for transportation, a microwave for cooking. Thus, physical products are vehicles that deliver services.

Services can also be supplied by other entities such as people, places, activities, organizations, and ideas. For example, when bored, one might attend a concert, travel to a beach resort, sing at a karaoke lounge, join a golf club, or adopt a new philosophy. These activities provide services that fulfill emotional or psychological needs.

Manufacturers often make the mistake of focusing more on their physical products than on the services these products offer. They see themselves as selling a product rather than providing a solution to a need. For example, a woman buying lipstick is purchasing "hope," and a carpenter buying a drill is acquiring the ability to create a "hole." A physical object is merely a means of delivering a service. The marketer’s job is to sell the benefits or services embedded in physical products rather than just describing their physical features.

This approach is crucial in avoiding marketing myopia, where sellers focus on their product rather than the consumer’s needs. Marketing myopia can lead to a business's downfall as it blinds companies to the broader service aspect that products fulfill. Emphasizing the service aspect encourages innovation and better customer satisfaction.

In today's fast-paced market, understanding this distinction is vital. The rapid evolution of technology and consumer expectations makes it even more important for companies to shift their focus from mere products to comprehensive solutions. This holistic approach ensures that businesses remain relevant and competitive by continuously meeting the evolving needs and desires of their customers.

In summary, products are not just items but service providers. Acknowledging this helps marketers and manufacturers deliver more value, fostering stronger customer relationships and sustainable business growth.
Products as Service Providers: Understanding the True Value

Marketing mix and its components

Marketing mixes have a number of facets and are important to devise strategies in order to manage the dynamic environmental effects of the market. Marketing mixes are inter-related, interdependent, and also a combination of many factors. Marketing mix means the product, distribution, promotion and pricing strategies to produce and carryout exchanges and achieve the target markets.

"Marketing mix -a set of relevant factors and solutions that enable customers to meet the (national) needs and achieve the goals set by the company. According to Philip Kotler “Marketing mix is the set of controllable variables that the firm can use to influence the buyer’s response”.

Product refers to the goods and services offered by the organization. It includes half of the material goods, such as furniture, clothing and grocery items and intangible products, such as services, which users buy. Product’s appearance, function, and support make up what the customer is actually buying. Successful managers pay close attention to the needs their product bundles address for customers.

Price is one of the most important marketing mix items and many scientists consider the price as one of the most important elements of the market, which increases not only profits, but also market share. It is the second most important element in the marketing mix. Many factors like demand for a product, cost involved consumer’s ability to pay, prices charged by competitors for similar products, government restrictions etc. have to be kept in mind while fixing the price.

Another very important element of marketing is a place that is also called the distribution, which is defined as the process and methods by which products or services reach customer. The distribution channel is defined as an integral part of the service, which involves the service provider, intermediaries (agents) and the same service user (in most cases). Products must be made available to the consumers at a place where they can conveniently make purchase.

The last 4P marketing complex element of the promotion, which helps to increase consumer awareness in terms of their products, leads to higher sales and helps to build brand loyalty. It is the communication process between the customer and the product or service, it is what the promotions try to tell target customer about the product, and it’s the way to make customer aware about the product.

Customer research is a key element in building an effective marketing mix. Knowledge of the target market and competitors will allow the company to offer a product that will appeal to customers and avoid costly mistakes.

Marketing mix and its components

What is countertrade?

Countertrade is a resourceful way to arrange for the sale of a product from an exporter to a company in a country that does not has the resources to pay for it in hard currency.

The problem is usually with the importer but may also be with the country’s limited resources. Countertrade can be defined as: Any transaction involving exchange of goods or services for something of equal value. Sometimes cash is used to pay for any value differences. More and more developing countries are posing requirements of countertrade.

The reasons vary, e.g. shortage of foreign currencies and other financial problems, trade barriers of industrialized countries, difficulties in expansion of new markets and a need it involve exporters in developmental projects.

Countertrade offers numerous advantages, including accessing foreign markets that would be unable to be entered otherwise.

Since no cash is involved, that money is available for other uses. Also, the value of a countertrade can be somewhat arbitrarily set since no money is involved.
What is countertrade?

