Lecture notes-- class 10

product

  • a product is a bundle of benefits ( to and for whom?, core, generic, expected, augmented product, potential product)

  • a important factor in building equity and loyalty

        1. experience with product helps tell people how they feel about a brand


the link between consumer and product

cuz we need to evaluate product decisions from consumer benefits prespective


low involvement

habit products — consumers will just do or buy something needed ( paper towels)


high invovlment— consumers are doing more reaserch and spending time consuming information before making their purchase, often leading to a more considered decision-making process (e.g., buying a car or a computer).


three types of goods:

  1. search: can be evaluated prior to consumption— inspection is possible

  2. Experiance: can be evaluated after consumption

  • inspectionnot possible

  • purchase or sampling necessary

  1. Credence goods: cannot be evalutated even after consumption no/ limited testable criteria


low involvement= emphize just try it

high involvemnt= emphize search and credence aspects

  • reaserch specs

  • rating and reviews

  • influencer strategy


new product development— idea generation, screening, idea evaluation, development, commercialization

  • market testing and launch strategies to ensure successful introduction into the market.


working backwards start with the customer

  • who is the consumer

  • what do they want/need

  • what is the most important benefits

  • how do we deliver it

  • how do we measure success


factors and affect the speed of adoption

  1. precieved relative advantages

  • differences and improvements

  1. compatiblitiy

  • lifestyle compatibility

  1. observability

  • how easy observable one persons use to another

  1. complexity and triability

  2. Complexity: Refers to the degree of difficulty in understanding and using a lifestyle change, which can affect its adoption.

  3. Trialability: The ability for individuals to experiment with a new lifestyle choice on a limited basis before fully committing.

  1. price


  • Bundle of Benefits & Strategic Priority:

    • A product is fundamentally a bundle of benefits (core, expected, augmented, and potential) rather than a mere set of physical features.

    • Strategy must precede tactics (the standard Four Ps shortcut); launching products or campaigns without strategic alignment causes disconnects with consumer needs.

    • Primary customer touchpoint is the product, supplemented by secondary touchpoints: advertising, physical retail environments, customer support, and digital communities.

  • Marketing Myopia & Segmentation:

    • Marketing Myopia: Defining offerings narrowly via engineering specifications rather than consumer benefits (e.g., evaluating a monitor by eye-strain reduction and utility rather than raw pixel counts).

    • Horizontal Benefit Segmentation: Consumer preferences are heterogeneous; optimal products cater to specific segments rather than a non-existent universal average (e.g., Malcolm Gladwell's findings on varied "perfect" tomato sauces).

  • Augmented Benefits to Table Stakes:

    • Innovative augmented benefits (dynamic variables) provide temporary differentiation but are eventually replicated by competitors into expected baseline features (main variables).

    • Historical Examples: Standardized automotive warranties evolved into table stakes; basic roadside lodging evolved into standardized hotel chains and luxury wellness resorts.

Behavioral Decision Pathways & Product Involvement

  • Involvement Categories:

    • Habit Products (Low Involvement): Purchased routinely with minimal cognitive deliberation; consumers bypass pre-purchase research and move directly to "Do" (e.g., paper towels, table salt).

    • Badge Products (High Involvement): Conspicuously consumed goods that signal social identity and status (e.g., luxury jewelry, smartphones); purchases follow a "Feel" → "Learn" → "Do" trajectory.

  • Marketer Cognitive Bias:

    • Marketers tend to overestimate the cognitive attention and emotional energy consumers devote to evaluating features and packaging, whereas consumers primarily seek cognitive efficiency.

Search, Experience, and Credence Goods

  • Good Classifications:

    • Search Goods: Attributes evaluated prior to purchase through inspection and technical data (e.g., diamond Four Cs, competitive roofing bids).

    • Experience Goods: Quality assessed only during or after consumption (e.g., automotive test drives, university campus tours, vacations, dining).

    • Credence Goods: Utility and efficacy remain difficult to verify even after extended usage due to a lack of testable personal criteria (e.g., dietary supplements, medical therapies, premium octane fuel).

  • Multi-Attribute Blends:

    • Most consumer products integrate all three attributes (e.g., mouthwash: search = retail price/volume; experience = flavor/astringency; credence = long-term plaque and gingivitis reduction).

Innovation & New Product Development Frameworks

  • Standard NPD Stages:

    • Five-step linear model: Idea generation → Screening → Idea evaluation → Development → Commercialization.

  • Amazon's "Working Backwards" Framework:

    • Product managers draft an internal Press Release and FAQs (PR/FAQ) prior to engineering allocation, answering five core questions:

    1. Who is the target customer?

    2. What is the fundamental customer problem or need?

    3. What is the primary customer benefit delivered?

    4. How will the firm operationalize and deliver that benefit?

    5. What quantitative metrics will define launch success?

  • Clayton Christensen's Innovator's Dilemma:

    • Incumbent firms routinely fail by over-investing in sustaining innovations for core, high-margin customers while ignoring emergent, cheaper, or seemingly inferior technologies until those alternatives improve and capture the market.

