Product and Services Strategy Chapter 8 Product and Services Strategy

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

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

Products, Services, and Experiences Service With Accompanying Minor Goods Tangible Good With Accompanying Services Pure Tangible Good Hybrid Offer Pure Service Auto With Accompanying Repair Services Airline Trip With Accompanying Snacks Soap Restaurant Doctor’s Exam The Product-Service Continuum

Levels of Product (Fig. 8.1) Brand Name Quality Level Packaging Design Features Delivery & Credit Installation Warranty After- Sale Service Core Benefit or Actual Product Core Product Augmented Product

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 Special purchase efforts High price Unique characteristics Brand identification Few purchase locations i.e Porsche, Rolex Unsought Products New innovations Products consumers don’t want to think about these products Require much advertising & personal selling i.e Life insurance, blood donation

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.

Individual Product Decisions (Fig. 8.2) Product Attributes Branding Labeling Packaging Product Support Services

Product Attributes Developing a Product or Service Involves Defining the Benefits that it Will Offer Such as: Product Quality Product Features Product Style & Design Ability of a Product to Perform Its Functions; Includes Level & Consistency Help to Differentiate the Product from Those of the Competition Process of Designing a Product’s Style & Function

Branding Advantages of Brand Names Brand Equity Consistency Quality & Value Attributes Identification Advantages of Brand Names Brand Equity High Brand Loyalty Strong Brand Association Name Awareness Perceived Quality

Major Branding Decisions (Fig. 8.3) Brand Name Selection Selection Protection Major Branding Decisions (Fig. 8.3) Brand Sponsor Manufacturer’s Brand Private Brand Licensed Brand Co-branding Brand Strategy Line Extensions Brand Extensions Multibrands New Brands

Four Brand Strategies (Fig. 8.4) Line Extension Multibrands Brand Extension New Brands Brand Name Existing New Product Category

Brand Strategy Line Extension Brand Extension Multibrands New Brands 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.

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.

Labeling 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.

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.

Product Mix Decisions Consistency Width - number of different product lines Consistency Length - total number of items in product lines Product Mix - all the product lines & items offered Depth - number of versions of each product

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?

Nature and Characteristic of a Service Intangibility Inseparability 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. Variability Perishability

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.

International Product and Services Marketing Decide Which Products & Services to Introduce Decide How Much to Standardize or Adapt Packaging Presents New Challenges International Product and Services Marketing Service Marketers Face Special Challenges Trend Toward Global Service Companies Will Continue

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.

New-Product Development and Product Life-Cycle Strategies Chapter 9 New-Product Development and Product Life-Cycle Strategies

New-Product Development Strategies Strategies for Obtaining New Product Ideas Acquired Companies Original Products Acquired Patents Product Improvements Acquired Licenses Product Modifications New Brands

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

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.

New Product Development Process 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

Product Life Cycle (Fig. 9.2) Time Product Develop- ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise

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.

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

Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Low sales High cost per customer Negative or low Create product awareness and trial Offer a basic product Usually is high; use cost-plus formula Distribution High distribution expenses Advertising Build product awareness among early adopters and dealers

Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer new product features, extensions, service, and warranty Price to penetrate market Distribution Increase number of distribution outlets Advertising Build awareness and interest in the mass market

Maturity Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Peak sales Costs Low cost per customer Profits High profits, then lower profits Marketing Objectives Maximize profits while defending market share Product Diversify brand and models Price Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits

Maturity Stage of the PLC Modifiying the Market Company tries to increase consumption of the current product. Modifying the Product Changing characteristics such as quality, features, or styles to attract new users. Modifying the Marketing Mix Company tries to improve sales by changing one or more marketing mix elements.

Decline Stage of the PLC Summary of Characteristics, Objectives, & Strategies Sales Costs Profits Marketing Objectives Product Price Declining sales Low cost per customer Declining profits Reduce expenditure and maintain, reposition, harvest or drop the product Phase out weak items Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers

Review of Concept Connections Explain how companies find and develop new-product ideas. Describe the stages of the product life-cycle. Describe how marketing strategies change during the product’s life-cycle.