Topic 11 - Product and Service Strategies

PRODUCT AND SERVICE STRATEGIES

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WHAT IS A PRODUCT?  People buy want satisfaction, not objects.  Example: Consumers buy televisions because they want entertainment, not because they want a box with a screen.

 Product Bundle of physical, service, and symbolic attributes designed to satisfy a customer’s wants and needs.

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GOODS AND SERVICES?

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 Services Intangible tasks that satisfy the needs of consumer and business users.  Goods Tangible products that customers can see, hear, smell, taste, or touch.

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SERVICES  Services are intangible

 Services are inseparable from the service providers.  Services are perishable.  Companies cannot easily standardize services.  Buyers often play important roles in the creation and distribution of services.  Service standards show wide variations.  Products often blur the distinction between goods and services.  Example: Rental car company is a service that provides a good.

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CLASSIFYING GOODS AND SERVICES Consumer Products

Business Products

Product destined for use by ultimate consumers.

Product that contributes directly or indirectly to the output of other products for resale; also called industrial or organizational product.

Some products fall into both categories. 5

TYPES OF CONSUMER PRODUCTS  Buyer’s perception of a need for the product Unsought Products

 Marketed to consumers who may not yet recognize any need for them  Most consumers recognize their own needs for various types of consumer purchases and actively seek them

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TYPES OF CONSUMER PRODUCTS  Buyer’s customers’ buying behavior

Convenience Products  goods and services that consumers want to purchase frequently, immediately, and with minimal effort Impulse

Staples

Emergency

purchased on the spur of the moment,

bought constantly to replenish and maintain a ready inventory, with many competitors offering these products

bought constantly to replenish and maintain a ready inventory, with many competitors offering these products 7

Convenience Products Store location can boost a product’s visibilitY

Product location within a store, and on a shelf, also makes a difference Slotting allowances, or slotting fees, are often charged to large firms in exchange for a guaranteed display of their merchandise in the most visible spots on store shelves 8

TYPES OF CONSUMER PRODUCTS Shopping Products  purchased only after the consumer compares competing offerings on characteristics  They’re generally more expensive

 The purchaser lacks complete information prior to the buying trip, and gathers it in the process  They often carry warranties and after-sale service terms  A store’s name and reputation have considerable influence on consumer buying behavior  The personal selling efforts of salespeople provide important promotional support 9

Shopping Products Homogenous one brand often seems much like another

differentiate homogeneous products from competing products in terms price and value, quality, appeal, or uniqueness

Heterogenous

Basic differences seem to stand out Perceptions of style, color, and fit can all affect consumer choices

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TYPES OF CONSUMER PRODUCTS Specialty Products  offer unique characteristics that cause buyers to prize those particular brands  carry high prices and many represent well-known brands  They know what they want and they are willing to pay for it  Buyers begin shopping with complete information and refuse to accept substitutes  Some specialty products are sold for less through a firm’s company-owned discount outlets or in designated discount areas of their retail stores 11

CLASSIFYING CONSUMER SERVICES What is the nature of the service? What type of relationship does the service organization have with its customers?

How much flexibility is there for customization and judgment on the part of the service provider? Do demand and supply for the service fluctuate? How is the service delivered? 12

APPLYING CONSUMER PRODUCT CLASSIFICATION SYSTEM  Buying behavior and marketing mix choices patterns differ for different product types

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APPLYING CONSUMER PRODUCT CLASSIFICATION SYSTEM

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TYPES OF BUSINESS PRODUCTS  Professional customers - their jobs require rational, costeffective purchase decisions  Use rather than buying behavior

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TYPES OF BUSINESS PRODUCTS Installations specialty products of the business market This classification includes major capital investments: major decisions : last a long time and expensive Negotiations are longer and greater no. of decision makers Efficiency and performance not price

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Installations Customized – design specific Training and after sales included Highly trained sales reps are needed Direct to customer

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TYPES OF BUSINESS PRODUCTS Accessory Equipment Capital items that cost less and last for shorter periods than installations Few decision makers participate in a purchase Quality & service but price may significantly affect Continuous representation over a widespread geographic dispersion of purchasers is required Advertising is an important 18

TYPES OF BUSINESS PRODUCTS Components Parts and Materials finished business products of one producer that become part of the final products of another producer Need regular, continuous supplies of uniform-quality products Contract to purchase these items for set periods of time direct sales and satisfied customers often become regular buyers

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TYPES OF BUSINESS PRODUCTS Raw Materials Resemble component parts and materials in that they become part of the buyers’ final products Carry grades determined by set criteria, assuring purchasers of the receipt of standardized products of uniform quality Sold directly to the firm Price seldom a deciding factor Purchased from the firms they consider best able to deliver the required quantities and qualities 20

TYPES OF BUSINESS PRODUCTS Supplies Regular expenses for daily operations, not part of a final product MRO items Maintenance items. Repair items Operating supplies Routine job duty Standardized leading to heavy price competition spends little time on these decisions

