Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Product Strategies Chapter 11

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives 1.Define the term product and distinguish between goods and services. 2.List the classifications of consumer goods and services, and briefly describe each category. 3.Describe each of the types of business goods and services. 4.Discuss how total quality management (TQM) is implemented. 5.Explain the role benchmarking plays in achieving continuous improvement. 6.Explain why firms develop lines of related products rather than marketing individual items. 7.Identify the major product mix decisions that marketers must make. 8.Explain the concept of the product life cycle and how a firm can extend a product’s life cycle.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. What is a Product? People buy want satisfaction rather than objects. A product is a bundle of physical, service, and symbolic attributes designed to satisfy a customer’s wants and needs.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Several Ways Services Can Be Distinguished From Goods 1.Services are intangible. 2.Services are inseparable from the service providers. 3.Services are perishable. 4.Companies cannot easily standardize services. 5.Buyers often plan roles in the development and distribution of services. 6.Service quality shows wide variations.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Importance of the Service Sector The service sector makes a crucial contribution to the U.S. economy. The service sector produces almost $2.5 billion annually in sales receipts. Services account for four out of five jobs in the U.S. Services also play a crucial role in the international competitiveness of U.S. firms.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Types of Consumer Products Convenience Products –Goods and services that consumers want to purchase frequently, immediately, and with minimal effort. –Marketers further subdivide the convenience category: Impulse 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.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Shopping Products  Consumers buy shopping products only after comparing competing offerings on such characteristics as price, quality, style, and color  Typically cost more than convenience purchases.  Include tangible items.  Purchaser of a shopping product lacks complete information prior to the buying trip and gathers information during the buying process.  Features distinguish shopping products: physical attributes, service attributes such as warranties and after-sale service terms, prices, styling, and places of purchase.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Specialty Goods Offer unique characteristics. Typically carry a high price. Represent well-know brands. Purchasers know what they want. Buyer is willing to pay asking price.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Classification of Consumer Products

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Quality as a Product Strategy  Quality is a key component to a firm’s success in a competitive marketplace.  Total quality Management (TQM)—continually improve products and work processes with the goal of achieving customer satisfaction and world-class performance.  The quality movement is very strong in European countries.  ISO 9002 standards define international criteria for quality management and quality assurance.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. ISO standards define criteria for quality management and quality assurance for firms seeking certification. ISO QUALITY MANAGEMENT, what are the requirements for becoming certified?

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Benchmarking Process

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. TQM Total Quality Management (TQM)—continually improve products and work processes with the goal of achieving customer satisfaction and world-class performance. How can a business achieve this “TQM”? –This web site has several ideas.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Why Firms Develop Lines of Related Products Desire to grow. Enhancing the company’s position. Optimal use of company resources. Exploit the product life cycle.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Product Mix The assortment of product lines and individual product offerings that the company sells. The right blend of product lines and products allows a firm to maximize sales opportunities. Product 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.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Product Life Cycle Introductory Stage A firm works to stimulate demand for the new market entry. Technical problems are common during the introductory stage. Growth Stage Sales volume rises rapidly during the growth stage Success attracts competitors A firm may need to make improvements and changes to a product during this stage.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Product Life Cycle (2 of 2) Maturity Stage Sales or a product category continue to grow Differences between competing products diminish. available supplies exceed industry demand for the first time. Heavy promotional outlays emphasize any differences that still separate competing products. Decline Stage Innovations or shifts in consumer preferences bring about an absolute decline in industry sales. Sales fall, profits for the product category decline. Companies gradually drop the declining items.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Product Life Cycle “Although the life of different products varies, in general product life cycles are getting shorter. This is partly due to rapidly changing technology--one new invention may make possible many new products that replace old ones.” Source: toLearn.net/marketing This web site provides a very good overview of PLC.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Extend the Product Life Cycle Increasing frequency of use or users Finding new uses for the product Changing package size, label, or quality.