Marketing - Products and Services
Product, Services, and Experiences
Objectives
Define product, services, and experiences.
Define levels of products and services.
Describe classification on consumer products.
Describe the decisions companies make regarding their Individual product and service decisions.
Discuss branding strategy—the decisions companies make in building and managing their brands.
List and define the steps in the new product development process and the major considerations in managing this process.
Describe the stages of the product life cycle and how marketing strategies change during a product’s life cycle.
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.
Examples: Apple iPhone, Toyota Camry, and a Caffé Mocha at Starbucks.
A service is an activity, benefit, or satisfaction offered for sale; it is intangible and does not result in ownership of anything.
Examples: banking, hotel, airline travel, retail, wireless communication, and home-repair services.
Market Offerings
Market offerings include both tangible goods and services.
Companies create and manage customer experiences with their brands or companies to differentiate their offers from that of the competitors.
Apple's retail stores create engaging life-feels-good brand experiences.
Levels of Products and Services
Core Customer Value
The most basic level that addresses the question: What is the buyer really buying?
Marketers must first define the core, problem-solving benefits, services, or experiences that consumers seek.
Example: People who buy a Harley-Davidson motorcycle are buying more than a machine that gets them from point A to point B.
Actual Product
Product planners must turn the core benefit into an actual product.
They need to develop product and service features, a design, a quality level, a brand name, and packaging.
Example: A Harley-Davidson motorcycle with its name, styling, features, sounds, parts, and other attributes.
Augmented Product
Product planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits.
Example: Harley-Davidson provides a warranty on parts and workmanship, quick repair services, a showroom full of accessories, web and mobile sites, and the Harley Owners Group (H.O.G.) with benefits like roadside assistance and events.
Product and Service Classifications
Consumer products are bought by final consumers for personal consumption and include:
Convenience products
Shopping products
Specialty products
Unsought products
Marketing Considerations for Convenience and Shopping Products
Marketing Considerations | Convenience | Shopping |
|---|---|---|
Customer buying behavior | Frequent purchase; little planning, little comparison or shopping effort | Less frequent purchase; much planning and shopping effort; comparison of brands on price, quality, and style |
Price | Low price | Higher price |
Distribution | Widespread distribution; convenient locations | Selective distribution in fewer outlets |
Promotion | Mass promotion by the producer | Advertising and personal selling by both the producer and resellers |
Examples | Toothpaste, magazines, and laundry detergent | Major appliances, televisions, furniture, and clothing |
Marketing Considerations for Specialty and Unsought Products
Marketing Considerations | Specialty | Unsought |
|---|---|---|
Customer buying behavior | Strong brand preference and loyalty; special purchase effort; little comparison; low price sensitivity | Little product awareness or knowledge |
Price | High price | Varies |
Distribution | Exclusive distribution in only one or a few outlets per market area | Varies |
Promotion | More carefully targeted promotion by both the producer and resellers | Aggressive advertising and personal selling by the producer and resellers |
Examples | Luxury goods, such as Rolex watches or fine crystal | Life insurance and Red Cross blood donations |
Product and Service Decisions
Marketers make product and service decisions at three levels:
Individual product decisions
Product line decisions
Product mix decisions
Individual Product Decisions
Product Attributes
Product Quality: The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs.
Total Quality Management (TQM): An approach in which all the company’s people are involved in constantly improving the quality of products, services, and business processes.
Product Features: A product can be offered with varying features. The company can then create higher-level models by adding more features. Features are a competitive tool for differentiating the company’s product from competitors’ products.
Product Style and Design:
Style: Describes the appearance of a product.
Design: Contributes to a product’s usefulness as well as to its looks.
Branding
A name, term, sign, symbol, or design, or a combination of these, that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors.
Consumers view a brand as an important part of a product, and branding can add value to a consumer’s purchase.
Packaging
The activities of designing and producing the container or wrapper for a product.
Packages must perform many sales tasks—from attracting buyers to communicating brand positioning to closing the sale.
Labeling and Logos
Labels and logos range from simple tags attached to products to complex graphics that are part of the packaging.
The label might also describe several things about the product and help to promote the brand and engage customers.
Product Support Services
Customer service is another element of product strategy and is an important part of the customer’s overall brand experience.
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 ranges.
The major product line decision involves product line length—the number of items in the product line.
Product line filling: Adding more items within the present range of the line.
Product line stretching: Lengthening the product line beyond its current range.
Product Mix (or Product Portfolio)
The set of all product lines and items that a particular seller offers for sale.
Width: Number of different product lines the company carries
Length: Total number of items a company carries within its product lines
Depth: Number of versions offered for each product in the line
Consistency: Relativity of the various product lines in end use, production requirements, distribution channels, or some other aspect
Branding Strategy
Brand equity is the differential effect that knowing the brand name has on customer response to the product or its marketing.
