Chapter 8

1. Chapter 8 Product and Services Strategy

2. 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

3. 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

4. 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

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

6. Shopping Products • Buy less frequently • Higher price • Fewer purchase locations • Comparison shop • i.e Clothing, cars, appliances Convenience Products • Buy frequently & immediately • Low priced • Mass advertising • Many purchase locations • i.e Candy, newspapers 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 Specialty Products • Special purchase efforts • High price • Unique characteristics • Brand identification • Few purchase locations • i.e Porsche, Rolex Product ClassificationsConsumer Products

7. Product ClassificationsOther 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.

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

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

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

11. 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

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

13. Brand Strategy • Line Extension • 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.

14. 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.

15. 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.

16. 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.

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

18. 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?

19. 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

20. 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.

21. 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

22. 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.

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

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

25. 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

26. 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.

27. New Product Development ProcessSources of New product Ideas Idea Generationis the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From: Distributors Suppliers Competitors Customers

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

29. 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.

30. 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 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:

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

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

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

34. 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.

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

36. 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.