Presentation on theme: "Product and Service Strategies"— Presentation transcript:
1 Product and Service Strategies Chapter 11Product and Service Strategies
2 Chapter ObjectivesDefine the term product and distinguish between goods and services and how they relate to the goods-services continuum.Explain the importance of the service sector in today’s marketplace.List the classifications of consumer goods and services and briefly describe each category.Describe each of the types of business goods and services.Explain how quality is used by marketers as a product strategy.Explain why firms develop lines of related products.Describe the way marketers typically measure product mixes and make product mix decisions.Explain the concept of the product life cycle and identify the different stages.Describe how a firm can extend a product’s life cycle.
3 What is a Product?Product: bundle of physical, service, and symbolic attributes designed to enhance buyers’ want satisfaction
4 What are Goods and Services? Service: intangible task that satisfies consumer or business user needsGoods-services continuum: device that helps marketers to visualize the differences and similarities between goods and services
5 Characteristics that distinguish services from goods: IntangibilityInseparabilityPerishabilityDifficulty of standardizationFrequent requirement of interaction between buyer and SellerVariability
6 Importance of the Service Sector The service sector makes up more than two-thirds of the economy.Services also play a crucial role in the international competitiveness of U.S. firms.Concerns include offshoring service jobs such as customer service call centers.
7 Property InsuranceAn Important Part of the Service Sector
8 Classifying Goods and Services for Consumer and Business Markets Consumer products: products destined for use by ultimate consumersBusiness (or B2B) products: those that contribute directly or indirectly to the output of other products for resaleAlso called industrial or organizational products
10 Convenience product: good or service that consumers want to purchase frequently, immediately, and with minimal effortImpulse goods and services are purchased on the spur of the moment.Staples are convenience goods and services that consumers constantly replenish to maintain a ready inventory.Emergency goods and services are bought in response to unexpected and urgent needs.
12 Shopping product: good or service purchased only after the customer compares competing offerings from competing vendors on such characteristics as price, quality, style, and colorTypically cost more than convenience purchases.Include tangible items.Shopper lacks complete information and gathers information during the buying process.
18 Installation: major capital investment by a business buyer that typically involves expensive and relatively long-lived products, such as a new factory or piece of heavy machinery
19 Accessory equipment: capital product, usually less expensive and shorter-lived that insulation, such as a laptop computerIndustrial distributor--wholesaling marketing intermediary
20 Component parts and materials: finished business products that become parts of buying firms’ final products, such as spark plugs for new carsRaw materials: business product, such as a farm product (wheat, cotton, soybeans) or natural product (coal, lumber, iron ore) that become part of a final product
21 Supplies: products that represent regular expenses necessary to carry out a firm’s daily operations but are not part of the final product. Supplies are sometimes called MRO itemsMRO [Maintenance, Repair, Operating Supplies] item: part of business supplies categorized as maintenance items, repair items, or operating supplies such as light bulbs, nuts and bolts used in repairing equipment, or pencils
22 Business services: intangible product purchased to facilitate a firm’s production and operating processes such as financial services, leasing of vehicles, legal advice and consultingWireless Communications for a Mobile Workforce
23 Quality as a Product Strategy Quality is a key component to a firm’s success in a competitive marketplace.Total quality management (TQM): approach that involves all employees in continually improving products and work processes to achieve customer satisfaction and world-class performance
24 Worldwide Quality Programs Malcolm Baldrige National Quality AwardISO 9002: set of standards for quality management and quality assurance developed by the International Standards Organization in Switzerland for countries in the European UnionBenchmarking: process in which an organization improves performance by continually comparing and measuring itself against the leading firms in an industry and implementing changes for quality improvement
25 Quality of ServicesService encounterService quality: Expected and perceived quality of a service offeringDetermined by five variables:Tangibles – physical evidenceReliability – consistent performanceResponsiveness – willingness to provide a serviceAssurances – communicated confidenceEmpathy – understand customer needs, and respond accordingly
26 Development of Product Lines Product Line: a series of related productsMotivationDesire to GrowEnhancing the Company’s Position in the MarketOptimal Use of Company ResourcesExploit the Product Life Cycle
28 The Product MixA company’s assortment of product lines and individual offeringsProduct Width--the number of product lines offered.Product Length--the number of different products a firm sells.Product Depth--variations in each product that a firm markets in its mix.
29 Product Mix DecisionsA firm may lengthen or widen its product mixA Company may decide to add variations that will attract new usersA product may be pruned or altered, and new product may extend the product life cycleLine extension: introduction of a new product that is closely related to other products in the firm’s existing line
30 The Product Life CycleProduct life cycle: progression of products through introduction, growth, maturity, and decline stages
31 Introduction StageFirm works to stimulate demand for the new market entryPromotional campaigns stress featuresAdditional promotions to intermediaries attempt to induce them to carry the productAlthough prices are typically high, financial losses are common due to heavy promotional and research-and-development costs
32 Growth StageSales volume rises rapidlyFirm usually begins to realize substantial profitsSuccess attracts competitorsFirm may need to make improvements to the productAdditional spending on promotion and distribution may be necessary
33 Maturity StageIndustry sales continue to grow, but eventually reach a plateauMany competitors have entered the market, and profits began to declineDifferences between competing products diminishAvailable supplies exceed industry demand for the first timeCompetition intensifies and heavy promotional outlays are common
34 Figure 11.15Using Promotion--and Product Extensions--to Extend the Maturity Stage of the Product Life Cycle
35 Decline StageInnovations or shifts in consumer preferences cause an absolute decline in industry salesIndustry profits fall -- sometimes become lossesFirms cut prices in a bid for the dwindling marketManufacturers gradually drop the declining items from their product lines
36 Extending the Product Life Cycle Marketers usually try to expand each stage of the life cycle for their products as long as possibleProduct life cycles can stretch indefinitely as a result of decisions designed to:Increase the frequency of use by current customersIncrease the number of users for the productFind new usesAdd new product featuresChange package sizes, labels
37 Quaker OatsA new application for a mature product
38 BounceFinding new uses for Bounce Fabric Softener
40 Product Deletion Decisions Product lines must sometimes be pruned and marginal products eliminatedThis decision is typically faced during the late maturity and early declined stages of the product life cycleAn unprofitable item may be continued in order to provide a complete line for customers