Product deletion

Product deletion is a process of eliminating a product from the product mix, usually because it no longer satisfies a significant number of customers.  Product deletion may occur at any time. However a company generally does so when the product has reached the decline stage of the product life cycle or when sales begin showing a dramatic downward shift and profit erode.

A declining product reduces an organization’s profitability and drains resources that could be used to modify other products or develop a new one. On business armlets, product deletions may become quite complex, involving not just communication with customers, but also existing long-term contracts remaining estimated demand, carful production planning and estimated demand for spare parts. It is also complex decision that is likely to have ripple throughout the organization.

No manager will want to be associated with a product failure and may either completely abandon the sinking ship or there may be tendency to hold on and continue to channel resources to possible losing proposition.

Some organizations delete products only after the products have become heavy financial burdens. A better approach is one form of systematic review in which each product is evaluated periodically to determine its impact on the overall effectiveness of the firm’s product mix.

The product deletion process consists of four stages:
*Detection of weak products
*Analysis of the weak products identified
*decision to eliminate the product
*Implementation of the deletion decision
Product deletion

Product repositioning

No matter how well a product organization or brand is positioned in the market, the firm may have to adjust its position after a while.

This changing of position of the product is called product repositioning. In this situation the product is materially changed but is still aimed to appeal to the existing target market.

Positioning decisions are not just for new products. Evaluating the positions of existing products is important because a brand’s market share and profitability may be strengthened by product repositioning.

Product repositioning changes the place a product occupies in consumer’s mind relative to competitive products.

A firm can reposition a product by changing one or more of the four marketing mix elements.

Repositioning can be accomplished by physically changing the products, its price or its distribution. Rather than making any of these changes, marketers sometimes reposition a product by changing its image through promotional effort.
Product repositioning

Pricing strategy

In today’s marketplace, competitive pricing is important for attracting and retaining customers. Consequently, a well planned pricing policy pays a critical role in market-oriented strategic planning.

It is based on demand for the product and the cost of producing it. Some special considerations can also influence the process. Pricing strategy involves the systematic manipulation or planning or pricing decisions and policies over a period of time in the context of achieving the broader objectives contained in corporate and marketing plans.

Companies must consider different pricing strategies when selecting prices. ‘Pricing to penetrate’ is a pricing strategy that uses a low profit margin to penetrate the market. It is designed to grab market share quickly.

Market share strategy – use to take share points away from competition.

While ‘skimming the cream’, on the other hand, is a strategy that uses high pricing to obtain high profits.

High option pricing strategy used when a product line is declining and competition is minimal or when the product line is new and there is little competition. This allows maximization of profits and relates to skimming strategy.
Pricing strategy

Product poisoning

How customers perceive the relative value of a product in comparison by using important product differentiation criteria is referred to as the product position.

Product positioning shall be defined as the decisions and activities intended to create and maintain a certain concept of the firm’s product relative to competitive brands in customers’ minds.

The ultimate aim of positioning is to secure sales figures or in more precise terms, the right product positioning helps consumers to make their purchase decision in favor of a certain product.

When marketers introduce a product, they try to position it so that it appears to have the characteristics that the target market most desires.

The simplest way to understand product positioning is by using a grid called a perceptual map that illustrate the relative position of competing products as perceived by customers.
Product poisoning

Marketing mix

The marketing mix is one of the most widely accepted concepts in the discipline of marketing. According to William Stanton, marketing mix is the combination of a product, how it is distributed and promoted and its price.

The marketing has been defined as the controllable variables the company puts together in order to satisfy target markets and achieve the firm’s objectives.

Traditionally, the marketing mix has four components of variables known as the 4 P’s: product, price, place and promotion.

The marketing Mix was originally developed by Prof. Neil Borden of Harvard which has got six elements – Product Planning, Pricing, Distribution, Promotion, Servicing and Market research.

These were later reduced to four elements only (4 P’s) by McCarthy. Firms will manipulate the marketing mix variables to formulate strategies that are combined in marketing program for a product or service.

