Product and Services Strategy

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CHAPTER 5

• Product and Services Strategy
• Objective defining and classifying products, in
  addition discussing the decisions that marketers
  make regarding products.

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What is a product?

• A product is anything that can be offered to a
  market for attention, acquisition, use, or
  consumption that might satisfy a want or need.
• Products include more than just tangible goods
  but intangible services e.g. banking, home
  repair, consultancy.
• A product has three levels the core product,
  actual product, and augmented product

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• core product is the basic problem-solving
  benefit that consumers seek when they buy a
  product. e.g. a woman buying a lipstick buys more
  than lip color but hopes as well. That is why,
  when designing products, marketers first define
  the core benefit that the product will provide to
  consumers.
• actual product may have five characteristics - a
  quality level, features, design, a brand name,
  and packaging.
• augmented product offers additional consumer
  services and benefits. e.g. warranty, repair
  services...

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Product Classification

• Products are divided into two as consumer
  products and industrial products
• Consumer products are those bought by final
  consumers for personal consumption. Consumer
  products include convenience products, shopping
  products, specialty products, and unsought
  products. These products differ in the way how
  consumers buy and how marketers market them.

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• Convenience products are bought frequently with
  minimum comparison and effort e.g. soap, candy,
  newspapers... are usually low priced and highly
  distributed.
• Shopping products are less frequently purchased,
  compared carefully on quality, price, style,
  suitability e.g. furniture, clothing, used car
  are less distributed but given more sales
  support.
• Specialty products have unique characteristic
  and brand identification for some consumers who
  spend special effort to purchase e.g. specific
  brands and types of cars, high-priced
  photographic equipment, custom-made mens suits
  e.g. Rolls Royce buyers do not compare specialty
  products, they only invest the time needed to
  reach the sellers.
• Unsought products are not known by the consumers
  or not normally thought to be bought e.g life
  insurance, blood donation they require a lot of
  promotions and marketing efforts

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• Industrial products are those purchased for
  further processing or for use in conducting a
  business. There are three groups of industrial
  products materials and parts, capital items,
  supplies and services.
• Materials and parts include raw materials, sold
  directly to industrial users. Price and service
  are the major marketing factors rather than
  advertising.
• Capital items are industrial products that aid
  in the buyers production or operations including
  accessory e.g. fax machines desk
• Supplies and services supplies include e.g.
  paper, pencils.. Services include e.g. window
  cleaning, computer repair, legal consultancy
  are usually supplied under contract.

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Individual Product Decisions

• There are five important decisions to be made in
  the development and marketing of individual
  products
• product attributes
• branding
• packaging
• labeling
• product-support services

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Product Attributes

• The benefits that the product will offer would be
  based on (1) quality, (2)features, and (3)
  design.
• Product Quality
• Product quality (customer value) has two
  dimensions - level and consistency. Companies
  must choose a quality level that matches target
  market needs and the quality level of competing
  products.

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• Product Features
• Features are a competitive tool for
  differentiation the companys product from
  competitors products. In order to add new
  features to its products, companies can survey
  its customers.
• Product Design
• Product design contributes to a products
  usefulness and appearance. Good design can
  attract attention, improve product performance,
  cut production costs, give the product a strong
  competitive advantage.

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Branding

• A brand is a name, term, sign, symbol or design
  or a combination of these to identify the goods
  and services of one seller or group of sellers
  and to differentiate them from those of
  competitors.
• For the consumers brand names help consumers
  identify products, get an idea about the product
  quality, promise consistency in quality.

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• For the producers brand names provide legal
  protection for unique product features and
  prevent them to be copied by competitors. Plus,
  helps the seller to segment markets.
• Brand Equity
• Brand equity is the value of a brand. Brands
  vary in the amount of power and value that they
  have in the marketplace. A powerful brand has
  high brand equity. If the brand has higher brand
  loyalty, name awareness, perceived quality the
  brand is accepted to be having a strong brand
  equity.

