C H A P T E R © 2007 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Product and Service Strategies 10

10-2 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Learning Objectives After studying this chapter, you should be able to:  Understand the different characteristics of a product mix.  Recognize the stages and characteristics of the product life cycle.  Identify appropriate marketing strategies for products in different life cycle stages.  Describe the limitations of the product life cycle concept.  Discuss different product-mix and product-line strategies.

10-3 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed StarbucksStarbucks The first Starbucks coffee shop was at Pike Place Market in Seattle in The concept was successful, and 165 Starbucks locations were open in 1992 when the company went public. The chain now has more than 9,000 retail locations in the United States and internationally.

10-4 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Product Mix Thus a product mix is a combination of product lines, which are combinations of individual products. Product Mix Product Line A product mix is the total assortment of products and services marketed by a firm. A product line is a group of individual products that are closely related in some way. Individual Product An individual product is any brand or variant of a brand in a product line.

10-5 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Product Mix Characteristics Any product mix can be defined in terms of width, length, and consistency. Product Mix Length Consistency Product mix length refers to the number of products in a product line. Product mix consistency refers to the relatedness of the different product lines in a product mix. Product Mix Width The number of product lines in the product mix. The more product lines, the wider the product mix.

10-6 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Product Mix Characteristics Exhibit 10-1

10-7 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Product Mix Characteristics Firms marketing multiple products and services must devise strategies for individual products, specific product lines, and the overall product mix. Key strategies at each level are presented below: Exhibit 10-2

10-8 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Product Life Cycle The product life cycle (PLC), like the biological life cycle, describes the advancement of products through identifiable stages of their existence as shown below: Exhibit 10-3

10-9 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Diffusion Process When a new product form is first introduced to the market, consumers go through a process in determining whether to adopt it. Some consumers adopt a new product when it is first introduced; others wait until the innovation has been on the market for some time. These different adoption rates mean that it typically takes time for an innovative new product form to diffuse throughout a market. The diffusion process describes the adoption of an innovation over time. Exhibit 10-4

10-10 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed PLC Stages and Characteristics The interaction of the diffusion process and firm competition means that marketers face a different situation at each stage of the product life cycle. Exhibit 10-5

10-11 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed PLC Length and Shape Life cycle curves for styles, fashions, and fads differ from traditional product life cycle curves: Exhibit 10-6

10-12 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed PLC Marketing Strategies Shortening lengths of product life cycles and their different shapes increase the complexity of marketing decisions. Firms respond to these trends by developing marketing strategies to take advantage of each life cycle stage.

10-13 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Limitations of the PLC 1.The life cycle concept applies best to product forms rather than to classes of products or specific brands. 2.The life cycle concept may lead marketers to think that a product has a predetermined life, which may produce problems in interpreting sales and profits. 3.It is only a descriptive way of looking at the behavior of a product and the life cycle can not predict the behavior of a product.

10-14 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Upward Stretch An upward-stretch strategy is just the opposite: Products are added at the higher end of a product line. This has been a favorite approach for Japanese companies in the U.S. market. Downward Stretch A downward-stretch strategy is an attempt to add products to the lower end of the product line. Luxury car makers are introducing lower-priced cars to get new customers. more Increasing the Product Line

10-15 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Line Filling A line-filling strategy involves adding products in different places within a product line. A firm might use this strategy to fill gaps in its product line that are not at the high or low end. Two-way Stretch A two-way-stretch strategy entails adding products at both the high and low ends of the product line. Firms that have focused on the mass market might use this strategy to appeal to both price- conscious and luxury-seeking consumers. more Increasing the Product Line (con’t)

10-16 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Cannibalization Cannibalization occurs when a new product takes sales away from existing products. A great deal of cannibalization shifts sales from one product to the new product, with little overall gain for the firm. Increasing the Product Line (con’t)

10-17 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Product-Mix Strategies The product mix consists of all product lines and individual products marketed by a firm. Most firms market multiple product lines with many products in each line. However, sometimes companies can be very successful by having a limited product mix.

10-18 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Branding Strategies As firms expand product mixes and extend product lines, brand decisions become more complicated. Companies marketing multiple products and services need a strategy to guide branding decisions. The basic options are: Exhibit 10-8

10-19 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Ethical Issues Is the product safe when used as intended? Is the product safe when misused in a way that is foreseeable? Have any competitors’ patents or copyrights been violated? Is the product compatible with the physical environment? Is the product environmentally compatible when disposed of? Do any organizational stakeholders object to the product?

10-20 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed SummarySummary After studying this chapter, you should be able to:  Understand the different characteristics of a product mix.  Recognize the stages and characteristics of the product life cycle.  Identify appropriate marketing strategies for products in different life cycle stages.  Describe the limitations of the product life cycle concept.  Discuss different product-mix and product-line strategies.