    • Historical Precedents: Mainframes displaced by personal computers; Detroit automakers overtaken by fuel-efficient Japanese imports (Toyota); Swiss mechanical watchmakers disrupted by quartz technology; Kodak disrupted by digital photography.



Capacity and Operational Flexibility in Services—Lecture class 11

  • Labor and Operational Flexibility:

    • Cross-Training Disciplines: Training personnel across multiple operational roles creates internal labor elasticity. In food service, cross-training employees enables staff to alternate seamlessly between front-of-house roles (taking customer orders at the counter) and back-of-house duties (food preparation in the kitchen) depending on real-time service volume.

    • Pricing to Smooth Demand: Dynamic or surge pricing structures balance operational flow during peak events. Vendors at high-density public gatherings often adjust prices to throttle volume and maximize margins (e.g., selling a single specialty food item sized like a tortilla for $15\$15, compared to standard off-peak pricing of $3\$3 to $5\$5).

    • Contingent and On-Call Labor: Healthcare facilities maintain operational capacity during patient influxes or unplanned employee call-outs by deploying on-call rosters of nurses and clinical support staff.

    • Seasonal Workforce Scaling: Large-scale fulfillment organizations scale temporary labor to absorb predictable demand surges; Amazon routinely recruits 200,000200{,}000 to 300,000300{,}000 seasonal warehouse and fulfillment center employees ahead of peak holiday shipping periods.

    • Hemispheric Counter-Seasonal Migration: Resort operators smooth severe seasonal operational demand by recruiting cross-hemisphere labor; Whistler Blackcomb ski resort employs seasonal workers from Southern Hemisphere countries (such as Argentina and Australia) during their native summer to serve as lift operators and service personnel during the North American winter.

Service Characteristics and Variability Management

  • Core Service Realities:

    • Inseparability: Production and consumption occur simultaneously in service environments, making human execution an inherent operational constant.

    • Variability: The inevitable variance in service delivery stemming from human interaction (differing consumer expectations, moods, and employee execution). Counteracting variability requires three operational interventions: managing expectations, managing production, and managing memory.

  • Strategy 1: Managing Expectations (Pre-Purchase Framing):

    • Strict Promising Limits: Service providers must never commit to deliverables they cannot execute reliably.

    • Explicit Guarantees and Warranties: Formal guarantees provide pre-purchase reassurance and mitigate consumer risk. Starbucks deploys the "Perfect Cup Promise," under which baristas remake any drink that fails customer satisfaction or temperature standards free of charge without requiring managerial approval.

    • Specialization and Scope Demarcation: Defining and bounding professional capabilities builds trust and limits unreasonable client expectations. Specialized medical professionals (such as orthopedic surgeons who solely perform anterior cruciate ligament [ACL] reconstructions rather than joint replacements), attorneys, and specialized remodeling contractors (e.g., contractors who decline kitchen renovations to focus exclusively on bathroom remodels) explicitly set scope boundaries before intake.

  • Strategy 2: Managing Production (Operational Execution & Consistency):

    • Quality Control and Defect Reduction: Deploying Six Sigma precision methodologies eliminates operational defects and standardizes delivery across touchpoints.

    • Standard Operating Procedures (SOPs): Removing frontline variance through exact mechanical standards. McDonald's mandates strict specifications across all kitchens globally—such as cooking french fries in fry oil for precisely 1 minute and 52 seconds1\,\text{minute and } 52\,\text{seconds} rather than allowing line workers to assess doneness subjectively.

    • Principle of "Consistency Before Brilliance":

      • Originating insight attributed to Steve Martin: "It's easy to be great. It's hard to be consistent."

      • While brands aspire to be consistently brilliant, maintaining an absolute baseline of reliability is strategically superior to unpredictable spikes of delight.

      • Behavioral Economics Foundation (Loss Aversion): The psychological pain derived from an operational loss is significantly greater than the perceived pleasure derived from an unexpected gain.

      • The Birthday Restaurant Scenario: If a high-end sushi restaurant surprises a patron on their birthday with a complimentary bottle of sake, the consumer experiences delight. However, if the patron returns the following year and the staff fails to provide the complimentary sake, the patron experiences acute disappointment and perceived deprivation. Depriving a consumer of an established perk produces a worse brand outcome than having never introduced the perk at all.

