Basic Differences between Goods and Services

Products can be grouped in a variety of ways. One approach is to

distinguish between goods and services, which differ in fundamental re-

spects.

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Although the distinction between goods and services is important,

the line between the two types of products is often blurry. There is a

continuum with pure goods, like toothpaste, on one end and pure ser-

vices, like medical attention, on the other. In between lies a vast middle

ground where goods and services are bundled to create a total package

that satisfies the consumer. The mail-order-catalogue service is a typical

example.

Text 4

Read the text. What title can you suggest? Explain what has influenced your decision.

The major issue in product design is selecting the characteristics and

attributes a product will have. Engineers must consider several factors

when designing new products and services. It is difficult to range them

according to their importance but among the first are producibility and

cost. Producibility means the extent to which a product or service can

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be easily produced using existing facilities and processes. Cost refers to

the value of all inputs used to produce the product or service, including

raw materials, labor, plant and equipment overheads, and similar fac-

tors. Products that are less producible tend to cost more.

Perhaps the most talked about issue in the area of product design to-

day is quality. Product quality is the totality of features and characteristics

of a product or service that bear on its ability to satisfy stated or implied

needs. An important indicator of quality is a warranty for the product.

Warranty is the producer’s statement of what it will do to compensate the

buyer if the product is defective or does not work properly. Many sellers

offer a guarantee instead of or in addition to a warranty. A guarantee is

a promise that the product is as represented and will perform properly.

Typically, if the product fails to perform, the organization making the

guarantee replaces the product or refunds its cost. These promises imply

that the manufacturer is confident in the product’s quality.

It is necessary to distinguish between grade and quality. Grade rep-

resents the addition or deletion of features or characteristics to satisfy

additional needs, usually at a higher cost. Quality refers to satisfying

customer requirements. Japanese manufacturers have shown that high-

quality goods and services are actually less costly to produce in the long

run. This is because less scrap and rework are involved, and fewer pur-

chases are returned by customers.

Styling (colour, shape, size and so on) is also very important for prod-

ucts ranging from tissue paper to office furniture. Styling should facili-

tate a product’s function. Nowadays product designers are increasingly

emphasizing the human side of their products’ design – human factors

engineering, or ergonomics. The last but not the least characteristic is

materials that go into making a product. It is of great importance as it

can affect a product’s sales appeal.

The product development process involves analysis of the market-

place, the buyer, the company’s capabilities, and the other economic

potential of a new product idea. For every one hundred generated ideas,

only one or two salable products may emerge from the lengthy and ex-

pensive process of product development. As a rule, this process is both

expensive and time-consuming.

The first step -- generating and screening of ideas -- is to come up

with ideas that will satisfy unmet needs. From the mass of ideas, the

company culls a few that appear to be worthy of further development.

A product idea that survives the screening stage is subject to a business

analysis. At this point the question is: Can the company make enough

money on the product to justify the investment? To answer the question,

companies forecast the probable sales of the product.

The next step is to create and test a few samples, or prototypes, of

the product, including the packaging. During the product-testing stage,

a small group of consumers actually uses the product, often in compari-

son tests with existing brands. If the results are good, the next step is test

marketing. The company introduces the product in selected areas of the

country and monitor consumer reactions.

The final stage of development is commercialization, the large-scale

production and distribution of those products that have survived the

testing process. This phase requires the coordination of many activi-

ties – manufacturing, packaging, distribution, pricing, and promotion.

Look through the text once again and answer the following questions:

1. What is the major issue in product design?

2. What are the main “ingredients” of product design?

3. Why is quality the most talked about issue in the area of product

design?

4. What role does styling play in product design?

5. What are the steps of product development?

Text 5

Read the text. Be ready to explain what a product life cycle is, how many stages product

passes through, the objectives of each stage.