Chapter Objectives Product and Service Strategies CHAPTER Define product and distinguish between goods and services and how they relate to the goods-services continuum. Explain the importance of the service sector in todays 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 products 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 priceto 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. 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 customers 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. Two of Fortunes top 10 most admired firms are pure service firms. Other eight provide services in conjunction with their products. U.S. has maintained a trade surplus in services every year since the 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. Example: Prescription drugs, which are marketed to doctors and to end users.

CHAPTER 11 Product and Service Strategies TYPES OF CONSUMER 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.

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.Malcolm Baldrige National Quality Award ISO 9002 standards implemented by the European Union define international criteria for quality management and assurance.ISO U.S. member body of ISO is National Institute of Standards and Technology.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 encounterpoint at which customer and service provider interact, which usually determines the customers perception of the quality of service. Service qualityexpected 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. Example: L. L. Bean began selling a single style of boots but has grown by selling a variety of products.L. L. Beana single style of boots ENHANCING COMPANYS 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 widthNumber of product lines a firm offers. Product mix lengthNumber of different products a firm sells. Product mix depthVariations 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 extensionadding 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.

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. Example: Custom Printed M&Ms that allow consumers to order their own initials or sayings.Custom Printed M&Ms INCREASING THE NUMBER OF USERS Attracting new customers who have not previously used the product. Example: Walt Disney markets its theme parks to adults.markets its theme parks

CHAPTER 11 Product and Service Strategies FINDING NEW USES New applications extend a products life cycle. WD-40 identified the top 2,000 uses for its oil.WD-40 CHANGING PACKAGE SIZES, LABELS, OR PRODUCT QUALITY Example: Food marketers produce packages designed to appeal to one- person households. Example: Krafts 100-calorie Snack Packs, which package snacks in 100 calorie amounts.100-calorie Snack Packs

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. Example: Grocery stores carry bulky, low-unit value items like salt to meet shopper demand. Shortages or raw materials can prompt a firm to discontinue production. Firm may drop products that dont fit into the direction in which it plans to grow.