1. Product and Service Strategies
Chapter 11
Product and Service Strategies

2. 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.

3. What is a Product?
Product: bundle of physical, service, and symbolic attributes designed to enhance buyers’ want satisfaction

4. 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

5. Characteristics that distinguish services from goods:
Intangibility
Inseparability
Perishability
Difficulty of standardization
Frequent requirement of interaction between buyer and Seller
Variability

6. 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.

7. Property Insurance
An Important Part of the Service Sector

8. 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

9. Types of Consumer Products

10. 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.

11. Gum and Candy
An Impulse Convenience Good

12. 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.

13. Chico’s and Target
Ads for shopping products

14. Specialty product: good or service with unique characteristics that cause the buyer to value it and make a special effort to obtain it

15. Gucci A Specialty Product
Print reads: Gucci timepieces neiman marcus

16. Unsought product: good or service marketed to consumers who may not yet recognized in the need for it
Pet Insurance

17. Types of Business Products

18. 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

19. Accessory equipment: capital product, usually less expensive and shorter-lived that insulation, such as a laptop computer
Industrial distributor--wholesaling marketing intermediary

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. Yum Brands’ Product lines

28. 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.

29. 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

30. The Product Life Cycle
Product life cycle: progression of products through introduction, growth, maturity, and decline stages

31. 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

32. 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

33. 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

34. Figure 11.15
Using Promotion--and Product Extensions--to Extend the Maturity Stage of the Product Life Cycle

35. 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

36. 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

37. Quaker Oats
A new application for a mature product

38. Bounce
Finding new uses for Bounce Fabric Softener

39. Kraft
New cubed cheese for snacking

40. 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

41. End of Chapter Eleven