Project 1: Researching Consumer Buying Behavior

Offerings

Why do buyers purchase something? Why

do you own anything? Many of us own an

iPhone because it allows us to call, text, and

use apps. Or we own one because we have

been influenced to buy one. Shortly after

the iPhone's introduction, some people

undoubtedly purchased the devices because

they were considered trendy. Now iPhones

are so ubiquitous that no one gives them a

second glance. The impact that iPhones

have had on our lives has been huge

because the product revolutionized the way

we interact with the world.

What Composes an Offering?

People buy things to meet needs. In the

case of the iPhone, the need is to have

better access to communicate, to look keep

up with technological trends, or both.

Offerings are products and services

designed to deliver value to customers—

either to fulfill their needs, satisfy their

wants, or both. By the end of this text, we

will understand how marketing fills those

needs through the creation and delivery of

offerings.

Product, Price, and Service

Most offerings consist of a product, or a

tangible good people can buy, sell, and own.

Purchasing a classic iPod, for example, will

allow you to store up to 40,000 songs or

200 hours of video. The amount of storage

is an example of a feature, or characteristic

of the offering. If your playlist consists of

20,000 songs, then this feature delivers a

benefit to you—the benefit of ample

storage. However, the feature will only

benefit you up to a point. For example, you

won't be willing to pay more for the extra

storage if you only need half that much.

When a feature satisfies a need or want,

there is a benefit. Features, then, matter

differently to different consumers based on

each individual's needs.

Remember, the value

equation is different

for every customer.

An offering also consists of a price, or the

amount people pay to receive the offering's

benefits. The price paid can consist of a

one-time payment, or it can consist of

something more than that. Many consumers

think of a product's price as only the amount

they paid. However, the true cost of owning

an iPod, for example, is the cost of the

device itself plus the cost of the music or

videos downloaded onto it. The total cost of

ownership (TCO), then, is the total amount

someone pays to own, use, and eventually

dispose of a product.

TCO is usually thought of as a concept that

businesses use to compare offerings.

However, consumers also use the concept.

For example, suppose you are comparing

two sweaters, one that can be hand-washed

and one that must be dry-cleaned. The

hand-washable sweater will cost you less to

own in dollars but may cost more to own in

terms of your time and hassle. A smart

consumer would take that into

consideration. A TCO approach accounts for

the time and effort related to owning the

product—in this case, the time and effort to

handwash the sweater.

A service is an action that provides a buyer

with an intangible benefit. A haircut is a

service. When you purchase a haircut, it's

not something you can hold, give to another

person, or resell. Pure services are offerings

that don't have any tangible characteristics

associated with them. Skydiving is an

example of a pure service. You are left with

nothing after the jump but the memory of it.

Yes, a plane is required, and it is certainly

tangible. But it isn't the product—the jump

is. At times people use the term product to

mean an offering that's either tangible or

intangible. Banks, for example, often

advertise specific types of loans, or financial

products they offer consumers. Yet truly

these products are financial services. The

term product is frequently used to describe

an offering of either type.

The intangibility of a service creates

interesting challenges for marketers and

buyers when they try to judge the relative

merits of one service over another. An old

riddle asks, "You enter a barbershop to get a

haircut and encounter two barbers—one

with a bad haircut and the other with a great

haircut. Which do you choose?" The answer

is the one with the bad haircut; he cut the

hair of the other barber. But in many

instances, judging how well a barber will do

before the haircut is difficult. Thus, services

can suffer from high variability in quality

because they are often created as they are

received.

Services usually also require the consumer

to be physically present or involved. A

haircut, a night in a hotel, and a flight all

require the consumer to be physically

present. Consumption of the service is not

separate from the creation of the service.

Unlike a physical product, which can be

created and purchased off a shelf, a service

often (but not always) involves the

consumer in its creation.

Another challenge for many services

providers is that services are perishable—

they can't be stored. A night at a hotel, for

example, can't be saved and sold later. If it

isn't sold that day, it is lost forever. A barber

isn't really paid for a haircut (to use the

riddle) but for time. Services have difficult

management and marketing challenges

because of their intangibility.

