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PRODUCT SERVICE MGT 3.03 Understands the concepts and processes needed to obtain, develop, maintain, and improve a product or service mix in response to market opportunities   Employ product-mix strategies to meet customer expectations . Explain the concept of product mix

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PRODUCT SERVICE MGT 3.03

Understands the concepts and processes needed

to obtain, develop, maintain, and improve aproduct or service mix in response to marketopportunities 

Employ product-mix strategies to meetcustomer expectations.

Explain the concept of product mix

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Product Planning

How are decisions made tointroduce new products anddelete old ones?

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What is Product Planning? 

Product Planning: The decisions madeabout what features should be used in

selling of a business’s products. 

These decisions relate to:

packaging

labeling

warranties

guarantees

branding

product mix

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Product Planning

Involves making

decisions about

those features

that are needed to

sell a business’s

products,

services, or ideas.

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What is Product Planning?(cont.) 

Product Mix: All the different products that acompany makes or sells.

Product Line: A group of closely related productsmanufactured or sold by a business.

Product Item: A specific model, brand, or size of aproduct within a product line.

Product Width: The number of different productlines a business manufactures or sells.

Product Depth: The number of product items in aproduct line. 

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A well defined product plan allows a businessto:

Create sales opportunities.

Design appropriate marketing programs.Develop effective advertising campaigns.

Coordinate the product mix offered tocustomers.

Add new products.

Delete older products that no longer appealto customers

What is Product Planning?(cont.) 

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4 P’s of the PRODUCT MIX 

PRICE

PRODUCT

PLACE

PROMOTION

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PRODUCT MIX

= all the types of products acompany makes or sells. The

particular assortment of goodsand services that a businessoffers to meet the needs of its

market(s) and its companygoals.

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Product Mix and Product Line

PRODUCT MIX

The set of all products offered

for sale by a company

PRODUCT LINEA broad group of 

products for similar uses

and with similar characteristics

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Product Mix

Includes all the different products that

a company makes or sells.

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Identify ways in whichproduct lines can be

organized. Product Line = group of closely related products manufacturedby a business

Product Item = specific model, brand, or size of a productwithin a line

Ex: P&G has over 250 products within 21 product lines

Dish care is a product line 

Cascade, Dawn, Joy,

& Ivory are

product items

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Describe product mix

dimensions. Some companies have different brands

for different markets

Coca-Cola has different drinks forsparkling beverages, water, juice,

performance, coffee, tea, andinternational flavors.

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Product Line

 A group of closely related products

manufactured and/or sold by a

business.

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Product Item

 A specific model, brand, or size of a

product within a product line.

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DIMENSIONS

WIDTH = number of product lines carried by acompany.

NARROW = offering a limited number of productlines

BROAD = many different product lines carried

DEPTH = number of products and the assortment of sizes, colors, and models offered in a product line

SHALLOW = limited variety within a product line

DEEP = extensive variety within a product line 

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BREADTH The number of product lines carried

Product Mix

DEPTH

Variety

of 

sizes,colors,

models

within

a

productline

PRODUCT MIX

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Product Width

Oral

Care

Blades &

Razors

Personal

Care

Batteries Appliances

Width of the Gillette Product Mix

The number of different product lines a

business manufactures or sells.

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Product Depth

Oral

Care

Blades &

Razors

Personal

Care

Batteries Appliances

The number of product items offered

within each product line.

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NARROW PRODUCT MIX

= Limited product lines carried, typicallyvery specialized. A description of thewidth of a business's product mix offeringa limited number of  product lines.

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Broad Product Mix

= Many different product lines carried .

A description of the width of abusiness's product mix offering many  product lines.

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Shallow Product Mix

= Limited variety within a product 

line. A description of the depth of abusiness's product mix offering fewitems in the product line.

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Deep Product Mix

= Extensive variety within a product 

line. A description of the depth of abusiness's product mix offering agreat many items in the product line.

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Identify reasons that abusiness would offer a

narrow product mix. Product Width – number of different product lines

CONTRACTING - Pruning weak brands can strengthen theremaining brands in the line.

Ease on management

Cost effective

Simplicity

Consistency

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Identify reasons that abusiness would offer a

broad product mix. Product Width – number of different product lines

EXPANDING

Reach all markets

Competitive advantage

Ex: Red Lobster specializes in seafood, but offerschicken and steak to broaden their product mix.

