1. Product, Services, and Branding Strategy Chapter 8

2. 7 - 1 Learning Goals Understand products and the major classifications of products and services Learn the decisions companies make regarding their products and services Understand branding strategy Identify the four characteristics that affect the marketing of a service Realize additional product issues

3. 7 - 2 Definitions Product  Anything offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want. Service  A form of product that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything. Goal 1: Understand products and their classifications

4. 7 - 3 What is a Product? Products, Services, and Experiences  Market offerings may consist of a combination of goods and services  Experiences are used to differentiate offerings Levels of Product and Services  Core benefit, actual and augmented product Product and Service Classifications  Consumer products and industrial products Goal 1: Understand products and their classifications

5. 7 - 4 What is a Product? Augmented product Delivery and credit Installation Warranty After-sale service Core Benefit Actual product Brand name Quality level Packaging Design Features Three levels of product

6. 7 - 5 What is a Product? Convenience Shopping Specialty Unsought Frequent purchases bought with minimal buying effort and little comparison shopping Low price Widespread distribution Mass promotion by producer Types of Consumer Products Goal 1: Understand products and their classifications

7. 7 - 6 What is a Product? Convenience Shopping Specialty Unsought Less frequent purchases More shopping effort for comparisons. Higher than convenience good pricing Selective distribution in fewer outlets Advertising and personal selling Types of Consumer Products Goal 1: Understand products and their classifications

8. 7 - 7 What is a Product? Convenience Shopping Specialty Unsought Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity High price Exclusive distribution Carefully targeted promotions Types of Consumer Products Goal 1: Understand products and their classifications

9. 7 - 8 What is a Product? Convenience Shopping Specialty Unsought Little product awareness and knowledge (or if aware, sometimes negative interest) Pricing varies Distribution varies Aggressive advertising and personal selling by producers and resellers Types of Consumer Products Goal 1: Understand products and their classifications

10. 7 - 9 Product Classifications Consumer products Industrial products  Materials and parts  Capital items  Supplies and services Goal 1: Understand products and their classifications

11. 7 - 10 Product Classifications Organizations, persons, places, and ideas  Organizational marketing makes use of corporate image advertising  Person marketing applies to political candidates, entertainment sports figures, and professionals  Place marketing relates to tourism  Social marketing promotes ideas Goal 1: Understand products and their classifications

12. 7 - 11 Product Decisions Individual Product Product Line Product Mix Product attributes  Quality, features, style and design Branding Packaging Labeling Product support services Key Decisions Goal 2: Learn decisions companies make regarding products

13. 7 - 12 Product and Service Decisions Product line  A group of products that are closely related because they may: function in a similar manner be sold to the same customer groups, be marketed through the same types of outlets fall within given price ranges Key Decisions Individual Product Product Line Product Mix Goal 2: Learn decisions companies make regarding products

14. 7 - 13 Product Decisions Individual Product Product Line Product Mix Product line length  Line stretching: adding products that are higher or lower priced than the existing line  Line filling: adding more items within the present price range Key Decisions Goal 2: Learn decisions companies make regarding products

15. 7 - 14 Product Decisions Product line stretching is when a company lengthens its product line beyond its current range Downward Upward Product Line Decisions

16. 7 - 15 Product Decisions Individual Product Product Line Product Mix Product mix  Also known as product assortment  Consists of all the product lines and items that a particular seller offers for sale Key Decisions Goal 2: Learn decisions companies make regarding products

17. 7 - 16 Product Decisions Individual Product Product Line Product Mix Product mix width:  Number of different product lines carried by company Product mix depth:  Number of different versions of each product in the line Product mix consistency Key Decisions Goal 2: Learn decisions companies make regarding products

18. 7 - 17 Services Marketing Services  Account for 74% of U.S. gross domestic product.  Service industries include business organizations, government, and private not-for-profit organizations. Goal 3: Understand branding strategy