  • Strategy 3: Managing the Memory (Post-Purchase Framing):

    • Retrospective evaluation dictates brand equity; post-service interventions influence how the experience is consolidated into long-term recall through two specific techniques:

    • Emphasizing Success: Actively reinforcing positive moments after consumption. Following family vacations, Disney sends targeted emails and mobile application alerts prompting guests to review and download automated photos captured during ride climaxes (e.g., Space Mountain), compelling consumers to relive the positive emotional peak of the trip one week later.

    • Reinterpreting Failure (Service Recovery): Transforming acute operational breakdowns into positive brand affinity through creative, on-brand intervention. During a mechanical flight delay on a Virgin America flight to San Francisco, gate agents diverted customer frustration by hosting interactive "gate games" over the public address system (awarding complimentary in-flight cocktail vouchers to the passenger possessing the goofiest driver's license photograph). The intervention neutralized boarding frustration, reinforced Virgin's playful brand positioning, and generated lasting word-of-mouth advocacy.

The Human Factor in Service Operations

  • Empowering Frontline Personnel:

    • Frontline service employees must possess autonomous authority to resolve service failures immediately at the point of delivery without managerial intervention (e.g., Starbucks baristas remaking orders; Nordstrom enabling floor employees to execute customer-friendly return policies directly).

  • Standardization via Rigorous Employee Training:

    • Systematic, mandatory training institutionalizes execution consistency. Starbucks has historically shut down nationwide retail locations simultaneously to conduct mandatory barista retraining workshops.

    • Historically, London taxi drivers had to pass "The Knowledge"—an exhaustive navigation exam requiring memorization of thousands of streets, landmarks, and routes without reliance on GPS technology—before receiving operating licenses.

  • Dramatizing the Front-of-House vs. Standardizing the Back-of-House:

    • Front-of-House (High Value / Experiential): Consumer-facing operations should be customized, highly visible, and dramatized to elevate perceived value. Examples include the open-line assembly format at Chipotle where food preparation occurs directly in front of the customer, or face-to-face consultative diagnostic reviews between physicians and patients.

    • Back-of-House (Low Value / Operational): Non-visible background tasks should be standardized, automated, or outsourced to drive efficiency. Routine medical imaging analysis (such as X-rays and MRI scans) can be offshored to radiologists in India or processed through computer-vision machine learning models, reserving high-touch human communication for the in-person consultation.

  • Full Human Decoupling (Self-Service Automation):

    • Replacing human labor with mechanical or digital self-service channels standardizes process timing and operational costs (e.g., Automated Teller Machines [ATMs], self-service gasoline pumps, self-directed digital real estate platforms like Redfin, and customer-facing artificial intelligence agents).

The Experience Economy and Staging Experiences

  • The Pine & Gilmore Theoretical Framework:

    • Conceptualized by B. Joseph Pine II and James H. Gilmore in The Experience Economy.

    • Because augmented service attributes inevitably erode into basic industry expectations, sustainable differentiation and premium pricing power require companies to transition from merely delivering services to orchestrating staged experiences.

  • The Progression of Economic Value (The Birthday Paradigm):

    • Commodities: Grandmothers originally baked birthday cakes entirely from basic, undifferentiated raw agricultural commodities (eggs, flour, sugar) for pennies.

    • Goods: Food manufacturers like Betty Crocker packaged pre-mixed ingredients into shelf-stable goods; consumers paid a price premium over raw commodities for convenience (simply adding an egg and baking).

    • Services: Consumers transitioned to buying fully baked, decorated cakes from retail grocery bakeries (such as QFC), outsourcing the labor entirely at a higher price point.

    • Experiences: Parents completely outsource the celebration to dedicated experiential venues (e.g., Chuck E. Cheese or laser tag facilities). Consumers pay hundreds of dollars not for the cake itself, but for a memorable, turnkey, staged event where entertainment, food, and activities are orchestrated on their behalf.

  • Four Core Traits of Staged Experiences:

    • Personal: Tailored specifically to the individual participant.

    • Relevant and Meaningful: Directly resonant with the customer’s values and self-identity.

    • Memorable: Structured to leave a durable imprint on long-term recall.

    • Revealed Over Duration: Unfolding dynamically over time to sustain neurological stimulation and engagement (drawing parallels to comedic timing, where audience engagement is maintained through progressive anticipation leading to a punchline).

    • Multisensory Integration: Engaging all human senses—sight, sound, tactile texture, taste, and olfactory cues—so the immersive sensation becomes synonymous with the brand itself.

Case Study: Emirates A380 First Class Experience

  • End-to-End Experiential Architecture:

    • Ground Transport: Chauffeur-driven airport transfer originating in Dubai operating flagship Mercedes-Benz S-Class vehicles.

    • Pre-Flight Environment: Dedicated access to the luxury Emirates First Class Lounge at Dubai International Airport.

    • Private Suite Enclosure: Personal suite featuring motorized sliding privacy doors, customized personal minibars, curated gourmet snack baskets, and complimentary travel amenity kits designed by luxury partner Bulgari.

