Chapter 12 - Product and Service Strategy Product vs. Service Continuum Figure 12.1

3 Classifications of Consumer Products 1. CONVENIENCE PRODUCTS purchase frequently, immediately, & w/ minimum effort Ex. candy, chewing gum, milk, soft drinks 2. SHOPPING PRODUCTS consumer has made comparisons of competing products Ex. clothing, jewelry, furniture, appliances & used cars

3. SPECIALTY PRODUCTS unique characteristics that cause the buyer to prize these particular brands Ex. Porsche, Gucci

Business Products Classifications 1. INSTALLATIONS - specialty products of the industrial market Ex. factories, computers, heavy machinery, jets for an airline

Ex. Desks, Laptops, & lathes 3. Component Parts and Materials 2. ACCESSORY EQUIPMENT - capital items that are usually less expensive & shorter-lived than installations Ex. Desks, Laptops, & lathes 3. Component Parts and Materials - finished industrial products that actually become part of a final product Ex. Computer chips, tires, motors

Ex. cattle, wheat, cotton, iron ore, lumber, copper 4. RAW MATERIALS - used in producing the final industrial product Ex. cattle, wheat, cotton, iron ore, lumber, copper 5. SUPPLIES - regular expense items that are necessary to the firm's daily operation BUT DO NOT become part of the final product Ex. Maintenance items, Repair items: nuts & bolts Operating items: paper, pencils

Ex. financial, leasing & rental of equipment & vehicles, and insurance 6. BUSINESS SERVICES - include intangible products firms buy to facilitate their production & operational processes Ex. financial, leasing & rental of equipment & vehicles, and insurance

Impact on Classification See Table 12.1

THE PRODUCT LIFE CYCLE 1. INTRODUCTION 2. GROWTH STAGE objective is to stimulate demand for the new product entry 2. GROWTH STAGE sales volumes rise rapidly new customers make initial purchases old customers repurchase the product

3. MATURITY DECLINE DEATH industry sales continue to grow during the early part sales eventually reach a plateau as the number of potential customers dwindles DECLINE DEATH

How to Extend the PLC 1. Increase the frequency of use Ex. Dairy Assoc. (Milk) 2. Increasing the number of users Ex. broadening distribution

4. Changing package sizes, labels, & product quality 3. Finding new uses Ex. Baking soda, WD-40 4. Changing package sizes, labels, & product quality Ex. Pepto Bismol introducing new take along tablets for awayfrom home use

Product Mix Width Length Depth # of product lines # of products Ex. PepsiCo. - soft drinks, snack foods (Frito-Lay and Quaker Foods), and restaurants Length # of products Ex. Pepsi, Mountain Dew, Sierra Mist, etc. Depth variations of each product Ex. Pepsi - regular, diet, cherry, caffeine free, Lime, Vanilla, Twist, Jazz, One

Total Quality Management TQM: W. Edwards Deming Malcolm Baldridge Award ISO 9000 Benchmarking