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Chapter 8 Product and Services Strategy 1 What is a Product? A Product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Includes: Physical Objects Services Events Persons Places Organizations Ideas Combinations of the above 2 What is a Service? A Service is a form of product that consist of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything. Examples include: Banking Hotels Tax Preparation Home Repair Services 3 Products, Services, and Experiences Tangible Good Pure With Tangible Accompanying Good Services Soap Hybrid Offer Service With Accompanying Minor Goods Pure Service Auto With Airline Trip Accompanying Restaurant With Doctor’s Repair Accompanying Exam Services Snacks 4 Levels of Product (Fig. 8.1) Augmented Product Installation Packaging Delivery & Credit Brand Name Quality Level Core Benefit or Service Features Design AfterSale Service Warranty Actual Product Core Product 5 Product Classifications Consumer Products Convenience Products Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers Shopping Products Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances Specialty Products Unsought Products Special purchase efforts New innovations High price Unique characteristics Brand identification Few purchase locations i.e Porsche, Rolex Products consumers don’t want to think about these products Require much advertising & personal selling i.e Life insurance, blood donation 6 Product Classifications Other Marketable Entities Activities undertaken to create, maintain, or change the attitudes and behavior toward the following: Organizations - Profit (businesses) and nonprofit (schools and churches). Persons – Politicians, entertainers, sports figures, doctors and lawyers. Places - Business sites and tourism. Ideas (social ideas marketing) – public health campaigns, environmental campaigns, and others such as family planning, or human rights. 7 Place Marketing: Vacation spots are the subject of most place marketing Click orp ress space bar to re tu rn. Individual Product Decisions (Fig. 8.2) Product Attributes Branding Labeling Packaging Product Support Services 8 Product Attributes Developing a Product or Service Involves Defining the Benefits that it Will Offer Such as: Product Quality Ability of a Product to Perform Its Functions; Includes Level & Consistency Product Features Help to Differentiate the Product from Those of the Competition Product Style & Design Process of Designing a Product’s Style & Function 9 This Land-O-Lakes ad shows the depth of the brand. Branding Consistency Quality & Value Attributes Advantages of Brand Names Identification High Brand Loyalty Brand Equity Strong Brand Association Name Awareness Perceived Quality 10 Major Branding Decisions (Fig. 8.3) Brand Name Selection Selection Protection Brand Sponsor Manufacturer’s Brand Private Brand Licensed Brand Co-branding Brand Strategy Line Extensions Brand Extensions Multibrands New Brands 11 Four Brand Strategies (Fig. 8.4) Product Category Existing Brand Name Existing New New Line Extension Brand Extension Multibrands New Brands 12 Brand Strategy Line Extension Existing brand names extended to new forms, sizes, and flavors of an existing product category. Brand Extension Existing brand names extended to new or modified product categories. Multibrands New brand names introduced in the same product category. New Brands New brand names in new product categories. 13 This business-to-business ad offers to provide ecologically sound packaging. Besides its impact on the environment, what aspects of packaging can help/hinder product sales? How have these products become known by their packaging: •Cracker Jacks? •Capri Sun? Packaging Activity of designing and producing the container or wrapper for a product. Packaging used to just contain and protect the product. Packing now has promotional value and marketers should: Establish a packaging concept, Develop specific elements of the package, Tie together elements to support the positioning and marketing strategy. 14 A classic labeling example . Labeling What about thi s l abe l he lps to se ll the pr oduc t? Click or pres s s pacebar to r et urn. Printed information appearing on or with the package. Performs several functions: Identifies product or brand Describes several things about the product Promotes the product through attractive graphics. 15 Product - Support Services Companies should design its support services to profitably meet the needs of target customers and gain competitive advantage. How? Step 1. Survey customers to assess the value of current services and to obtain ideas for new services. Step 2. Assess costs of providing desired services. Step 3. Develop a package of services to delight customers and yield profits to the company. 16 Product Mix Decisions Consistency Width - number of different product lines Length - total number of items in product lines Product Mix all the product lines & items offered Depth - number of versions of each product 17 Discussion Connections Using P&G’s Web site (www.pg.com) , its annual report, or other sources, develop a list of all the company’s product lines and individual products. What surprises you about this list of products? Is P&G’s product mix consistent? What overall strategy or logic appears to have guided the development of this product mix? 18 Nature and Characteristic of a Service Intangibility Inseparability Variability Perishability Can’t be seen, tasted, felt, heard, or smelled before purchase. Can’t be separated from service providers. Quality depends on who provides them and when, where and how. Can’t be stored for later sale or use. 19 Marketing Strategies for Service Firms Managing Service Differentiation Develop differentiated offer, delivery and image. Managing Service Quality Empower front-line employees, Become “Customer obsessed”, Develop high service quality standards, Watch service performance closely. Managing Service Productivity Train current or new employees better, Work on quality as well as quantity, Utilize technology. 