Chapter 10: Developing and Managing Goods and Services

1. Chapter 10:Developing and Managing Goods and Services Pride/Ferrell Foundations of Marketing Fourth Edition Prepared by Milton Pressley University of New Orleans

2. Objectives • Understand how companies manage existing products through line extensions and product modifications. • Describe how businesses develop a product idea into a commercial product. • Know the importance of product differentiation and the elements that differentiate one product from another. • Explain product positioning and repositioning. • Understand how product deletion is used to improve product mixes. • Understand the characteristics of services and how these characteristics present challenges when developing marketing mixes for service products. • Be familiar with organizational structures used for managing products.

3. Managing Existing Products An organization can benefit by capitalizing on its existing products

4. Line Extension • Development of a product that is closely related to existing products in the line but meets different customer needs Line Extension Chocolate-flavored Chex Mix is a line extension.

5. Product Modifications • Change in one or more characteristics of a product Product Modification Automobile companies employ quality, functional, and aesthetic modifications.

6. Discussion Question • When Apple introduced the 3G iPhone, was it a line extension or a product modification? • When Apple introduced the 3GS iPhone, was it a line extension or a product modification?

7. Quality, Functional, and Aesthetic Modifications • Quality modifications • Changes relating to a product’s dependability and durability • Functional modifications • Changes affecting a product’s versatility, effectiveness, convenience or safety • Aesthetic modifications • Changes to the sensory appeal of a product

8. Discussion Question • Click on the TV below to watch a Windows 7 Promotional Video. After viewing it, and using your personal knowledge of Windows 7, discuss whether you think Windows 7 is a quality, functional, or aesthetic modification.

9. Developing New Products • The term “new product” can have more than one meaning • Offering innovative benefits • Different and distinctly better than existing products • Never been sold by any organization • One a specific firm is currently launching even though other firms are already producing and marketing similar products • It is brought to one or more markets from another market

10. Discussion Question • Some marketers would consider this to be a new product, while others would view it as a line extension. Which do you think it is?

11. Figure 10.1 Phases of New-Product Development

12. Phases of New Product Development • Idea generation • Seeking product ideas to achieve objectives • Screening • Choosing the most promising ideas for further review • Concept testing • Seeking potential buyers’ responses to a product idea • Business analysis • Evaluating the potential contribution of a product idea to the firm’s sales, costs and profits • Product development • Determining if producing a product is technically feasible and cost effective

13. Test Marketing • Introducing a product on a limited basis to measure the extent to which potential customers will actually buy it

14. Commercialization • Deciding on full-scale manufacturing and marketing plans and preparing budgets Stages of Expansion into a National Market During Commercialization

15. Product Differentiation • Creating and designing products so that customers perceive them as different from competing products

16. Product Quality • Characteristics of a product that allow it to perform as expected in satisfying customer needs • Every product possessesa certain level of quality • Products are judged byconsistency of qualityover time Product Quality Selected products are designed to have a very high quality and to use quality as a major competitive tool.

17. Product Design and Features • Product Design • How a productis conceived, planned, or produced • Styling • The physical appearance of a product • Product Features • Specific design characteristics that allow a product to perform certain tasks

18. Product Support Services • Often referred to as customer services, these services include any human or mechanical efforts or activities a company provides that add value to a product Product Support Services CORT Furniture provides product support services that some other office furniture manufactures do not.

19. Product Positioning • Creating and maintaining a certain concept of a product in customers’ minds Product Positioning The makers of Dockers position their products as being comfortable, flexible, and a reasonable value.

20. Perceptual Mapping • Created by questioning a sample of consumers about their perceptions of products, brands, and organizations with respect to two or more dimensions • Respondents are asked about their preferences for product features to establish “ideal points” or “ideal clusters” • Represent a consensus about what a specific group of customers desires in terms of product features

21. Hypothetical Perceptual Map for Pain Relievers

22. Bases For Positioning • Use competitors • Head-to-head competition • Avoiding competition • Price • Quality level • Benefits provided by the product

23. Repositioning • A brand’s market share and profitability may be strengthened by repositioning • Can be accomplished by: • physically changing the product • changing the price • changing distribution • changing image through promotional efforts • aiming product at a different target market

24. Discussion Question • Click on the TV below and watch the commercial. What base(s) for product positioning do you think was used in this commercial?

25. Product Deletion Process • Eliminating a product from the product mix, usually because it no longer satisfies a sufficient number of customers

26. Services As Products • Services, like products, must be marketed. • Those marketing services must understand their unique characteristics: • Intangibility • Inseparability of production and consumption • Perishability • Heterogeneity (variation in quality) • Client-based relationships (resulting in repeated use of the service) • Customer contact

27. Customer Contact • The level of interaction between provider and customer needed to deliver the service Level of Customer Contact There is a high level of customer contact associated with medical services.

28. Service Characteristics and Marketing Challenges

29. Creating Marketing Mixes for Services • Development of services • Core service • Supplementary service • Pricing of services • Most revenues brought in during peak demand • Distribution of services • Many firms have changed a high-contact service into a low-contact one • Promotion of services • Typically includes tangible cues that symbolize the service

30. Distribution of Services Distribution FedEx mainly provides its services through retail stores, as well as pickup and delivery at customers’ homes or offices.

31. Organizing to Develop and Manage Products • Product manager • The person within an organization responsible for a product, a product line, or several distinct products that make up a group • Brand manager • The person responsible for a single brand • Market manager • The person responsible for managing the marketing activities that serve a particular group of customers • Venture team • A cross-functional group that creates entirely new products that may be aimed at new markets

32. After Reviewing This Chapter You Should: • Understand how companies manage existing products through line extensions and product modifications. • Be able to describe how businesses develop a product idea into a commercial product. • Know the importance of product differentiation and the elements that differentiate one product from another. • Be able to explain product positioning and repositioning. • Understand how product deletion is used to improve product mixes. • Understand the characteristics of services and how these characteristics present challenges when developing marketing mixes for service products. • Be familiar with organizational structures used for managing products.

33. Key Concepts • Line extension • Product modification • Quality modifications • Functional modifications • Aesthetic modifications • New-product development process • Idea generation • Screening • Concept testing • Business analysis • Product development • Test marketing • Commercialization • Product differentiation • Quality • Level of quality • Consistency of quality • Product design • Styling • Product features • Customer services • Product positioning • Product deletion • Intangibility • Inseparability • Perishability • Heterogeneity • Client-based relationships • Product manager • Brand manager • Market manager • Venture team