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Chapter 11 . Product and Service Strategies. Chapter Objectives. Define the term product and distinguish between goods and services and how they relate to the goods-services continuum. Explain the importance of the service sector in today’s marketplace.

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chapter 11

Chapter 11

Product and Service Strategies

chapter objectives
Chapter Objectives
  • Define the term product and distinguish between goods and services and how they relate to the goods-services continuum.
  • Explain the importance of the service sector in today’s 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 product’s life cycle.
what is a product
What is a Product?
  • Product: bundle of physical, service, and symbolic attributes designed to enhance buyers’ want satisfaction
what are goods and services
What are Goods and Services?
  • Service: intangible task that satisfies consumer or business user needs
  • Goods-services continuum: device that helps marketers to visualize the differences and similarities between goods and services
Characteristics that distinguish services from goods:
    • Intangibility
    • Inseparability
    • Perishability
    • Difficulty of standardization
    • Frequent requirement ofinteraction between buyer and Seller
    • Variability
importance of the service sector
Importance of the Service Sector
  • The service sector makes up more than two-thirds of the economy.
  • Services also play a crucial role in the international competitiveness of U.S. firms.
  • Concerns include offshoring service jobs such as customer service call centers.
Property Insurance
    • An Important Part of the Service Sector
classifying goods and services for consumer and business markets
Classifying Goods and Services for Consumer and Business Markets
  • Consumer products: products destined for use by ultimate consumers
  • Business (or B2B) products: those that contribute directly or indirectly to the output of other products for resale
    • Also called industrial or organizational products
Convenience product: good or service that consumers want to purchase frequently, immediately, and with minimal effort
    • 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.
Gum and Candy
    • An Impulse Convenience Good
Shopping product: good or service purchased only after the customer compares competing offerings from competing vendors on such characteristics as price, quality, style, and color
    • Typically cost more than convenience purchases.
    • Include tangible items.
    • Shopper lacks complete information and gathers information during the buying process.
Chico’s and Target
    • Ads for shopping products
Specialty product: good or service with unique characteristics that cause the buyer to value it and make a special effort to obtain it
GucciA Specialty Product
    • Print reads: Guccitimepieces neiman marcus
Unsought product: good or service marketed to consumers who may not yet recognized in the need for it
    • Pet Insurance
Installation: major capital investment by a business buyer that typically involves expensive and relatively long-lived products, such as a new factory or piece of heavy machinery
Accessory equipment: capital product, usually less expensive and shorter-lived that insulation, such as a laptop computer
    • Industrial distributor--wholesaling marketing intermediary
Component parts and materials: finished business products that become parts of buying firms’ final products, such as spark plugs for new cars
  • Raw materials: business product, such as a farm product (wheat, cotton, soybeans) or natural product (coal, lumber, iron ore) that become part of a final product
Supplies: products that represent regular expenses necessary to carry out a firm’s daily operations but are not part of the final product. Supplies are sometimes called MRO items
    • MRO [Maintenance, Repair, Operating Supplies] item: part of business supplies categorized as maintenance items, repair items, or operating supplies such as light bulbs, nuts and bolts used in repairing equipment, or pencils
Business services: intangible product purchased to facilitate a firm’s production and operating processes such as financial services, leasing of vehicles, legal advice and consulting
    • Wireless Communications for a Mobile Workforce
quality as a product strategy
Quality as a Product Strategy
  • Quality is a key component to a firm’s success in a competitive marketplace.
  • Total quality management (TQM): approach that involves all employees in continually improving products and work processes to achieve customer satisfaction and world-class performance
Worldwide Quality Programs
    • Malcolm Baldrige National Quality Award
    • ISO 9002: set of standards for quality management and quality assurance developed by the International Standards Organization in Switzerland for countries in the European Union
  • Benchmarking: process in which an organization improves performance by continually comparing and measuring itself against the leading firms in an industry and implementing changes for quality improvement
Quality of Services
    • Service encounter
    • Service quality: Expected and perceived quality of a service offering
    • Determined by five variables:
      • Tangibles – physical evidence
      • Reliability – consistent performance
      • Responsiveness – willingness to provide a service
      • Assurances – communicated confidence
      • Empathy – understand customer needs, and respond accordingly
development of product lines
Development of Product Lines
  • Product Line: a series of related products
    • Motivation
      • Desire to Grow
      • Enhancing the Company’s Position in the Market
      • Optimal Use of Company Resources
      • Exploit the Product Life Cycle
the product mix
The Product Mix
  • A company’s assortment of product lines and individual offerings
    • 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.
Product Mix Decisions
    • A firm may lengthen or widen its product mix
    • A Company may decide to add variations that will attract new users
    • A product may be pruned or altered, and new product may extend the product life cycle
    • Line extension: introduction of a new product that is closely related to other products in the firm’s existing line
the product life cycle
The Product Life Cycle
  • Product life cycle: progression of products through introduction, growth, maturity, and decline stages
Introduction Stage
    • Firm works to stimulate demand for the new market entry
    • Promotional campaigns stress features
    • Additional promotions to intermediaries attempt to induce them to carry the product
    • Although prices are typically high, financial losses are common due to heavy promotional and research-and-development costs
Growth Stage
    • Sales volume rises rapidly
    • Firm usually begins to realize substantial profits
    • Success attracts competitors
    • Firm may need to make improvements to the product
    • Additional spending on promotion and distribution may be necessary
Maturity Stage
    • Industry sales continue to grow, but eventually reach a plateau
    • Many competitors have entered the market, and profits began to decline
    • Differences between competing products diminish
    • Available supplies exceed industry demand for the first time
    • Competition intensifies and heavy promotional outlays are common
Figure 11.15
    • Using Promotion--and Product Extensions--to Extend the Maturity Stage of the Product Life Cycle
Decline Stage
    • Innovations or shifts in consumer preferences cause an absolute decline in industry sales
    • Industry profits fall -- sometimes become losses
    • Firms cut prices in a bid for the dwindling market
    • Manufacturers gradually drop the declining items from their product lines
extending the product life cycle
Extending the Product Life Cycle
  • Marketers usually try to expand each stage of the life cycle for their products as long as possible
  • Product life cycles can stretch indefinitely as a result of decisions designed to:
    • Increase the frequency of use by current customers
    • Increase the number of users for the product
    • Find new uses
    • Add new product features
    • Change package sizes, labels
Quaker Oats
    • A new application for a mature product
    • Finding new uses for Bounce Fabric Softener
    • New cubed cheese for snacking
product deletion decisions
Product Deletion Decisions
  • Product lines must sometimes be pruned and marginal products eliminated
  • This decision is typically faced during the late maturity and early declined stages of the product life cycle
  • An unprofitable item may be continued in order to provide a complete line for customers