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• Branding Decisions
• Major branding decisions are (1) selecting the
  brand name, (2) finding a brand sponsor, (3)
  identifying the brand strategy, (4) repositioning
  the brand.
• Brand Name Selection A good brand differentiates
  the product, communicates its benefits, suits the
  target market and marketing strategies.
• Brand Sponsor A producer has four sponsorship
  options. The product may be sold (1) as a
  manufacturers (producers) brand, (2) to a
  reseller (middleman) who give it a private

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• brand (who create and own the brand), (3) as a
  licensed brand (a company may be licensed to sell
  its products under another companys brand), or
  (4) as a co-brand (two companies combine their
  brands and create a new one).
• Brand strategy A company has four choices
• line extension using a successful brand name to
  introduce additional items in an existing product
  category under the same brand name, such as new
  flavors, forms, colors, added ingredients, or
  package sizes. Meets consumer desires for
  variety, works best when it decreases
  competition.
• brand extension using a successful brand name
  to launch a new product in a new category. Helps
  the

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• company introduce new product categories more
  easily, provides instant recognition and
  acceptance, decreases advertising costs. But may
  be dangerous if it fails, because it may tarnish
  the companys whole image.
• multibrands a strategy under which a seller
  develops two or more brands in the same product
  category. Offers a way to establish different
  features and appeal to different types of buyers,
  therefore, may increases the market share of the
  company.
• new brands introducing new brand names in new
  product categories. Demands lot of company
  resources, that is why, nowadays some companies
  use megabrand strategies - spending resources
  only on brands that can achieve the number one or
  two market share position in their categories and
  dropping the weaker brands.

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Four Brand Strategies

• Product Category
• Existing New
• Existing Line Brand
• Brand Name extention extention
• New
• Multibrands New brands

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Packaging

• The activities of designing and producing the
  container or wrapper for a product.
• There are three packages - the products primary
  container a secondary package that is thrown
  away when the product is about to be used and
  the shipping package to ship and store the
  product.
• Packaging decisions are based on cost and
  production.
• Packages attract attention and describe the
  product.

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Labeling

• Labels may range from tags attached to products
  to graphics that are part of the package.
• Labels may (1) identify, (2) grade, (3) describe,
  or (4) promote (through attractive graphics) the
  product or brand.
• Labels can mislead customers, fail to describe
  important ingredients or fail to include
  important safety warnings. That is why, laws
  regulate labeling in (1) unit pricing, (2) shelf
  life, and (3) nutritional value

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Product-Support Services

• The product-support services augment the actual
  product, can help the product to gain a
  competitive advantage and create customer
  loyalty.
• The company should periodically survey its
  customers to assess its customers satisfaction
  and to get new ideas for product improvements.
• E.g. services to handle complaints, credits,
  maintenance, technical issues, customer
  information.

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Product Line Decisions

• A product line is a group of products that are
  closely related because they function in a
  similar manner, are sold to the same customer
  groups, are marketed through the same types of
  outlets or fall within given price range. E.g.
  Nike produces several lines of athletic shoes.
• In developing product line strategies, marketers
  decide on

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• product line length the number of items in the
  product line. Product line length is influenced
  by company objectives. If the company wants to
  position itself as a full-line company or wants
  to have high market share and growth, the company
  prefers to carry a longer line. Product lines
  tend to lenghten over time. However, such line
  increases raise the costs of design, inventory,
  production, promotion, that is why, pruning is
  inevitable.
• increasing the length of the product line there
  are two ways - by streching and filling. Product
  line streching occurs when a company

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• lengthens (downward, upward or both ways) its
  product line beyond its current range. E.g.
  Xerox, Marriott Hotels... On the other hand,
  product line filling occurs when a company adds
  more items within the present range of the line.
  Reasons are reaching for extra profit, tyring to
  satisfy dealers, use excess capacity, be the
  leading full-line company, plug holes to keep out
  competitors. E.g. Sony solar-powered and
  waterproof Walkman.

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Product Mix Decisions

• A product mix (or product assortment) includes
  all the product lines and items that a particular
  seller offers for sale. E.g. Avons product mix
  includes cosmetics, jewellery, fashion each with
  sublines such as lipstick, eyeliner
• A companys product mix has four dimensions
  width, length, depth, and consistency.

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• Width refers to the number of different product
  lines the company carries. E.g. Procter Gamble
  has a product mix of six lines as detergents,
  toothpaste, bar soap, deodorants, fruit juice,
  and lotions.
• Length refers to the total number of items that
  the company carries. E.g. PG has 42 different
  products under its six lines.
• Depth refers to the number of versions offered
  of each product in the line. E.g. one of the
  products of PG may have different sizes and
  formulations.
• Consistency refers to how closely related the
  various product lines are. E.g. PGs products
  are consistent in the way that they are all
  consumer products, but inconsistent in the way
  that they perform different functions for buyers.

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Services Marketing

• Service industries are quite varies governmental
  services - courts, hospitals, police, fire
  departments, postal services, schools etc
  private nonprofit organizations - museums,
  colleages, hospitals etc business organizations
  - airlines, hotels, restaurants, advertising,
  real estate etc.

