Chapter 11 Chapter 11

Product and Product and Service StrategiesService Strategies

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Chapter ObjectivesChapter Objectives1. Define the term product and distinguish between goods and

services and how they relate to the goods-services continuum.

2. Explain the importance of the service sector in today’s marketplace.

3. List the classifications of consumer goods and services and briefly describe each category.

4. Describe each of the types of business goods and services.5. Explain how quality is used by marketers as a product

strategy.6. Explain why firms develop lines of related products.7. Describe the way marketers typically measure product mixes

and make product mix decisions.8. Explain the concept of the product life cycle and identify the

different stages.9. Describe how a firm can extend a product’s life cycle.

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What is a Product?What is a Product?

Product:Product: bundle of physical, service, and symbolic attributes designed to enhance buyers’ want satisfaction

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What are Goods and Services?What are Goods and Services?

Service:Service: intangible task that satisfies consumer or business user needs

Goods-services continuum:Goods-services continuum: device that helps marketers to visualize the differences and similarities between goods and services

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Characteristics that distinguish services from goods:IntangibilityInseparabilityPerishabilityDifficulty of standardizationFrequent requirement of

interaction between buyer and Seller

Variability

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Importance of the Service SectorImportance 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.

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Property Property InsuranceInsuranceAn Important

Part of the Service Sector

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Classifying Goods and Services for Classifying Goods and Services for Consumer and Business MarketsConsumer and Business Markets

Consumer productsConsumer products: products destined for use by ultimate consumers

Business (or B2B) productsBusiness (or B2B) products: those that contribute directly or indirectly to the output of other products for resaleAlso called industrial or organizational

products

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Types of Consumer ProductsTypes of Consumer Products

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Convenience productConvenience product: good or service that consumers want to purchase frequently, immediately, and with minimal effortImpulse 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.

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Gum and CandyGum and CandyAn Impulse Convenience Good

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Shopping productShopping product: good or service purchased only after the customer compares competing offerings from competing vendors on such characteristics as price, quality, style, and colorTypically cost more than convenience

purchases.Include tangible items.Shopper lacks complete information and

gathers information during the buying process.

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Chico’s and TargetChico’s and TargetAds for shopping products

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

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GucciGucciA Specialty ProductPrint reads:

Guccitimepieces neiman marcus

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Unsought Unsought productproduct: good or service marketed to consumers who may not yet recognized in the need for itPet Insurance

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Types of Business ProductsTypes of Business Products

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InstallationInstallation: 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

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Accessory Accessory equipmentequipment: capital product, usually less expensive and shorter-lived that insulation, such as a laptop computerIndustrial

distributor--wholesaling marketing intermediary

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Component parts and Component parts and materialsmaterials: finished business products that become parts of buying firms’ final products, such as spark plugs for new cars

Raw materialsRaw 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

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SuppliesSupplies: 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 itemsMRO [Maintenance, Repair, Operating MRO [Maintenance, Repair, Operating

Supplies] itemSupplies] 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

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Business servicesBusiness 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

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Quality as a Product StrategyQuality as a Product Strategy

QualityQuality is a key component to a firm’s success in a competitive marketplace.

Total quality managementTotal quality management (TQM): approach that involves all employees in continually improving products and work processes to achieve customer satisfaction and world-class performance

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Worldwide Quality ProgramsWorldwide Quality Programs Malcolm Baldrige National Quality AwardISO 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: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

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Quality of ServicesQuality of ServicesService encounterService quality: Expected and perceived

quality of a service offeringDetermined by five variables:

Tangibles – physical evidenceReliability – consistent performanceResponsiveness – willingness to provide

a serviceAssurances – communicated confidenceEmpathy – understand customer needs,

and respond accordingly

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Development of Product LinesDevelopment of Product Lines

Product LineProduct Line: a series of related productsMotivation

Desire to GrowEnhancing the Company’s Position in

the MarketOptimal Use of Company ResourcesExploit the Product Life Cycle

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Yum Brands’ Yum Brands’ Product lines Product lines

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A company’s assortment of product lines and individual offeringsProduct 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.

The Product MixThe Product Mix

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Product Mix DecisionsProduct Mix Decisions A firm may lengthen or widen its product

mixA Company may decide to add variations

that will attract new usersA 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

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The Product Life CycleThe Product Life Cycle Product life cycleProduct life cycle: progression of products

through introduction, growth, maturity, and decline stages

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Introduction StageIntroduction StageFirm works to stimulate demand for the

new market entryPromotional campaigns stress featuresAdditional promotions to intermediaries

attempt to induce them to carry the productAlthough prices are typically high, financial

losses are common due to heavy promotional and research-and-development costs

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Growth StageGrowth StageSales volume rises rapidlyFirm usually begins to realize substantial

profitsSuccess attracts competitorsFirm may need to make improvements to

the productAdditional spending on promotion and

distribution may be necessary

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Maturity StageMaturity StageIndustry sales continue to grow, but

eventually reach a plateauMany competitors have entered the

market, and profits began to declineDifferences between competing products

diminishAvailable supplies exceed industry demand

for the first timeCompetition intensifies and heavy

promotional outlays are common

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Figure 11.15Figure 11.15Using

Promotion--and Product Extensions--to Extend the Maturity Stage of the Product Life Cycle

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Decline StageDecline StageInnovations 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

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Extending the Product Life CycleExtending 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

customersIncrease the number of users for the

productFind new usesAdd new product features Change package sizes, labels

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Quaker OatsQuaker OatsA new

application for a mature product

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BounceBounceFinding new

uses for Bounce Fabric Softener

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KraftKraftNew cubed

cheese for snacking

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Product Deletion DecisionsProduct 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

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End of Chapter ElevenEnd of Chapter Eleven