With positive brand equity, consumers react more favorably to the brand than to an unbranded version of the same product.
Consumer perception dimensions:
Differentiation
Relevance
Knowledge
Esteem
Brand value is the total financial value of a brand, while customer equity is the value of customer relationships that the brand creates.
Brand Positioning
Marketers need to position their brands clearly in target customers’ minds and should establish a mission and vision for the brand when positioning it.
A brand can be better positioned by associating its name with a desirable benefit and on strong beliefs and values, engaging customers on a deep, emotional level.
Brand Name Selection
A good name can add greatly to a product’s success and begins with a careful review of the product and its benefits, the target market, and proposed marketing strategies.
Desirable qualities for a brand name should be:
Based on the product’s benefits and qualities
Easy to pronounce, recognize, and remember
Distinctive and extendable
Easily translated into foreign languages
Capable of registration and legal protection
Brand Sponsorship (Branding Decisions)
National brands (or manufacturers’ brands): Marketed under the manufacturer’s own name.
Store brands (private brands):
Licensing: Companies license names or symbols previously created by other manufacturers, names of well-known celebrities, or characters from popular movies and books.
Co-branding: Use the established brand names of two different companies on the same product.
Brand Development
A company has four choices when it comes to developing brands:
Line extensions: Occur when a company extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category.
Brand extensions: Extends an existing brand name to new or modified products in a new category.
Multibranding: Offers a way to establish different features that appeal to different customer segments, lock up more reseller shelf space, and capture a larger market share.
New brands: A company might believe that the power of its existing brand name is waning, so a new brand name is needed or when it enters a new product category for which none of its current brand names are appropriate.
New Product Development Strategy
Developing new products through the firm’s own research and development efforts requires:
Understanding consumers, markets, and competitors
Developing products that deliver superior value to customers
Stages in New Product Development
Idea Generation: Systematic search for new product ideas from internal and external sources.
Idea Screening: Screening new product ideas to spot good ones and drop poor ones as soon as possible using the R-W-W framework (Real, Win, Worth doing).
Concept Development and Testing: Developing a new product into alternative product concepts and testing the concepts with groups of target consumers.
Marketing Strategy Development: Initial marketing strategy for a new product involving the target market, planned value proposition, sales, market-share, and profit goals.
Business Analysis: A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.
Product Development: Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering.
Test Marketing: Introduces the product and its proposed marketing program into realistic market settings to test the product and its marketing program.
Commercialization: Introducing a new product into the market considering when and where to launch.
Managing New Product Development
Requires a holistic approach:
Customer-centered new product development: Focuses on finding new ways to solve customer problems and create more customer-satisfying experiences.
Team-based new product development: Various company departments work together, overlapping the steps in the product development process.
Systematic new product development: Innovation management systems collect, review, evaluate, and manage new product ideas.
Product Life-Cycle Strategies
The product life cycle (PLC) is the course that a product’s sales and profits take over its lifetime and has five distinct stages:
Product development: Sales are zero, and the company’s investment costs mount.
Introduction: A period of slow sales growth.
Growth: A period of rapid market acceptance and increasing sales and profits.
Maturity: A period of slowdown in sales growth.
Decline: The period when sales fall off and profits drop.
Summary of Product Life-Cycle Characteristics, Objectives, and Strategies
Introduction | Growth | Maturity | Decline | |
|---|---|---|---|---|
Characteristics | ||||
Sales | Low sales | Rapidly rising sales | Peak sales | Declining sales |
Costs | High cost per customer | Average cost per customer | Low cost per customer | Low cost per customer |
Profits | Negative | Rising profits | High profits | Declining profits |
Customers | Innovators | Early adopters | Middle majority | Laggards |
Competitors | Few | Growing number | Stable number beginning to decline | Declining number |
Marketing objectives | Create product awareness and trial | Maximize market share | Maximize profit while defending market share | Reduce expenditure and milk the brand |
Strategies | ||||
Product | Offer a basic product | Offer product extensions, service | Diversify brand and models | Phase out weak items |
Price | Use cost-plus | Price to penetrate market | Price to match or beat competitors | Cut price |
Distribution | Built selective distribution | Build intensive distribution | Build more intensive distribution | Go selective: phase out unprofitable outlets |
Advertising | Build product awareness | Build interest in the mass market | Stress brand differences and benefits | Reduce to level needed to retain hard-core loyals |
Sales Promotion | Use heavy sales promotion to entice trial | Reduce to take advantage of demand | Increase to encourage brand switching | Reduce to minimal level |