    • In-Flight Entertainment: Cinematic widescreen display systems offering thousands of on-demand entertainment channels and live satellite broadcasts of international sporting events (e.g., Premier League football matches, US Open tennis) at 40,000 feet40{,}000\,\text{feet}.

    • Bespoke Dining: Regionally inspired a la carte menu designed by executive airline chefs using fresh, locally sourced ingredients, paired with exclusive vintage reserve wines.

    • Social and Rest Environments: An onboard bar and cocktail lounge; private lie-flat sleeping suites appointed with luxury linens, full duvets, and loungewear/pajamas.

    • The Shower Spa: Full onboard shower facilities operating at cruising altitude.

    • Strategic Tangibilization: The high retail price tag of long-haul First Class tickets (ranging from $20,000\$20{,}000, $26,000\$26{,}000, $41,000\$41{,}000, up to $50,000\$50{,}000 for long-distance routes such as Seattle to Dubai) is justified by systematically diminishing the intangibility of air travel through physical brand partnerships (Mercedes-Benz, Bulgari) and take-home physical artifacts.

Questions & Discussion

  • Personal Training Service Design:

    • Question/Prompt: How does an independent service provider, such as a personal trainer, operationalize the three variability antidotes?

    • Response/Application:

      • Managing Expectations: Offering a free initial consultation dedicated solely to establishing client fitness goals and assessing mutual fit. If a client presents an unrealistic objective (e.g., training from scratch to complete an Ironman triathlon in 2 months2\,\text{months}), the trainer transparently establishes boundaries or refers the client to specialized endurance coaches.

      • Managing Production: Establishing strict execution rituals, such as delivering standardized post-workout email recaps containing embedded technique videos, coupled with mandatory dietary tracking journals reviewed at fixed intervals.

      • Managing Memory: Framing fitness journeys around progressive advancement rather than unattainable perfection ("progress, not perfection"), supported by periodically referencing baseline "before" photographs to tangibly prove physical transformation that clients might overlook day-to-day.

  • Service Scripting and Cultural Variance at Red Robin:

    • Question/Prompt: How do consumer expectations dictate performance rituals in restaurant chains?

    • Response/Application: Red Robin enforces a mandatory theatrical birthday song performed communally by restaurant staff. Line workers are trained to execute the performance enthusiastically because consumers explicitly patronize the venue anticipating this exact ritual. This theatrical service expectation is distinctly American; service staff operating in traditional European dining environments (such as non-tourist Italian restaurants) would reject such performative rituals.

  • Operational Testing and Speed Metrics at Jamba Juice:

    • Question/Prompt: How do quick-service beverage concepts standardize quality control and production speed?

    • Response/Application: Before new hires can operate point-of-sale cash registers at Jamba Juice, they must complete rigorous training and pass a comprehensive, written ingredient exam covering flagship recipes (including the "Banana A Go-Go" and "Strawberry Surf Rider"). Following ingredient certification, workers undergo empirical speed testing to prove they can assemble and blend any drink in under 3 minutes3\,\text{minutes}. Post-service memories and intangibility are managed via seasonal collectible cups that unlock repeat-purchase discounts.

  • Warehouse Standardization and Sensory Dynamics at Costco:

    • Question/Prompt: How does Costco balance operational consistency with consumer discovery?

    • Response/Application: Costco maintains standardized warehouse layouts across diverse geographic markets (e.g., Kirkland and Sodo locations) to ensure navigational familiarity, while placing oversized bulky goods toward store perimeters. To balance operational efficiency with consumer engagement, Costco maintains a tightly restricted overall SKU count through strict merchant screening, excludes aisle navigational signage to force shoppers into an exploratory "treasure hunt" across aisles, and anchors consumer price perceptions by holding the food court hot dog price point perpetually at $1.50\$1.50 (or $1.00\$1.00).

  • Tangibilizing Memories Through Souvenirs:

    • Question/Prompt: How do entertainment and retail brands manage post-purchase memory?

    • Response/Application: Cinematic movie theaters distribute collectible themed popcorn buckets (such as limited-edition Marvel movie containers), Starbucks retails specialty branded drink tumblers, and healthcare/hospitality operators deploy structured post-discharge follow-ups. These tangible physical anchors reduce service intangibility and reinforce positive cognitive recall long after the core service has concluded.

  • Student Experiential Application (REI Adventure Pass):

    • Question/Prompt: How can outdoor service ventures be structured as experiences rather than simple service offerings?

    • Response/Application: Concepts like the REI Adventure Pass must expand beyond basic travel logistics by integrating Pine and Gilmore's experiential traits: embedding personalized guided excursions, orchestrating narrative pacing across the trip's duration, and managing memory retention through automated digital photo-sharing services delivered one week post-travel.