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Identify reasons that abusiness would offer a

deep product mix. Product Depth – number of items

offered within each product line

EXPANDING

Variety

Quantity

Ex: Kohl’s carries various quantities of sizes, colors, & styles of Levi Jeans.

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Identify reasons that abusiness would offer a

shallow product mix. Product Depth – number of items offered

within each product line

CONTRACTING

Cost effective

Satisfy small markets

Ex: Only 2 chicken items on Red Lobster’s menu. 

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REVIEW:

What are some key

product mix

strategies?

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Product-Mix Strategies

Alteration of existing products

Contraction

Trading Up andTrading Down

Expansion

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Explain the importance of 

a business’s product mix. 

Businesses must plan their product mix

carefully because they cannot offer all theproducts that customers may want.

They should be a profitable market forproduct offered by a company

H d b i

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How do businessesdetermine which products to

produce and sell? Businesses will use different product mix

strategies to determine what to produce orsell.

Product mix strategies depend on:

Resources

Objectives

Past and current sales

Consumer trends

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Product Mix Strategies

The plan for how the business determineswhich products it will make or stock

May develop completely new products

May expand or modify their currentproduct lines

May drop existing products

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EXPANSION

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Developing New Products

Generating Ideas

Come from a variety of sources

Creativity is essential

Screening Ideas

Ideas are evaluated and matched against thecompany’s overall objectives. 

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Developing New Products (cont.)

Developing a Business Proposal

Consider a product’s potential sales, costs,and production requirements.

Developing the Product

The new idea takes physical shape

Marketers develop a marketing strategy.

Testing the Product with consumers

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Developing New Products (cont.)

Introducing the Product

The product has been researchedsuccessfully

This stage also is calledcommercialization.

Evaluating Customer Acceptance

Marketers track new productperformance.

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EXPANSION

ADVANTAGES Extend product

lifecycle

Adding items to aproduct line orintroducing an entire

product line cancapture marketshare and meetcustomer’s needsand wants.

DISADVANTAGES Adding items to a

product line or

introducing an entireproduct line can beexpensive, be difficult tomanage, and not alwaysbe successful.

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Deleting a Product or Product Line

Obsolescence

Loss of appeal

Conflict with current company objectives

Replacement with new products

Lack of profit

Conflict with other products in the line

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CONTRACTION

ADVANTAGES Cut losses

Reallocate resources tomore profitableproducts

Deleting products froma product line or the

entire product line canbe cost effective andeasier to manage whilecreating simplicity andconsistency

DISADVANTAGES Deleting products from a

product line or the entireproduct line is concedingmarket share to yourcompetitors.

It may be wiser to

improve the existingproduct or line torecapture market share.

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Describe alteration

product-mix strategies.Alteration of Existing Products: Making changes to meet customer

needs & wantsImprove an established product with

new design, new package, new uses.

Ex: Jeep offering 4 doors

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Developing Existing Products

(ALTERATION)

Companies constantly review theirproduct mix to see if they can furtherexpand their product lines or modifyexisting products.

Two ways to do this:

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Developing Existing Products (cont.)

Original Product

Newer Products

Line Extensions – new product lines,items, or services

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Product Modifications – an alteration ina company’s existing product 

Developing Existing Products (cont.)

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ALTERATION

ADVANTAGES Improving an

established

product cancapture newcustomers andmeet customer’sunmet wants as

trends change.Ex: McDonald’sopening stores inIndia

DISADVANTAGES Improving an

established product is

expensive and notalways a success.Example: New Coke

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Product Mix Strategies

Developing New Products

Follows seven steps:

Generate Ideas

Screen Ideas

Develop a Business Proposal

Test the product with consumersIntroduce the product

Evaluate customer acceptance

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Product Mix Strategies (cont)

Developing Existing Products

Line Extensions: Adding new product lines, itemsor services.

Ex: Tylonol

Product Modifications: An alteration to anexisting product:

New and different varieties

Formulations

Colors

Styles

Features

Sizes

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Product Mix Strategies (cont)

Deleting a Product or Product Line

Obsolescence

Loss of AppealChanges in Company Objectives

Replacement with New Products

Lack of ProfitConflict with other products in the line

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Describe trading up / downproduct-mix strategies.

