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11
CHAPTER
Product and Service
Strategies
Chapter Objectives
1 Define product and
distinguish between
goods and services and
how they relate to the
goods-services
continuum.
4 Describe each of the
types of business goods
and services.
5 Explain how quality is
used by marketers as a
product strategy.
2 Explain the importance of
6 Explain why firms
the service sector in
develop lines of related
today’s marketplace.
products.
3 List the classifications of
consumer goods and
services and briefly
describe each category.
7 Describe the way
marketers typically
measure product mixes
and make product mix
decisions.
8 Explain the concept of the
product life cycle and
identify the different
stages.
9 Describe how a firm can
extend a product’s life
cycle, and explain why
certain products may be
deleted.
CHAPTER 11 Product and Service Strategies
• Marketing mix Blending of the four strategy elements
—product, distribution, promotion, and price—to fit the
needs and preferences of a specific target market.
• Marketers develop strategies to sell both tangible
goods and intangible services.
CHAPTER 11 Product and Service Strategies
WHAT IS A PRODUCT?
• People buy want satisfaction, not objects.
• Product Bundle of physical, service, and symbolic attributes designed to
satisfy a customer’s wants and needs.
WHAT ARE GOODS AND SERVICES?
• Services Intangible tasks that satisfy the needs of consumer and business
users.
• Goods Tangible products that customers can see, hear, smell, taste, or
touch.
CHAPTER 11 Product and Service Strategies
IMPORTANCE OF THE SERVICE SECTOR
• Service sector makes up more than two-thirds of the U.S. economy.
• U.S. has maintained a trade surplus in services every year since the 1970.
• Homeshoring Hiring workers to do jobs from their homes.
• Marketing is growing in importance in the service sector.
CHAPTER 11 Product and Service Strategies
CLASSIFYING GOODS AND SERVICES FOR
CONSUMER AND BUSINESS MARKETS
• Consumer (B2C) products Product destined for use by ultimate
consumers.
• Business (B2B) products. Product that contributes directly or indirectly to
the out- put of other products for resale; also called industrial or
organizational product.
• Some products fall into both categories.
CHAPTER 11 Product and Service Strategies
TYPES OF CONSUMER PRODUCTS
Specialty Products
Unsought Products
Convenience Products
Shopping Products
CHAPTER 11 Product and Service Strategies
CLASSIFYING CONSUMER SERVICES
• Marketers rely on five questions to classify 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?
APPLYING THE CONSUMER PRODUCTS
CLASSIFICATION SYSTEM
• Buying behavior and marketing mix choices patterns differ for different
product types.
CHAPTER 11 Product and Service Strategies
TYPES OF BUSINESS PRODUCTS
• Categories emphasize product use rather than consumer buying behavior.
Installations
Business Services
MRO Supplies
Raw Materials
Accessory Equipment
Components
CHAPTER 11 Product and Service Strategies
QUALITY AS A PRODUCT STRATEGY
• Total quality management (TQM) Continuous effort to improve products
and work processes with the goal of achieving customer satisfaction and
world-class performance.
WORLDWIDE QUALITY PROGRAMS
• Leadership of several large U.S. corporations led to quality revolution of
the 1980s.
• U.S. Congress established the Malcolm Baldrige
National Quality Award to recognize excellence in
quality management.
• ISO 9002 standards implemented by the European Union define
international criteria for quality management and assurance.
• U.S. member body of ISO is National Institute of Standards and
Technology.
CHAPTER 11 Product and Service Strategies
BENCHMARKING
• 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.
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.
CHAPTER 11 Product and Service Strategies
DEVELOPMENT OF PRODUCT LINES
• Product line Series of related products offered by one company.
DESIRE TO GROW
• Growth potential limited if company focuses on a single product.
ENHANCING COMPANY’S POSITION IN THE MARKET
• Entire lines of products make company more important to consumers and
marketing intermediaries.
OPTIMAL USE OF COMPANY RESOURCES
• Spreading operations costs over a series of product lines reduces the
average production and marketing costs of each product.
CHAPTER 11 Product and Service Strategies
THE PRODUCT MIX
• Assortment of product lines and individual product offerings that the
company sells.
• Product mix width—Number of product lines a firm offers.
• Product mix length—Number of different products a firm sells.
• Product mix depth—Variations in each product that the firm markets in its
mix.
PRODUCT MIX DECISIONS
• Firms evaluate the effectiveness of the width, length, and depth to make
decisions about adding or eliminating products from their offerings.
• Line extension—adding individual offerings that appeal to different market
segments while remaining closely related to the existing product line.
CHAPTER 11 Product and Service Strategies
THE PRODUCT LIFE CYCLE
• Product life cycle Progression of a product through introduction, growth,
maturity, and decline stages.
STAGES IN THE PRODUCT LIFE CYCLE
Introduction
Growth
Maturity
Decline
CHAPTER 11 Product and Service Strategies
EXTENDING THE PRODUCT LIFE CYCLE
• 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.
INCREASING THE NUMBER OF USERS
• Attracting new customers who have not previously used the product.
CHAPTER 11 Product and Service Strategies
FINDING NEW USES
• New applications extend a product’s life cycle.
CHANGING PACKAGE SIZES, LABELS, OR PRODUCT
QUALITY
• Example: Food marketers produce packages designed to appeal to oneperson households.
• Example: Kraft’s 100-calorie Snack Packs, which package snacks in 100
calorie amounts.
CHAPTER 11 Product and Service Strategies
PRODUCT DELETION DECISIONS
• Marketers prune product lines and eliminate marginal products to preserve
limited resources.
• Firms may carry poor performing items to carry a complete product line.
• Shortages or raw materials can prompt a firm to discontinue production.
• Firm may drop products that don’t fit into the direction in which it plans to
grow.