THE VALUE OF A PRODUCT OFFER

The heart of a successful marketing program is a product offer that people want and need. But what do we mean when we say "product offer"? Is a service part of a product offer? Yes. Is an idea part of a product offer? Sure, people try to market (and sell) ideas. A product offer, then, is not necessarily something tangible nor is it always visible. Let's see if we can clarify what the term product offer means to a marketer.

First of all, notice that the same physical good (for example, a car) is worth different amounts to different people. How can that be? Clearly, a product offer's value is not determined by the good (e.g., car) itself but by the perceptions of the consumer; otherwise all physical goods would have the same value to different consumers. So the consumer determines a product offer's value.

Also, notice that product offers have value that goes beyond tangible features. For example, a car may have status value. A painting may have additional value simply because it is rare. A product offer's value, therefore, is determined by the consumers' tastes and desire to be different as well as the physical characteristics.

From a marketing standpoint, therefore, a product offer includes an intangible sense of value that the consumer perceives when evaluating the product offer. In simpler terms, a product offer is what the consumer thinks it is. If a consumer thinks a product offer is valuable, it is valuable to him or her. And if a consumer thinks a product offer has no value, it has no value until the consumer is convinced it does. The consumer, not the producer, determines a product offer's value.

There is no such thing as a "better" product offer in marketing. There are only product offers that consumers think are better. Many marketers make the mistake of making a better-quality product with the hope that consumers will buy the better quality. But a product has no quality until consumers perceive it. Since consumers can't see quality, they are not moved to buy by better quality unless it can be shown. Ford, Chrysler, and other American automobile producers are saying that "Quality is Job 1" and other such slogans, but until consumers perceive that quality, it does not exist (from a marketing perspective). Many consumers still believe that the Japanese make better-quality cars, whether or not that is true in reality.

To make a product offer better, make consumers think it is better. It does no good to improve a product unless consumers can be convinced that the improvement is there. This sounds confusing, but it becomes clear when we look at an example:

Which is a better product, a BMW Z4 Roadster or a Ford Focus? Be careful and think before you answer. (Take a poll of the class by having them raise their hands. Almost everyone will say that BMW is a better product.) If BMW is a better product, why do more people buy Ford Focuses? Someone must think that Ford Focuses are better products. (No," your students will say. "They know that BMW is better; they simply cannot afford one.")

Another point, then, is that cost is obviously an important part of what a consumer looks at when evaluating a product. We could say that a consumer looks at benefits of a product and then subtracts cost to get value. When evaluating a BMW versus a Focus, therefore, a consumer's evaluation process might look like this:

Benefits of a BMW                                Benefits of a Focus

                       Comfort                                    Price

                        Status                                      Mileage

                        Quality

                        Durability

                        Reliability

Value of a BMW           $35,000             Value of a Focus        $18,000

Cost of a BMW          -$50,000               Cost of a Focus       -$16,000

Net value                    -$15,000              Net value                     $2,000

In this case, the Focus would be the better product because it had more value to the consumer. That is why more consumers buy Focuses than BMWs. "But wait a minute," you say. "A BMW is still a better car." Yes, but the car is not the product. The product is the car as seen through the eyes of the consumer who is evaluating not just the car and its quality, but price as well.

The answer to the question "Which is the better product, a BMW or a Ford Focus?" is that it all depends. To some people, a BMW is a better product because they put more value on comfort, status, and so forth. To others, the Ford Focus is a better product because they put more value on price and mileage. Neither is a better product inherently, although we largely would agree that the BMW is a better car.

1. What is the product of a community college? (Be careful; the product is not what the school offers,  but what the school offers as seen through the eyes of students.

2. Which is the better product, what you get at a community college, or what you get at Harvard?

3. How can you make a product better?

4. Is a better-quality product perceived as a better product by consumers?

Locate the case, read and analyze and submit the questions and answers found at the end of the case.