Product And Services

Products are anything that can be offered to a market for attention, acquisition & consumption that might satisfy a need or want.

To differentiate G&S, firms are creating value by creating & managing customer experiences with their brand or company.

Product Levels Core Productrefers to the use-benefit, problem-solving service that the consumer is really buying QANTAS Time Critical Transportation Actual Producttangible product or intangible service that serves as the medium for receiving the core product benefits. Quality Level (performance), Features (attributes), Styling, Brand Name (position/promote), Packaging (protect/promote) QANTAS Seat Allocation, Safety Record, Meals, Booking System Augmented Productconsists of measures taken to help the consumer put the actual product to sustained use. E.g. Credit, Delivery, Warranties, Installations & After Sale Service QANTAS Frequent Flyer Scheme, Holiday Packages, Car Rental Booking Help, Qantas Club

Product And Service Classifications

Consumer Products bought by final consumers for personal consumption Convenience Products buy frequently, little comparison, tend to be low price & widely available e.g. Sweets, groceries. Shopping Products less frequently purchased, effort to compare on suitability/quality/price/style e.g. Furniture/Hotels Specialty Products unique characteristics or brand identification, special purchase effort e.g. designer clothes, Ferrari Unsought Products not normally considered by the buyer e.g. blood donations, funeral services, life insurance.

Industrial Products bought by firms/individuals for further processing or for use in conducting a businessThe distinction between consumer & industrial products is based on the purpose for which the product is bought. Materials & Parts- raw materials, manufactured materials & parts (wheat, timber, iron ore, tyres, motors) Capital Items- aid the production process/operations, installations & accessory equipment (drill presses, forklifts) Supply & Services- operating supplies, repair/maintenance services, advisory services (pencils, pc repair, consulting)

Services Intangible Activities, Benefits Or SatisfactionsSome services are capital intensive & some are people based. These service characteristics distinguish almost pure G&S: Intangibility services have little physical element, cannot be tasted, felt, heard or smelled before they are bought Inseparability services cannot be separated from their providers Perishability cannot store for later sale or use (only a memory is left) e.g. rock concert Variability people based services are almost never exactly the same, quality depends on provider High Involvement & Personal Nature of Services services are personalised e.g. dentist Synchronous Delivery & Consumption delivery & consumption of the service in real time (RT interaction e.g. L2Drive)

Marketing Strategies for Service Firms The ServiceProfit Chain In a service business, the customer and frontline service employee interact to create the service. Hence service firms profit comes from effective employee and customer satisfaction. Hence, it is necessary to understand the serviceprofit chain consisting of five key aspects of a the service business: 1. Internal service quality: superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which in turn results in.2. Satisfied and productive service employees: more satisfied, loyal, and hardworking employees, which results in.3. Greater service value: more effective and efficient customer value creation and service delivery, which results in.4. Satisfied and loyal customers: satisfied customers who remain loyal, repeat purchase, and refer other customers, which results in.5. Healthy service profits and growth: superior service firm performance.

Internal marketing means that the service firm must orient and motivate its customercontact employees and supporting service people to work as a team to provide customer satisfaction. Interactive (frontline) marketing means that service quality depends heavily on the quality of the buyerseller interaction during the service encounter.

There are three major marketing tasks that service marketers face in this context: Managing Service Differentiation: Service companies can differentiate their service delivery by having better trained and reliable customercontact people. Managing Service Quality: Service quality will always vary, depending on the interactions between employees and customers and is harder to define and judge than product quality. Managing Service Productivity: Service firms are under great pressure to increase service productivity. They can train current employees better or hire new ones who will work harder or more skilfully.