Many tangible products have an intangible

service component attached to them,

however. When Hewlett-Packard (HP)

introduced its first piece of audio testing

equipment, a key concern for buyers was

the service HP could offer with it. Could a

new company such as HP back up the

product, should something go wrong with it?

As you can probably tell, a service does not

have to be consumed to be an important

aspect of an offering. HP's ability to provide

good after-sales service in a timely fashion

was an important selling characteristic of

the audio oscillator, even if buyers never

had to use the service.

What services do you get when you

purchase a can of soup? You might think

that a can of soup is as close to a pure

product devoid of services that you can get.

But think for a moment about your choices

in terms of how to purchase the can of soup.

You can buy it at a convenience store, a

grocery store, or online. Your choice of how

to get it is a function of the product's

intangible service benefits, such as the way

you are able to shop for it.

The Product-Dominant Approach to

Marketing

From the traditional product-dominant

perspective of business, marketers consider

products, services, and prices as three

separate and distinguishable characteristics.

To some extent, they are. HP could, for

example, add or strip out features from a

piece of testing equipment and not change

its service policies or the equipment's price.

The product-dominant marketing

perspective has its roots in the Industrial

Revolution. During this era, businesspeople

focused on the development of products

that could be mass produced cheaply. In

other words, firms became product-

oriented, meaning that they believed the

best way to capture market share was to

create and manufacture better products at

lower prices. Marketing remained oriented

that way until after World War II.

The Service-Dominant Approach to

Marketing

Who determines which products are better?

Customers do, of course. Thus, taking a

product-oriented approach can result in

marketing professionals focusing too much

on the product itself and not enough on the

customer or service-related factors that

customers want. Most customers will

compare tangible products and the prices

charged for them in conjunction with the

services that come with them. In other

words, the complete offering is the basis of

comparison. So, although a buyer will

compare the price of product A to the price

of product B, in the end, the prices are

compared in conjunction with the other

features and services of the products. The

dominance of any one of these dimensions

is a function of the buyer's needs.

The advantage of the

service-dominant

approach is that it

integrates the product,

price, and service

dimensions of an

offering. This

integration helps

marketers think more

like their customers,

which can help them

add value to their

firm's products.

In addition to the offering itself, marketers

should consider what services it takes for

the customer to acquire their offerings (e.g.,

the need to learn about the product from a

sales clerk), to enjoy them, and to dispose of

them (e.g., someone to move the product

out of the house and haul it away), because

each of these activities creates costs for

their customers—either money or time and

hassle.

Critics of the service-dominant approach

argue that the product-dominant approach

also integrated services (though not price).

The argument is that at the core of an

offering is the product, such as an iPod or

iPhone. The physical product, in this case an

iPhone, is the core product. Surrounding it

are services and accessories, called the

augmented product, which support the core

product. Together, these make up the

complete product. One limitation of this

approach has already been mentioned; price

is left out. But for many "pure" products, this

conceptualization can be helpful in bundling

different augmentations for different

markets.

Customers are now becoming more involved

in the creation of benefits. Consider a "pure"

product like Campbell's cream of chicken

soup. The consumer may prepare that can as

a bowl of soup, but it could also be used as

an ingredient in a recipe like king ranch

chicken. As far as the consumer goes, no

benefit is experienced until the soup is

eaten; thus, the consumer played a part in

the creation of the final product when the

soup was an ingredient in the king ranch

chicken recipe. Or suppose your school's

cafeteria made king ranch chicken for you to

consume. In that case, you both ate a

product and consumed a service.

Some people argue that focusing too much

on the customer can lead to too little

product development or poor product

development. These people believe that

customers often have difficulty seeing how

an innovative new technology can create

benefits for them. Researchers and

entrepreneurs frequently make many

discoveries, and then products are created

as a result of those discoveries. 3M's Post-it

notes are an example. The adhesive that

made it possible for Post-it notes to stick

and restick was created by a 3M scientist

who was actually in the process of trying to

make something else. Post-it notes came

later.