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Nature and Characteristics of a Service

• Service intangibility means that services cannot
  be seen, tasted, felt, heard or smelled before
  they are bought. That is why, buyers look for
  signals for service quality from the place,
  people, price, equipment and communications that
  they can see.
• Service inseparability means that services
  cannot be separated from their providers. If a
  service employee provides the service, then the
  employee is part of the service. Both the
  provider and the customer affect the service
  outcome.

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• Service variability means that the quality of
  services depends on who provides them, plus,
  when, where, and how they are provided. E.g.
  within a given Marriott hotel, one reception desk
  agent may be cheerful and efficient, another
  would be unpleasant and slow. Service providers
  service quality depends on his energy and his
  frame of mind at the time of each customer
  encounter.
• Service perishability means that services cannot
  be stored for later sale or use. E.g. the demand
  for public transportation during the rush-hour.
  Service perishability is a serious problem when
  demand fluctuates. Here, the marketer needs to
  design strategies for producing better match

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• between demand and supply. E.g. hotels charge
  lower rates in the off-season to attract more
  guests restaurants hire part-time employees to
  serve during peak periods tour operators and
  airline companies have last-minute sales.

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Marketing Strategies for Service Firms

• Services are different form tangible products,
  that is why, additional marketing approaches are
  needed to market services.
• In service businesses, the customer and
  front-line service employees interact. Service
  providers must interact effectively with
  customers to satisfy them. That is why, companies
  take care of their employees to make profit.
  Because they believe that only

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• satisfied and productive service employees can
  create satisfied and loyal customers.
• Internal marketing means that the service firm
  must effectively train and motivate its
  customer-contact employees to provide customer
  satisfaction.
• Interactive marketing means that service quality
  depends on the quality of the buyer-seller
  interaction during the service encounter.
• In order to increase the profit margin, there are
  three major marketing tasks for service companies

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Managing Service Differentiation

• Differentiated offer, delivery and image are the
  keys for the solution to price competition.
• The offer can provide innovative features like
  e.g. in-flight movies, advance seating,
  frequent-flyer award programs in an airlines.
  British Airways offers a sleeping compartment and
  hot showers.

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• The delivery can be differentiated by having
  better customer-contact people, developing
  a superior physical environment, or by designing
  a superior deliver process like e.g. home banking
  can be provided as a better way to deliver
  banking services.
• The image can differentiate the service company
  through symbols and branding.

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Managing Service Quality

• A service firm can also differentiate itself by
  delivering consistently higher quality than its
  competitors do.
• Service quality will always vary, depending on
  the interactions between employees and customers.
  A company cannot always prevent service problems
  but can recover them. A good service recovery can
  turn angry customers into loyal ones. Companies
  empower front-line

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• service employees (giving authority to do
  whatever it takes to keep customers happy) to
  recover problems.
• Good service companies also communicate their
  qualities to employees and provide performance
  feedback.

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Managing Service Productivity

• Service productivity can be increased by
• training the employees better or hiring new and
  better employees
• industrializing the service with equipment and
  standardized production as in McDonalds
• using technology to save time and money
• Trying to increase the productivity would reduce
  quality and diminish customer service. That is
  why, some service providers accept to have lower
  productivity levels.

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Marketing Organizations, Persons, Places, and
Ideas

• Organization marketing consists of activities
  undertaken to create, maintain, or change the
  attitudes and behavior of target customers toward
  an organization. Corporate image advertising is a
  major toolfor a company to build up or maintain
  its favorable image in various publics over many
  years.
• Person marketing consists of activities
  undertaken to create, maintain, or change
  attitudes or behavior toward particular people.
  Politicians, entertainers, business leaders etc.
  practice persons marketing.

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• Place marketing involves activities undertaken
  to create, maintain or change attitudes or
  behavior toward particular places. There are two
  basic types - business site marketing and tourism
  marketing. Business site marketing involves
  developing, selling, or renting sites for
  factories, stores etc.Tourism marketing involves
  attracting vacationers to tourist locations and
  organizations e.g. I love New York.
• Idea marketing also called social marketing,
  involves the marketing of social ideas such as
  public health (e.g. drug abuse), family planning,
  environmental (e.g. protecting the wild life)
  campaigns.

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International Product and Service Marketing

• International product and service marketers
  must
• first figure out what products and services to
  introduce and in which countries
• second decide how much to standardize or adapt
  their products and services

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• standardization helps a company to build a
  consistent worldwide image, reduces production,
  research and development, advertising and product
  design costs.
• adaption helps a company to develop its product
  offering in a way that satisfies customers with
  different attitudes, buying behaviors and
  cultures.