Product And Service Decisions

Product AttributesMarketers are constantly involved in making individual product and service decisions relating to the development and marketing of individual products. The important decisions relate to product attributes, branding, packaging, labelling and productsupport services. Product and service attributes Developing a product or service involves defining the benefits that will be offered to the marketplace. These benefits are communicated and delivered by product attributes such as quality, features, style and design. Decisions about these attributes greatly affect consumer reactions to a product. Product quality refers to the characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. Level and consistency of quality are the two dimensions used in the measurement of product quality. Quality is a major positioning tool for marketers. In developing a product, the marketer must first choose a quality level that will support the products position in the target market. Product features refer to technical characteristics of the offering. Consumers seek value and needsatisfaction. A product can be offered with varying features. Product feature decisions must reflect consumer needs and perceptions, affordable value and company cost. Starting with a strippeddown model a company can create higherlevel models by adding more features to suit diverse customer needs which may help the company better compete in the marketplace. Product style and design adds to product distinctiveness. While style simply describes the appearance of a product, design is a much broader concept. A sensational and eyecatching style may grab attention, but it does not necessarily make the product perform better.

BrandingBrand is a name, term, sign, symbol, design, or a combination of these, that identifies the goods or services of one seller or group of sellers and differentiates them from those of competitors. Brand has become a buzzword in modern marketing. Branding can add value to a product and as such, has become a major issue in product strategy, requiring a number of decisions. Brand Equityis theadded value that knowledge about a brand brings to a product over & above its functional qualities. It must have extensive awareness & be strong, unique & favourable in the minds of consumers. Building a brand name can cost $150M & the success rate is low. Coca Cola brand equity is estimated to be $80bn. Firms often acquire brands to build brand portfolios with strong brand equity. Brand valuation is the process of estimating the total financial value of a brand. Young & Rubicams Brand Asset Evaluator measures brand strength along four consumer perception dimensions: differentiation (what makes the brand stand out), relevance (how consumers feel it meets their needs), knowledge (how much consumers know about the brand), and esteem (how highly consumers regard and respect the brand). Building Strong Brands Brand Positioning: Marketers can position brands at any of three levels. They can position the brand (i) on product attributes; (ii) with a desirable benefit and (iii) on beliefs and values. Brand Name Selection: Desirable qualities for a brand name include the following: It should suggest something about the products benefits and qualities. It should be easy to pronounce, recognise, remember and distinctive. Brand Sponsorship: A manufacturer has four sponsorship options: (i) he can launch the product as a manufacturers brand (or national brand); (ii) may sell to resellers who give it a private brand (also called a store brand or distributor brand); (iii) can market licensed brands; and finally (iv) can join forces with another company and cobrand a product. National brands (or manufacturers brands) have long dominated the retail scene.

Brand Development: A company has four choices when it comes to developing brands.

PackagingPackaginginvolvesdesigning & producing the container or wrapper for a product. It is an important marketing tool (attract attention, describing the product) in addition to holding & protecting the product

LabellingLabellingidentifies (distinguishes from competitors), describes (content information) & promotes (arouse attention) the product & brand by supporting its positioning.

Product Line DecisionsA Product Line is a group of products that are closely related because they function in a similar manner, sold to the same customer groups, are marketed via the same outlets or fall within the same price range1. Product line length is influenced by the companys objectives and has to be carefully decided. A product line is too short if adding items increases profits, it is too long if dropping items increases profits. The company must plan line growth carefully; it can increase the length either by line filling or line stretching. Companies that want to be positioned as fullline companies or that are seeking high market share and market growth, are likely to carry longer lines. 2. Line Filling is the process whereby a product line can also be lengthened by adding more items within the current range. Line filling is overdone if it results in cannibalisation or customer confusion. The new items should be noticeably different from the current items. 3. Line stretching occurs when a company lengthens its line beyond its current range; downwards or upwards. Many companies initially locate at the high end of the market and later stretch their lines downward. Companies in the middle may decide to stretch the lines in both directions, employing a twoway stretch strategy. 4. Featuringselecting a few items to receive special marketing attentionto increase sales volume or draw customers to other products in the line (loss leadership)

Product Mix DecisionsTheProduct Mix/Portfolioconsists of all the product lines & items that a firm sells. For long term growth the mix must be expanded (replaced or modified). It is optimised according to engineering, production & marketing skills available resources & objectives.1. Width the number of different product lines marketed by a firm2. Length the number of items sold by a firm within each product line3. Depth number of shapes, models, designs & versions of the product4. Consistency how closely related the various product lines are in end use, production requirements, distribution channels or other ways.