Product Levels and Product Lines

A product's technology platform is the core

technology on which it is built. Take for

example, the iPod, which is based on MP3

technology. In many cases, the development

of a new offering is to take a technology

platform and rebundle its benefits in order

to create a different version of an already-

existing offering. For example, in addition to

the iPod Touch, Apple offers the Shuffle and

the Nano. Both are based on the same core

technology.

In some instances, a new offering is based

on a technology platform originally designed

to solve a different problem. For example, a

number of products originally were designed

to solve the problems facing NASA's space-

traveling astronauts. Later, that technology

was used to develop new types of offerings.

EQyss's Micro Tek pet spray, which stops

pets from scratching and biting themselves,

is an example. The spray contains a

trademarked formula developed by NASA to

decontaminate astronauts after they return

from space.

A technology platform isn't limited to

tangible products. Knowledge can be a type

of technology platform in a pure services

environment. For example, the bioesthetic

treatment model was developed to help

people who suffer from TMJ, a jaw disorder

that makes chewing painful. A dentist can be

trained on the bioesthetic technology

platform and then provide services based on

it. There are, however, other ways to treat

TMJ that involve other platforms or bases of

knowledge and procedures (such as surgery).

Few firms survive by selling only one

product. Most firms sell several offerings

designed to work together to satisfy a broad

range of customer needs and desires. A

product line is group of related offerings.

Product lines are created to make marketing

strategies more efficient. Campbell's

condensed soups, for example, are basic

soups sold in cans with red labels. But

Campbell's Chunky is a ready-to-eat soup

sold in cans that are labeled differently.

Most consumers expect there to be

differences between Campbell's red-label

chicken soup and Chunky chicken soup,

even though they are both made by the

same company.

When new but similar

products are added to

the product line, it is

called a line extension.

A product line can be broad, as in the case

of Campbell's condensed soup line, which

consists of several dozen different flavors.

Or, a product line can be narrow, as in the

case of Apple's iPod line, which consists of

only a few different devices. The number of

offerings in a single product line—that is,

whether the product line is broad or narrow

—is called line depth. When new but similar

products are added to the product line, it is

called a line extension. If Apple introduces a

new iPhone to the iPhone family, that would

be a line extension. Companies can also

offer many different product lines. Line

breadth (or width) is a function of how many

different, or distinct, product lines a

company has. For example, Campbell's has a

Chunky soup line, condensed soup line, kids'

soup line, lower sodium soup line, and a

number of nonsoup lines, like Pace Picante

sauces, Prego Italian sauces, and crackers.

The entire assortment of products that a

firm offers is called the product mix.

There are four offering levels:

the basic offering (e.g., the iPod

Shuffle)

the offering's technology platform (the

MP3 format or storage system used by

the Shuffle)

the product line to which the offering

belongs (Apple's iPod line of MP3

music players)

the product category to which the

offering belongs (MP3 players as

opposed to iPhones)

Companies market

offerings composed of a

combination of tangible

and intangible

characteristics for certain

prices. During the

Industrial Revolution, firms

focused primarily on

products and not so much

on customers. The service-

dominant perspective to

marketing integrates three

different dimensions of an

offering—not only the

product, but also its price

and the services associated

with it. This perspective

helps marketers think more

like their customers, which

Key Points

helps firms add value to

their offerings. An offering

is based on a technology

platform, which can be

used to create a product

line. A product line is a

group of similar offerings. A

product line can be deep

(many offerings of a similar

type) and/or broad

(offerings that are very

different from one another

and cover a wide range of

customers' needs). The

entire assortment of

products that a company

offers is called the product

mix.

Types of Consumer Offerings

Consumer offerings fall into four general

categories:

convenience offerings

shopping offerings

specialty offerings

unsought offerings

In this section, we will discuss each of these

categories. Keep in mind that the categories

are not a function of the characteristic of

the offerings themselves. Rather, they are a

function of how consumers want to

purchase them, which can vary from

consumer to consumer. What one consumer

considers a shopping good might be a

convenience good to another consumer.