In 1961, Albert Frey suggested that all the marketing mix variables could be categorized into just two groups:
*The Offering (product, packaging, service, brand and price)
*The Methods/Tools (distribution channels, personal selling, advertising and sales promotion).
Marketing mix

Augmented Product

The augmented product refers to services and other activities that support the marketing of the main (or core) product.

The augmented product comprises the totality of features of a product. It includes the core benefits and any numbers of ‘add-on’ or premium benefits, which makes the product more acceptable to certain segments of the markets.

This definition is wider than the mere provision of after sales services and warranty back up which form part of this definition; it also includes sales persons, service personnel, transportation and, where appropriate, assembly or construction of the product at the customer’s home or workplace.

In other words, the augmented product encompasses everything surrounding the service and its delivery, including intangible attributes such as accessibility and atmosphere.

It also includes all aspects of the commercial transaction of the purchase itself and the provision of credit when required.

In many modern marketing situations, the value of the augmented product is often deemed to be at least as important as the core product.

There are three layer involved:
*The core layer is simply product itself. The core product is what actually meets the consumer’s needs.
*Layer two adds elements to the product designed to make it more appealing.
*Layer three adds more and adds things that might be describe as less inherently part of the product itself.

The augmented product exceeds customer expectations. MacDonald’s are a good example of what marketing people call the ‘augmented product; that is the actual product is surrounded by additional goods or services that together make up a package of customer expectations.
Augmented Product

Product Complexity

Product Complexity
Turning to another dimension of industrial marketing uniqueness, technical product complexity, the major barrier to a true marketing orientation in the industrial firm remains excessive product, engineering, manufacturing and technical orientation.

One class or business strategies available to industrial companies calls for a high degree of technical innovativeness and risk taking with related high expenditures for research and development.

In such companies, top management is likely to have been grown in the engineering and research garden and technical values may be prominent in management decision making.

The real risk in these cases is “loving the product more than the customer,” becoming so enamored with a technical accomplishment or particular product parameters that the necessary flexibility for responding to customer needs in a competitive marketplace disappears.

As a result, one of the most common marketing sins can be unwittingly committed – trying to change the customer to fit the product.

Assuming there can be degrees of sin, this sin of product orientation is more serious in industrial marketing than in consumer complexity of the problem the customer is trying to solve.

Therefore greater supplier flexibility is required in contrast to consumer marketing.

One marketing guru offers four key concepts for understanding the nature of industrial market selection and product planning:

*The basic and most important decision in planning marketing strategy are those related to the choice of market or markets to serve. All else follows.

*The form of the product is a variable, not a given, in developing marketing strategy. Products are planned and designed to serve customers. In other words, various product options must be evaluated and the best selected to serve the needs of particular market.

*The product is what it does; it is total package of benefits the customer receives when he buys.

*The product, in this broad sense will have different meaning to different customers – important with regard to both market selection and pricing.
Product Complexity

Product and Market Development Across Cultures

Product and Market Development Across Cultures
Although some companies view themselves as pure marketing organizations that only focus on branding, the basis of existence of a global company is its product or services and the ability to develop or adapt product concepts for different markets. The most important decisi0n of a company is which products or product variations to market to which markets, therefore, marketers would work in close contact with research and development.

Many products sell better in some markets than in others, the cause of such variations can be wealth or culture. If the cause of low penetration of a specific product in a specific country is culturally defined, products should be adapted to better fit that culture.

New product market combination must be developed when products enter new markets of different configurations. Life insurance, for example, is a product for individualistic cultures; entering a market with a collectivistic culture demands different products. An example could be offering parent related pension insurance to the Singapore yuppies whose new mobile lifestyles make it more difficult to fulfill their obligations to look after their parents, a strong element of their collectivistic and Confusion values.

Well defined cultural differences can help to develop more appropriate products or product adaptations for different cultures. If certain do-it-yourself products do not sell as well in strong as in weak uncertainty avoidance cultures, adapt the product to the need for competence. Add instructions, offer training, whatever helps the market to feel more competent. Similarly, electronic appliances such as remote control devices should be easy to use for weak uncertainty avoidance cultures, but may have complicated details for strong uncertainty avoidance cultures where people want to control the process.
Product and Market Development Across Cultures