Product, PLC and ServicesProduct, PLC and ServicesChapters 9-11(sections)

What is a Product?What is a Product?

• Everything, both favorable and unfavorable, that a person receives in an exchange.– Primary characteristics– Auxiliary characteristics

BrandName

QualityLevel

Packaging

Design

Features

Delivery& Credit

Installation

Warranty

After-Sale

Service

CoreBenefit

orService

CoreBenefit

orService

AugmentedProduct

AugmentedProduct

Product ClassificationsProduct Classifications

UnsoughtProducts

UnsoughtProducts

SpecialtyProductsSpecialtyProducts

ShoppingProducts

ShoppingProducts

ConvenienceProducts

ConvenienceProducts

ConsumerProducts

ConsumerProducts

BusinessProductsBusinessProducts

PRODUCTSPRODUCTS

Some Product DefinitionsSome Product Definitions• Product item – a specific version of a

product that can be designated as a distinct offering among a firm’s products.

• Product line – a group of closely related product items.

• Product mix – all products that a firm sells.

Gillette’s Product LinesGillette’s Product Lines & & MixMix

Blades and Writingrazors Toiletries instruments Lighters

Mach 3 Series Paper Mate CricketSensor Adorn Flair S.T. Dupont Trac II ToniAtra Right GuardSwivel Silkience Double-Edge Soft and Dri Lady Gillette Foamy Super Speed Dry LookTwin Injector Dry Idea Techmatic Brush Plus

Width of the product mixWidth of the product mix

De

pth

of

the

pro

du

ct

line

sD

ep

th o

f th

e p

rod

uc

t lin

es

Why Product Lines?Why Product Lines?

• Advertising Economies

• Package Uniformity

• Standardized Components

• Efficient Sales and Distribution

• Equivalent Quality

Product Line StrategiesProduct Line Strategies

• Extensions: Adding additional products to an existing product line in order to compete more broadly in the industry.

• Contractions: deleting products from product lines if there are low sales, cannibalization, obsolesce or few resources.

What is the Product Life Cycle (PLC)?

• A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death).

• It is based on the product category.

The Product Life Cycle

Time

Do

llar

s

ProductCategory Profits

ProductCategory Sales

IntroductoryIntroductoryStageStage

GrowthGrowthStageStage

MaturityMaturityStageStage

DeclineDeclineStageStage

0

Introduction Stage

• High failure rates• Little competition• Frequent product modification• Limited distribution• High marketing and production costs• Negative profits• Promotion focuses on awareness and

information• Intensive personal selling to channels

Growth Stage

• Increasing rate of sales• Entrance of competitors• Market consolidation• Initial healthy profits• Promotion emphasizes brand ads• Goal is wider distribution• Prices normally fall• Development costs are recovered

Maturity Stage

• Declining sales growth• Saturated markets• Extending product line• Stylistic product changes• Heavy promotions to dealers and consumers• Marginal competitors drop out • Prices and profits fall• Niche marketers emerge

Decline Stage• Long-run drop in sales• Large inventories of unsold items• Elimination of all nonessential marketing

expenses• Options for Deleting Products:

• Maintaining• Deletion• Harvesting• Contracting

Marketing Strategies for PLC

INTRODUCTION GROWTH MATURITY DECLINE

ProductStrategy

DistributionStrategy

PromotionStrategy

PricingStrategy

Limited modelsFrequent changes

More modelsFrequent changes.

Large number of models.

Eliminate unprofitable

models

LimitedWholesale/

retail distributors

Expanded dealers. Long-term relations

Extensive.Margins drop.Shelf space

Phase out unprofitable

outlets

Awareness. Stimulate

demand.Sampling

Aggressive ads.Stimulatedemand

Advertise. Promote heavily

Phase outpromotion

Higher/recoupdevelopment

costs

Fall as result ofcompetition &

efficient produc-tion.

Prices fall (usually).

Prices stabilize at low level.

Consider TiVoWhere is it in the PLC?

• 90% TiVo subscribers channel surf less than before

• 95% say it is easier to work than VCR• 40% would rather give up their mobile

phones than TiVo• 80% shift prime time programming• 50% watch up to 2 or more hours of TV

daily

Categories of Product Adopters

Pe

rce

nta

ge

of

Ad

op

ters

Time

Innovators2.5%

EarlyAdopters

13.5%

LateMajority

34%

EarlyMajority

34%Laggards

16%

Diffusion Process and PLC Curve

Innovators

Early adopters

Early majorityLate majority

Laggards

ProductProductlife cyclelife cyclecurvecurve

DiffusionDiffusioncurvecurve

Introduction Growth Maturity Decline

Sal

es

What is a Service?

• The result of applying human or mechanical efforts to people or objects.

• Medical, utilities, entertainment, professional (law, medical), transportation, financial

Characteristics of Services• Intangibility – cannot be touched, seen,

tasted, heard or felt in the same manner as goods.

• Inseparability –services are produced and consumed simultaneously

• Heterogeneity – services are less standardized and uniform than goods.

• Perishability – services cannot be stored, warehoused or inventoried.

Marketing Mixes for Services

• Product– People processing– Possession

processing– Information

processing

• Mass Customization• Core and

Supplementary Services

• Distribution– Convenience– Number of outlets– Direct v indirect

distribution– Location– Scheduling

Marketing Mix for Services

• Promotion– Stress tangible cues– Use personal

informational sources

– Create a strong firm image

– Engage in postpurchase communication

• Price– Define unit of service

consumption– Determine if multiple

elements are bundled

– Trends have made pricing an active component