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TYPES OF BUSINESS PRODUCTS Business Services  Includes intangible products that firms buy to facilitate their production and operating processes  Many service providers sell the same services to both consumers and organizational buyers  purchase additional services that assist their operations but are not of the final product  Price strongly influence purchase decisions  Purchase or do

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QUALITY AS A PRODUCT STRATEGY

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POOR QUALITY

discovered in a newly purchased item can leave an impression that will lead customers to make different decisions in the future leave bad impressions with consumers

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TOTAL QUALITY MANAGEMENT

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 Expects all of a firm’s employees to continually improve products and work processes with the goal of achieving customer satisfaction and world-class performance To achieve quality, support must come from top management in the form of resources and staff

Managers are expected to communicate the goals of total quality to all staff

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ISO 9002 STANDARDS

 define international criteria for quality management and quality assurance  Switzerland to ensure consistent quality among products manufactured and sold in the EU  Many European companies require suppliers to have ISO certification as a condition of doing business with them

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BENCHMARKING

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 Purpose is to achieve superior performance that results in a competitive advantage.  Involves three main activities: Identifying manufacturing or business processes that need improvement Comparing internal processes to those of industry leaders. Implementing changes for quality improvement.  Internal and External Analyses 1

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QUALITY OF SERVICES

 Service encounter—point at which customer and service provider interact, which usually determines the customer’s perception of the quality of service.  Service quality—expected and perceived quality of a service offering.

TANGIBLES

RESPONSIVENESS

RELIABILITY

ASSURANCE EMPATHY 29

DEVELOPMENT OF PRODUCT LINES  Product line Series of related products offered by one company.  Example: Home furnishings product line by RL  Marketing entire product lines can help company grow, economize company resources, and exploit product life cycles.

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DEVELOPMENT OF PRODUCT LINES Desire to Grow  Growth potential limited if company focuses on a single product.

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DEVELOPMENT OF PRODUCT LINES Enhancing Company’s Position in the Market  Entire lines of products make company more important to consumers and marketing intermediaries.

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DEVELOPMENT OF PRODUCT LINES Enhancing Company’s Position in the Market  Service involved with the variety of products that a firm sells (such as return policies or special programs) can enhance its position in the market

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DEVELOPMENT OF PRODUCT LINES Optimal Use of Company’s Resources By spreading the costs of operations over a series of products, a firm may reduce the average production and marketing costs for each product

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PRODUCT MIX  Assortment of product lines and individual product offerings that the company sells.  Right blend of product lines and products allows a firm to maximize sales opportunities within the limitations of its resources Product Mix Width

Product Mix Length

Product Mix Depth

refers to the number of product lines a firm offers

refers to the number of different products a firm sells

constantly to refers to variations in each product that the firm markets in its mix

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PRODUCT MIX DECISIONS  Adding depth, length, and width to product mixes requires careful thinking and planning, or the firm ends up with too many products, including some poor seller

 If a firm has ignored a consumer segment, it might increase its depth by offering a new variation  If a firm wants to achieve economies in sales and distribution, it may increase its width by adding a complementary line  If a firm wants to gain equal contributions from all products, it may lengthen or shorten its mix  If it wants to further expand, it may purchase lines from other companies or acquire entire companies through mergers or acquisitions 37

LINE EXTENSION  Adds individual offerings that appeal to different market segments while remaining closely related to the existing product line  A firm may assess its current product mix in order to determine the feasibility of a line extension

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PRODUCT LIFECYCLE  Progression of a product through introduction, growth, maturity, and decline stages.  concept applies to products or product not brands  no set time frame for a life cycle stage—

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LINE EXTENSIONS  Product life cycles can be extended indefinitely as a result of marketers’ decisions.

Increasing Frequency of Use  Convincing current customers to buy a product more frequently boosts total sales even if no new buyers enter the market  Marketers may persuade people to buy products year round that were once considered seasonal, or firms may add holiday or seasonal versions of products

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LINE EXTENSIONS Increasing No. Of Users  Attracting new customers who have not previously used the product.

 Marketers may promote the same products or services to previously neglected demographic segments

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LINE EXTENSIONS Increasing no. Of Uses  New applications extend a product’s life cycle.  Marketers may conduct contests or surveys to identify new uses for their products, since consumers are often the ones who come up with these ideas

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LINE EXTENSIONS Changing package sizes, labels, or product quality  Marketers may promote new individual sizes for food products, or highlight the new face of a product by changing its package or labeling  Example: Food marketers produce packages designed to appeal to one-person households.

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PRODUCT DELETION DECISIONS  Prune product lines and eliminate marginal products to avoid wasting a firm’s resources in the promotion of unpromising items  During the late maturity and early decline stages  May continue to carry an unprofitable item in order to provide a complete line for its customers

 Drop if:  Shortages of raw materials  Fit no longer fits the product line or the direction taken by the firm 1

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