Convenience Offerings

Convenience offerings are products and

services consumers generally don't want to

put much effort into shopping for because

they see little difference between

competing brands. For many consumers,

bread is a convenience offering. A consumer

might choose the store in which to buy the

bread but be willing to buy whatever brand

of bread the store has available. Marketing

convenience items is often limited to simply

trying to get the product in as many places

as possible where a purchase could occur.

Closely related to convenience offerings are

impulse offerings, or items purchased

without any planning. The classic example is

Life Savers, originally manufactured by the

Life Savers Candy Company, beginning in

1913. The company encouraged retailers

and restaurants to display the candy beside

their cash registers and to always give

customers a nickel back as part of their

change to encourage them to buy one

additional item—a roll of Life Savers, of

course!

Shopping Offerings

A shopping offering is one for which the

consumer will make an effort to compare

and select a brand. Consumers believe there

are differences between similar shopping

offerings and want to find the right one or

the best price. Buyers might visit multiple

retail locations or spend a considerable

amount of time visiting websites and reading

reviews about the product, such as the

reviews found in Consumer Reports.

Consumers often care about brand names

when they're deciding on shopping goods. If

a store is out of a particular brand, then

another brand might not do. For example, if

you prefer Crest Whitening Expressions

toothpaste and the store you're shopping at

is out of it, you might put off buying the

toothpaste until your next trip to the store.

Or you might go to a different store, or buy

a small tube of some other toothpaste until

you can get what you want. Note that even

something as simple as toothpaste can

become a shopping good for someone very

interested in dental health—perhaps after

they've read online product reviews or

consulted with her dentist. That's why

companies like Procter & Gamble, the maker

of Crest, work hard to influence not only

consumers but also people like dentists,

who can influence the sale of their products.

Specialty Offerings

Specialty offerings are highly differentiated

offerings, and the brands under which they

are marketed are very different across

companies, too. For example, an Orange

County Chopper or Iron Horse motorcycle is

likely to be far different than a Kawasaki or

Suzuki motorcycle in terms of its available

features. Typically, specialty items are

available only through limited channels. For

example, exotic perfumes available only in

exclusive outlets are considered specialty

offerings. Specialty offerings are purchased

less frequently than convenience offerings.

Therefore, the profit margin on them tends

to be greater.

Note that while marketers try to distinguish

between specialty offerings, shopping

offerings, and convenience offerings, it is

the consumer who ultimately makes the

decision. Therefore, what might be a

specialty offering to one consumer may be a

convenience offering to another. For

example, one consumer may never go to

Sport Clips or Ultra-Cuts because hair

styling is seen as a specialty offering. A

consumer at Sport Clips might consider it a

shopping offering, while a consumer for

Ultra-Cuts may view it as a convenience

offering. The choice is the consumer's.

Marketing specialty goods requires building

brand name recognition in the minds of

consumers and educating them about your

product's key differences. This is critical. For

fashion goods, the only point of difference

may be the logo on the product (for

example, an Izod versus a Polo label). Even

so, marketers spend a great deal of money

and effort to try to get consumers to

perceive these products differently than

their competitors'.

Unsought Offerings

Unsought offerings are those that buyers do

not generally want to have to shop for until

they need them. Towing services and funeral

services are generally considered unsought

offerings. Marketing unsought items is

difficult. Some organizations try to presell

the offering, such as preneed sales in the

funeral industry or towing insurance in the

auto industry. Other companies, such as

insurance companies, try to create a strong

awareness among consumers so that when

the need arises for these products,

consumers think of their organizations first.

Convenience offerings,

shopping offerings,

specialty offerings, and

unsought offerings are the

major types of consumer

offerings. Convenience

offerings often include

life's necessities (bread,

milk, fuel, and so forth), for

which there is little

difference across brands.

Shopping goods vary, and

many consumers develop

strong preferences for

some brands versus others.

Specialty goods are even

more exclusive. Unsought

goods are a challenge for

marketers because

Key Points

customers do not want to

have to shop for them until

they need them.