19. 7 - 18 Characteristics of Services Intangibility  Consumers look for service quality signals Inseparability  Services can’t be separated from providers Variability  Employees and other factors result in variability Perishability  Services can’t be inventoried for later sale Goal 3: Understand branding strategy

20. 7 - 19 Service Firm Marketing Strategies The Service-Profit Chain  Internal Marketing  Interactive Marketing Managing Service Differentiation Managing Service Quality Managing Service Productivity Goal 4: Identify 4 characteristics that affect marketing a service

21. 7 - 20 Services Marketing Three types of marketing in service industries Company Customers Employees Internal marketing External marketing Interactive marketing

22. 7 - 21 Product Decisions and Social Responsibility Acquiring and dropping products Patent protection Product quality and safety Product warranties Goal 5: Realize additional product issues

23. 7 - 22 International Product and Services Marketing Special challenges:  Which products should be marketed internationally?  Should the products be standardized or adapted for world markets? Packaging? Goal 5: Realize additional product issues

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

25. VS.

26. Blu-ray VS. HD DVD STANDARD WAR Blu-ray Alliance Hardware SONY, Hitachi, LG Panasonic, Phillips, Samsung Software, Contents Columbia TriStar and MGM), Disney (Buena Vista), and Fox. Paramount HD DVD Alliance Hardware Toshiba, NEC, Sanyo, RCA, Intel Software, Content DreamWorks SKG, Paramount, Universal, MS Warner Bros Wal-mart Blockbuster Aug/07

27. Toshiba was confident but the judgment day was approaching Jan/4 th /08: Warner bros., the biggest DVD title releaser announced plans to drop HD DVD support completely as of the beginning of June 2008. Jan/7 th /08: Toshiba reduced the price of its HD DVD pl ayers by 40 to 50 percent, Feb/11 th /08: Best Buy began recommending Blu-ray Di sc as the customer's digital format choice. Netflix, the largest online video rental service, began phasing out its HD DVD inventory Feb/15 th /08: Wal-Mart announced a plan to phase HD DVD out completely by June 2008 Feb/19 th /08: Toshiba announced it would cease develo ping, manufacturing and marketing HD DVD players a nd recorders

28. Aftermath Toshiba’s loss : $986 million Microsoft ceased production of Xbox 360 HD DVD players Blu-ray player sales rose 2 percent from February to March, 2008,

29. 9 - 28 Learning Goals 1.Learn how companies find and develop new-product ideas 2.Understand the steps in the new- product development process 3.Know the stages of the product life cycle 4.Realize how marketing strategies change during the product’s life cycle

30. 9 - 29 Definition New Product Development  Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts. Goal 1: Learn how companies find & develop new-product ideas

31. 9 - 30 New Product Development Strategy New products can be obtained via acquisition or development. New products suffer from high failure rates. Several reasons account for failure. Goal 1: Learn how companies find & develop new-product ideas

32. 9 - 31 Overestimation of market size Poor design Incorrect positioning Wrong timing Priced too high Ineffective promotion Management influence High development costs Competition 9-6 Reasons for new product failure

33. 9 - 32 New Product Development Strategy Idea Generation Idea Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization Major Stages in New Product Development

34. 9 - 33 Stages of the New Product Development Process Stage 1: Idea Generation  Internal idea sources: R & D  External idea sources: Customers, competitors, distributors, suppliers Goal 2: Understand steps in the new-product development process

35. 9 - 34 Stages of the New Product Development Process Stage 2: Idea Screening  Product development costs increase substantially in later stages so poor ideas must be dropped  Ideas are evaluated against criteria; most are eliminated Goal 2: Understand steps in the new-product development process

36. 9 - 35 Stages of the New Product Development Process Stage 3: Concept Development and Testing  Concept development creates a detailed version of the idea stated in meaningful consumer terms.  Concept testing asks target consumers to evaluate product concepts. Goal 2: Understand steps in the new-product development process