Trading up: Adding a higher-pricedproduct to a line to attract a higher-income market and improve the sales of 

existing lower-priced products. Trading down: Adding a lower-priced item

to a line of prestige products to encouragepurchases from people who cannot afford

the higher-priced product, but want thestatus.

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TRADING UP

ADVANTAGES Adding higher priced

items to a product linewill attract the higherincome market andmay help increase theimage and sales of thelower priced items.

DISADVANTAGES While sales may be generated for the new

product or line, sales of establishedproducts may decline.

If the business uses trading up to enhanceits image, the business must be careful thatpresent customers are not lost in theprocess of gaining new ones.

Customers may become confused as towhat the company’s image is meant to be,or they may refuse to believe that betterquality merchandise can be purchased froma business that had formerly sold budgetgoods.

Adding higher priced items to a product lineis expensive and may not attract newcustomers while hurting the image andsales of the lower priced items.

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TRADING DOWN

ADVANTAGES

Adding lower priceditems to a product

line of prestigeproducts can capturea lower incomemarket who cannot

afford the higherpriced items. 

DISADVANTAGES Adding lower priced items to a product

line of prestige products can hurt theimage and sales of the higher priced

items in the line Consumers may be confused about the

new product or line.

Profits from the cheaper product may beeroded by reduced sales in the moreexpensive line.

Dealers may not be willing to add thelower priced product to their offering.

Competition may become stronger at thehigh end of the market.

Gaining short-term sales at the expense

of long term sales 

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How are

products/services

positioned in the

market place?

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POSITIONING is about bringingattention to products and

DIFFERENTIATING them fromsimilar ones.

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Positioning the Product

COMPETITOR

High price/high quality

or 

low price

Differential

advantage

 Associated with

attractive attribute

PRODUCT CLASS

OR ATTRIBUTE

PRICE

AND QUALITY

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Product Positioning = the IMAGE aproduct projects

The goal is to set the product apart fromthe competition.

 “The way you get into your customer’smind.”  

The efforts a business makes to identify,place, and sell its products.

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Describe positioningproduct-mix strategies.

Positioning – is all about perception; actionsmarketers take to create a certain image of aproduct in the minds of the customers

• In Relation to a Competitor• In Relation to a Product Class or Attribute

• In Relation to a Target Market

• By Price and Quality

• Difficult to change

P d t P iti i

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Product Positioning 

Product positioning: Efforts a businessmakes to identify, place and sell its productsin the marketplace.

Positioning by price and quality:

Ex: Ford Motor Company positions itsFocus as an economical passenger carwhile still emphasizing quality.

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Positioning by Price & Quality

Offer economy, mid-priced, and luxury lines

Product Positioning (cont)

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Product Positioning (cont) 

Positioning by features and

benefits:Ex: Oil of Olay was positioned as a

premium facial moisturizer andcleanser to keep skin soft and

young. 

Positioning by uniquecharacteristics:

Ex: Cell phones that can textmessage or take pictures and sendthem.

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Positioned by Features & Benefits

Unique characteristics

P d t P iti i ( t)

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Product Positioning (cont) 

Positioning in relation to the

competition:Ex: Warner-Lambert Company

introduced Cool Mint Listerine bypositioning against the “theraputic” 

benefits of Original Listerine andthe “cosmetic” benefits of Scope. 

Positioning in relation to other

products in a line:

Ex: Binney & Smith introducedwashable crayons and positionedthem as a specialty item in the

company’s Crayola crayon line. 

Positioning in

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Positioning inRelation to the Competition 

Positioning in Relation to

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Positioning in Relation toOther Products in a Line 

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POSITIONING STRATEGIES

ADVANTAGES Creating an identity

of a product helps

find a place for theproduct in themarketplace whilestrongly identifying

with a specific targetmarket and possiblycreating brandloyalty.

DISADVANTAGES Images of a product are

difficult to change once

they are established andvery expensive.

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6 Steps to SuccessfulPositioning

1. What position do you currently own?

2. What position do you want to own?

3. Whom you have to defeat to own theposition you want.

4. Do you have the resources to do it?

5. Can you persist until you get there?6. Are your tactics supporting the positioning

objective you set?