Types of Business-to-Business

(B2B) Offerings

Just like there are different types of

consumer offerings, there are different

types of business-to-business (B2B)

offerings as well. But unlike consumer

offerings, which are categorized by how

consumers shop, B2B offerings are

categorized by how they are used. The

primary categories of B2B offerings are as

follows:

capital equipment offerings

raw materials offerings

original equipment manufacturer

(OEM) offerings

maintenance, repair, and operations

(MRO) offerings

facilitating offerings

Capital Equipment Offerings

A capital equipment offering is any

equipment purchased and used for more

than one year and depreciated over its

useful life. Machinery used in a

manufacturing facility, for example, would

be considered capital equipment.

Professionals who market capital equipment

often have to direct their communications

to many people within the firms to which

they are selling, because the buying

decisions related to the products can be

rather complex and involve many

departments. From a marketing standpoint,

deciding who should get what messages and

how to influence the sale can be very

challenging.

Raw materials offerings are materials firms

offer other firms so they can make a product

or provide a service. Raw materials offerings

are processed only to the point required to

economically distribute them. Lumber is

generally considered a raw material, as is

iron, nickel, copper, and other ores. If iron is

turned into sheets of steel, it is called a

manufactured material because it has been

processed into a finished good but is not a

standalone product; it still has to be

incorporated into something else to be

usable. Both raw and manufactured

materials are then used in the manufacture

of other offerings.

Raw materials are often thought of as

commodities, meaning that there is little

difference among them. Consequently, the

competition to sell them is based on price

and availability. Natuzzi is an Italian

company that makes leather furniture. The

wood Natuzzi buys to make its sofas is a

commodity.

OEM Offerings or Components

An original equipment manufacturer (OEM)

is a manufacturer or assembler of a final

product. An OEM purchases raw materials,

manufactured materials, and component

parts and puts them together to make a final

product. OEM offerings or components, like

an on-off switch, are components, or parts,

sold by one manufacturer to another that

get built into a final product without further

modification. The metal feet of a Natuzzi

couch are probably made by a manufacturer

other than Natuzzi, making the feet an OEM

component. Dell's hard drives installed in

computer kiosks like the self-service kiosks

in airports that print your boarding passes

are another example of an OEM component.

MRO Offerings

Maintenance, repair, and operations (MRO)

offerings refer to products and services used

to keep a company functioning. Janitorial

supplies are MRO offerings, as is hardware

used to repair any part of a building or

equipment. MRO items are often sold by

distributors. However, you can buy many of

the same products at a retail store. For

example, you can buy nuts and bolts at a

hardware store. A business buyer of nuts

and bolts, however, will also need repair

items that you don't, such as very strong

solder used to weld metal. For convenience

sake, the buyer would prefer to purchase

multiple products from one vendor rather

than driving all over town to buy them. So,

the distributor sends a salesperson to see

the buyer. Most distributors of MRO items

sell thousands of products, set up online

purchasing websites for their customers, and

provide a number of other services to make

life easier for them.

Facilitating Offerings

Facilitating offerings include products and

services that support a company's

operations but are not part of the final

product it sells. Marketing research services,

banking and transportation services, copiers

and computers, and other similar products

and services fall into this category.

Facilitating offerings might not be central to

the buyer's business, at least not the way

component parts and raw materials are. Yet

to the person who is making the buying

decision, these offerings can be very

important. If you are a marketing manager

who is selecting a vendor for marketing

research or choosing an advertising agency,

your choice could be critical to your

personal success. For this reason, many

companies that supply facilitating offerings

try to build strong relationships with their

clients.

Business buyers purchase

various types of offerings

to make their own

offerings. Some of the

types of products they use

are raw materials,

manufactured materials,

and component parts and

assemblies, all of which can

become part of an offering.

MRO (maintenance, repair,

and operations) offerings

are those that keep a

company's depreciable

assets in working order.

Facilitating offerings are

products and services a

company purchases to

support its operations but

Key Points

are not part of the firm's

final product.