20 International Product and Services Marketing Decide Which Products & Services to Introduce Decide How Much to Standardize or Adapt Packaging Presents New Challenges Service Marketers Face Special Challenges Trend Toward Global Service Companies Will Continue 21 Review of Concept Connections Define product and the major classifications of products and services. Describe the roles of product and service branding, packaging, labeling, and product support services. Explain the decisions companies make when developing product lines and mixes. Identify the four characteristics that affect the marketing of a service. Discuss the additional marketing considerations for services. 22 Chapter 9 New-Product Development and Product Life-Cycle Strategies 23 New-Product Development Strategies Strategies for Obtaining New Product Ideas Acquired Companies Original Products Acquired Patents Product Improvements Acquired Licenses Product Modifications New Brands 24 Causes of New Product Failures One study estimated that as many as 80% of new consumer packaged products failed. Only about 40% of new consumer products are around 5 years after introduction. Why? Overestimation of market size, Product design problems, Product incorrectly positioned, priced or advertised, Product may have been pushed despite poor marketing research findings, Costs of product development, or Competitive actions 25 Improving New-Product Success New product success depends on having a: Unique superior product (one with higher quality, features, and value in use), & Well-defined product concept (a defined target market, product requirements, and benefits). To create successful new products, the company must: understand its customers, markets and competitors, & develop products that deliver superior value to customers. 26 Sources of New product Ideas Idea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From: Customers Competitors Distributors Suppliers 27 Product Life Cycle (Fig. 9.2) Sales and Profits ($) Sales Profits Time Product Development Introduction Growth Maturity Decline Losses/ Investments ($) Sales and Profits Over the Product’s Life From Inception to Demise 28 Applications of the Product Life Cycle The PLC concept can describe a: Product class which has the longest life cycles (i.e. gas-powered cars), Product form which tend to have the standard PLC shape (i.e. minivans), Brand which can change quickly because of changing competitive attaches and responses (i.e. Ford Taurus), Style which is a basic and distinctive mode of expression, Fashion which is a popular style in a given field, Fad which is a fashion that enters quickly, is adopted quickly and declines fast. 29 Problems Using the PLC The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life-Cycle, However Some Problems Can Arise: Trouble identifying Which Stage of the PLC the Product Is In Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLC Strategy is Both a Cause and a Result of the Product’s Life Cycle 30 Egg Beaters had to first convince people that they needed an egg substitute (overcoming a strong negative response to “fake eggs”) then demonstrate that their product was a perfect solution. Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Low sales Costs High cost per customer Profits Negative or low Marketing Objectives Create product awareness and trial Product Offer a basic product Price Usually is high; use cost-plus formula Distribution High distribution expenses Build product awareness among early adopters and dealers Advertising 31 Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Rapidly rising sales Costs Average cost per customer Profits Rising profits Marketing Objectives Maximize market share Offer new product features, extensions, service, and warranty Price to penetrate market Product Price Distribution Advertising Increase number of distribution outlets Build awareness and interest in the mass market 32 Maturity Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Peak sales Costs Low cost per customer Profits High profits, then lower profits Product Maximize profits while defending market share Diversify brand and models Price Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits Marketing Objectives 33 Maturity Stage of the PLC Company tries to increase consumption of the current product. Changing characteristics such as quality, features, or styles to attract new users. Company tries to improve sales by changing one or more marketing mix elements. 34 Decline Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Declining sales Costs Low cost per customer Profits Declining profits Reduce expenditure and maintain, reposition, harvest or drop the product Phase out weak items Marketing Objectives Product Price Distribution Advertising Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers 35 Review of Concept Connections Explain how companies find and develop new-product ideas. Describe the stages of the product lifecycle. Describe how marketing strategies change during the product’s life-cycle. 36