37. 9 - 36 Stages of the New Product Development Process Stage 4: Marketing Strategy Development The target market, product positioning, and sales, share, and profit goals for the first few years. Product price, distribution, and marketing budget for the first year. Long-run sales and profit goals and the marketing mix strategy. Goal 2: Understand steps in the new-product development process

38. 9 - 37 Stages of the New Product Development Process Stage 5: Business Analysis  Sales, cost, and profit projections Stage 6: Product Development  Prototype development and testing Goal 2: Understand steps in the new-product development process

39. 9 - 38 Stages of the New Product Development Process Stage 7: Test Marketing  Standard test markets  Controlled test markets  Simulated test markets Stage 8: Commercialization Goal 2: Understand steps in the new-product development process

40. 9 - 39 Product Life-Cycle Strategies Time Product Develop- ment Introduction Profits Sales GrowthMaturityDecline Losses/ Investments ($) Sales and Profits ($) Typical Product Life Cycle

41. 9 - 40 Product Life-Cycle Strategies The Product Life Cycle (PLC) has Five Stages  Product Development, Introduction, Growth, Maturity, Decline  Not all products follow this cycle: Fads Styles Fashions Goal 3: Know the stages of the product life cycle process

42. 9 - 41 Product Life-Cycle Strategies The product life cycle concept can be applied to a:  Product class (soft drinks)  Product form (diet colas)  Brand (Diet Dr. Pepper) Using the PLC to forecast brand performance or to develop marketing strategies is problematic Goal 3: Know the stages of the product life cycle process

43. 9 - 42 Product Life-Cycle Strategies Product development Introduction Growth Maturity Decline Begins when the company develops a new-product idea Sales are zero Investment costs are high Profits are negative PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle

44. 9 - 43 Product Life-Cycle Strategies Product development Introduction Growth Maturity Decline Low sales High cost per customer acquired Negative profits Innovators are targeted Little competition PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle

45. 9 - 44 Marketing Strategies: Introduction Stage Product – Offer a basic product Price – Use cost-plus/value added pricing Distribution – Build selective distribution Advertising – Build awareness among early adopters and dealers/resellers Sales Promotion – Heavy expenditures to create trial Goal 4: Realize how marketing strategies change during the product life cycle

46. 9 - 45 Product Life-Cycle Strategies Product development Introduction Growth Maturity Decline Rapidly rising sales Average cost per customer Rising profits Early adopters are targeted Growing competition PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle

47. 9 - 46 Marketing Strategies: Growth Stage Product – Offer product extensions, service, warranty Price – Penetration pricing Distribution – Build intensive distribution Advertising – Build awareness and interest in the mass market Sales Promotion – Reduce expenditures to take advantage of consumer demand Goal 4: Realize how marketing strategies change during the product life cycle

48. 9 - 47 Product Life-Cycle Strategies Product development Introduction Growth Maturity Decline Sales peak Low cost per customer High profits Middle majority are targeted Competition begins to decline PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle

49. 9 - 48 Marketing Strategies: Maturity Stage Product – Diversify brand and models Price – Set to match or beat competition Distribution – Build more intensive distribution Advertising – Stress brand differences and benefits Sales Promotion – Increase to encourage brand switching Goal 4: Realize how marketing strategies change during the product life cycle

50. 9 - 49 Product Life-Cycle Strategies Product development Introduction Growth Maturity Decline Declining sales Low cost per customer Declining profits Laggards are targeted Declining competition PLC Stages Goal 4: Realize how marketing strategies change during the product life cycle

51. 9 - 50 Marketing Strategies: Decline Stage Product – Phase out weak items Price – Cut price Distribution – Use selective distribution: phase out unprofitable outlets Advertising – Reduce to level needed to retain hard-core loyalists Sales Promotion – Reduce to minimal level Goal 4: Realize how marketing strategies change during the product life cycle