Managing the Offering

Managing a company's offerings presents a

number of challenges. Depending on the

size of the company and the breadth of the

company's offerings, several positions may

be needed.

A brand manager is one such position. A

brand manager is the person responsible for

all business decisions regarding offerings

within one brand. By business decisions, we

mean making decisions that affect profit and

loss, which include such decisions as which

offerings to include in the brand, how to

position the brand in the market, pricing

options, and so forth.

A brand manager is

often charged with

running the brand as if

it were its own

separate business.

A brand manager is much more likely to be

found in consumer marketing companies.

Typically, B2B companies do not have

multiple brands, so the position is not

common in the B2B environment. What you

often find in a B2B company is a product

manager, someone with business

responsibility for a particular product or

product line. Like the brand manager, the

product manager must make many business

decisions, such as which offerings to

include, advertising selection, and so on.

Companies with brand managers include

Microsoft, Procter & Gamble, SC Johnson,

Kraft, Target, General Mills, and ConAgra

Foods. Product managers are found at

Xerox, IBM, Konica-Minolta Business

Solutions, Rockwell International, and many

others.

Most brand managers have an

undergraduate degree in marketing, but it

helps to have a strong background in either

finance or accounting because of the

profitability and volume decisions brand

managers have to make.

In some companies, a category manager has

responsibility for business decisions within a

broad grouping of offerings. For example, a

category manager at SC Johnson may have

all home cleaning products, which would

mean that brands such as Pledge, Vanish,

Drano, Fantastik, Windex, Scrubbing

Bubbles, and Shout would be that person's

responsibility. Each of those brands may be

managed by a brand manager who then

reports directly to the category manager.

At the retail level, a category manager at

each store is responsible for more than just

one manufacturer's products. The home

cleaning category manager would have

responsibility for offerings from SC Johnson,

as well as Procter & Gamble, Colgate-

Palmolive, and many other producers.

Another option is to create a market

manager, who is responsible for business

decisions within a market. In this case, a

market can be defined as a geographic

market or region, a market segment such as

a type of business, or a channel of

distribution. For example, SC Johnson could

have regional insect control managers.

Regional market managers would make

sense for insect control because weather

has an influence on which bugs are a

problem at any given time. For example, a

southern regional manager would want

more inventory of the repellent Off! in

March because it is already warm and the

mosquitoes are already breeding and biting

in the southern United States.

In B2B markets, a market manager is more

likely to have responsibility for a particular

market segment, (e.g., hospital health care

professionals or doctor's offices). All

customers like these (retail, wholesale, and

so forth) in a particular industry compose

what's called a vertical market, and the

managers of these markets are called

vertical market managers. B2B companies

organize in this way for the following

reasons:

Buying needs and processes are likely

to be similar within an industry.

Channels of communication are likely

to be the same within an industry but

different across industries.

Because magazines, websites, and trade

shows are organized to serve specific

industries or even specific positions within

industries, B2B marketers find vertical

market structures for marketing

departments to be more efficient than

organizing by geography.

Market managers sometimes report to brand

managers or are a part of their firms' sales

organizations and report to sales executives.

Market managers are less likely to have as

much flexibility in terms of pricing and

product decisions and have no control over

the communication content of marketing

campaigns or marketing strategies. These

managers are more likely to be tasked with

implementing a product or brand manager's

strategy and be responsible for their

markets. Some companies have market

managers but no brand managers. Instead,

marketing vice presidents or other

executives are responsible for the brands.

Brand managers decide

what products are to be

marketed and how. Other

important positions include

category managers, market

managers, and vertical

market managers. Category

managers are found in

consumer markets, usually

in retail. Market managers

can be found in both

consumer markets and B2B

markets. However, vertical

market managers are found

only in B2B markets. Some

companies have market

managers but no brand

managers. Instead, a vice

president of marketing or

Key Points

other executive is

responsible for the brands.

Licenses and Attributions

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arketing-principles-v2.0/s09-creating-

offerings.html) from Marketing Principles

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