A company can adapt its product strategy in four ways: 1. It can add new product lines, widening its product mix. 2. It can lengthen its existing product lines. 3. It can add more versions of each product, deepening its product mix. 4. It can pursue more product line consistency.

New ProductsRapid changes in tastes, technology & competition, prompt consumers to want new & improved products (causes life cycle).

New Product Developmentis thedevelopment of original products, product modifications or new brands via own R&D (depends on buyer or sellers assessment). Newness can mean new to the world, new product lines, line extensions, improvements, repositioning & cost reductions. New Products can be obtained by Acquisition or New Product Development. 80% of new products fail/underperform. Reasons include poor research (overestimation), poor design, incorrect positioning

The New Product Development Process

1. Idea Generation the systematic search for new product ideas Internal employees, R&D team External customers, distributors, suppliers, competitors, shows, seminars2. Idea Screening focusing on good ideas & dropping poor ones ASAP to avoid development costs (via rough estimations)3. Concept Development & Testing translating ideas into product concepts Product Concepts detailed version of the idea stated in meaningful consumer terms Product Image the way consumers perceive actual or potential products Concept Testing testing new product concepts with a targeted consumers to discover if the concept has appeal4. Marketing Strategy Development designing a new marketing strategy for a new product based on the product concept Target Market, Value Proposition, Planned Sales/MKT Share/Profit Goals5. Business Analysis a review of the sales, costs & profit projections to see if it satisfies firm objectives6. Product Development converting the product concept into a physical product to check viability7. Test Marketing implementation of the marketing program in 1 or more realistic market settings8. Commercialisation introduction of the new product into the market place When (further improvements, cannibalism?), where (which market rollout), to whom & how, Costly

Managing New Product Development (NPD) Customer Centred NPD focused on new ways to solve customer problems & create more customer satisfying experiences Team Based NPD dept. work together in cross functional teams, overlapping steps in NPD process to save resources & increase effectiveness Sequential NPD Process (Above) helps bring control to complex/risky projects but can be slow (bottlenecks) Team Based NPD Process faster & effective, but can be confusing & bring tension (good for rapid change) Systematic NPD NPD process should be systematic & holistic to ensure new ideas are generated & good ones dont falter, requires a good management system; Innovation Management System to collect, review, evaluate & manage new product ideas Can encourage all stakeholders to be involved in generating new products

Common Organisational Arrangements Product Managers-close to the market/knowledgeable but often preoccupied with existing products, may lack NPD skills New Product Managers(NPM) assigned the NPD task, may be to obsessed with modifications & line extensions New Product Committeesspecialists from several functional areas to evaluate new product concepts & plans New Product Departmentsseparate departments with line staff authority to develop new products, manager access to executives New Product Venture Teamsspecialists from operating departments are assigned to a venture team

Product Life Cycle (PLC)The PLC can describe product classes (petrol cars) longer life, product forms standard PLC (SUV) & brands (Toyota) New Product Development finding & developing a new product idea 0 Sales & high expenses, Introduction period of slow growth as the product is introduced Slow sales growth, very high costs (commercialisation expenses & heavy promotion), no profits Strategy is intended to position the product Introduction Strategies Price Skimming generate high profits now to offset expenses Price Penetration build market share & create high profits later (after stabilisation) Growth period of rapid market acceptance & sales High sales growth, lower costs per unit (spreading overhead), increasing profits, increasing competition Growth Strategies- New Features, Improving Quality, Increasing Distribution, Entering New Market Segments Maturity slowdown in sales growth as the product achieves acceptance by most potential buyers. Longer stage. Slow sales growth, profits level off or decline (if marketing expense to defend from many competitors) Maturity Strategies Modifying the target market to increase consumption, modify product (quality, feature, style or packaging) & modify the Marketing Mix (e.g. Price Promotion). Decline sales fall off & profits drop Costs of managing & producing the product may exceed sales (low or no profits) Strategies Harvest profits whilst competitors drop out by lowering costs, Divest

Product & Market Modification & Product Re-positioning Strategiescan manage the PLC(aim to grow long term - renewal). Consumer product tend to have a shorter PLC than business products but there no exact time frame (depends on technology).

mark