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PRODUCT SERVICE MGT 3.03
Understands the concepts and processes needed
to obtain, develop, maintain, and improve aproduct or service mix in response to marketopportunities
Employ product-mix strategies to meetcustomer expectations.
Explain the concept of product mix
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Product Planning
How are decisions made tointroduce new products anddelete old ones?
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What is Product Planning?
Product Planning: The decisions madeabout what features should be used in
selling of a business’s products.
These decisions relate to:
packaging
labeling
warranties
guarantees
branding
product mix
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Product Planning
Involves making
decisions about
those features
that are needed to
sell a business’s
products,
services, or ideas.
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What is Product Planning?(cont.)
Product Mix: All the different products that acompany makes or sells.
Product Line: A group of closely related productsmanufactured or sold by a business.
Product Item: A specific model, brand, or size of aproduct within a product line.
Product Width: The number of different productlines a business manufactures or sells.
Product Depth: The number of product items in aproduct line.
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A well defined product plan allows a businessto:
Create sales opportunities.
Design appropriate marketing programs.Develop effective advertising campaigns.
Coordinate the product mix offered tocustomers.
Add new products.
Delete older products that no longer appealto customers
What is Product Planning?(cont.)
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4 P’s of the PRODUCT MIX
PRICE
PRODUCT
PLACE
PROMOTION
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PRODUCT MIX
= all the types of products acompany makes or sells. The
particular assortment of goodsand services that a businessoffers to meet the needs of its
market(s) and its companygoals.
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Product Mix and Product Line
PRODUCT MIX
The set of all products offered
for sale by a company
PRODUCT LINEA broad group of
products for similar uses
and with similar characteristics
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Product Mix
Includes all the different products that
a company makes or sells.
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Identify ways in whichproduct lines can be
organized. Product Line = group of closely related products manufacturedby a business
Product Item = specific model, brand, or size of a productwithin a line
Ex: P&G has over 250 products within 21 product lines
Dish care is a product line
Cascade, Dawn, Joy,
& Ivory are
product items
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Describe product mix
dimensions. Some companies have different brands
for different markets
Coca-Cola has different drinks forsparkling beverages, water, juice,
performance, coffee, tea, andinternational flavors.
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Product Line
A group of closely related products
manufactured and/or sold by a
business.
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Product Item
A specific model, brand, or size of a
product within a product line.
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DIMENSIONS
WIDTH = number of product lines carried by acompany.
NARROW = offering a limited number of productlines
BROAD = many different product lines carried
DEPTH = number of products and the assortment of sizes, colors, and models offered in a product line
SHALLOW = limited variety within a product line
DEEP = extensive variety within a product line
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BREADTH The number of product lines carried
Product Mix
DEPTH
Variety
of
sizes,colors,
models
within
a
productline
PRODUCT MIX
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Product Width
Oral
Care
Blades &
Razors
Personal
Care
Batteries Appliances
Width of the Gillette Product Mix
The number of different product lines a
business manufactures or sells.
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Product Depth
Oral
Care
Blades &
Razors
Personal
Care
Batteries Appliances
The number of product items offered
within each product line.
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NARROW PRODUCT MIX
= Limited product lines carried, typicallyvery specialized. A description of thewidth of a business's product mix offeringa limited number of product lines.
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Broad Product Mix
= Many different product lines carried .
A description of the width of abusiness's product mix offering many product lines.
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Shallow Product Mix
= Limited variety within a product
line. A description of the depth of abusiness's product mix offering fewitems in the product line.
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Deep Product Mix
= Extensive variety within a product
line. A description of the depth of abusiness's product mix offering agreat many items in the product line.
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Identify reasons that abusiness would offer a
narrow product mix. Product Width – number of different product lines
CONTRACTING - Pruning weak brands can strengthen theremaining brands in the line.
Ease on management
Cost effective
Simplicity
Consistency
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Identify reasons that abusiness would offer a
broad product mix. Product Width – number of different product lines
EXPANDING
Reach all markets
Competitive advantage
Ex: Red Lobster specializes in seafood, but offerschicken and steak to broaden their product mix.
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Identify reasons that abusiness would offer a
deep product mix. Product Depth – number of items
offered within each product line
EXPANDING
Variety
Quantity
Ex: Kohl’s carries various quantities of sizes, colors, & styles of Levi Jeans.
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Identify reasons that abusiness would offer a
shallow product mix. Product Depth – number of items offered
within each product line
CONTRACTING
Cost effective
Satisfy small markets
Ex: Only 2 chicken items on Red Lobster’s menu.
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REVIEW:
What are some key
product mix
strategies?
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Product-Mix Strategies
Alteration of existing products
Contraction
Trading Up andTrading Down
Expansion
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Explain the importance of
a business’s product mix.
Businesses must plan their product mix
carefully because they cannot offer all theproducts that customers may want.
They should be a profitable market forproduct offered by a company
H d b i
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How do businessesdetermine which products to
produce and sell? Businesses will use different product mix
strategies to determine what to produce orsell.
Product mix strategies depend on:
Resources
Objectives
Past and current sales
Consumer trends
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Product Mix Strategies
The plan for how the business determineswhich products it will make or stock
May develop completely new products
May expand or modify their currentproduct lines
May drop existing products
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EXPANSION
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Developing New Products
Generating Ideas
Come from a variety of sources
Creativity is essential
Screening Ideas
Ideas are evaluated and matched against thecompany’s overall objectives.
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Developing New Products (cont.)
Developing a Business Proposal
Consider a product’s potential sales, costs,and production requirements.
Developing the Product
The new idea takes physical shape
Marketers develop a marketing strategy.
Testing the Product with consumers
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Developing New Products (cont.)
Introducing the Product
The product has been researchedsuccessfully
This stage also is calledcommercialization.
Evaluating Customer Acceptance
Marketers track new productperformance.
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EXPANSION
ADVANTAGES Extend product
lifecycle
Adding items to aproduct line orintroducing an entire
product line cancapture marketshare and meetcustomer’s needsand wants.
DISADVANTAGES Adding items to a
product line or
introducing an entireproduct line can beexpensive, be difficult tomanage, and not alwaysbe successful.
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Deleting a Product or Product Line
Obsolescence
Loss of appeal
Conflict with current company objectives
Replacement with new products
Lack of profit
Conflict with other products in the line
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CONTRACTION
ADVANTAGES Cut losses
Reallocate resources tomore profitableproducts
Deleting products froma product line or the
entire product line canbe cost effective andeasier to manage whilecreating simplicity andconsistency
DISADVANTAGES Deleting products from a
product line or the entireproduct line is concedingmarket share to yourcompetitors.
It may be wiser to
improve the existingproduct or line torecapture market share.
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Describe alteration
product-mix strategies.Alteration of Existing Products: Making changes to meet customer
needs & wantsImprove an established product with
new design, new package, new uses.
Ex: Jeep offering 4 doors
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Developing Existing Products
(ALTERATION)
Companies constantly review theirproduct mix to see if they can furtherexpand their product lines or modifyexisting products.
Two ways to do this:
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Developing Existing Products (cont.)
Original Product
Newer Products
Line Extensions – new product lines,items, or services
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Product Modifications – an alteration ina company’s existing product
Developing Existing Products (cont.)
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ALTERATION
ADVANTAGES Improving an
established
product cancapture newcustomers andmeet customer’sunmet wants as
trends change.Ex: McDonald’sopening stores inIndia
DISADVANTAGES Improving an
established product is
expensive and notalways a success.Example: New Coke
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Product Mix Strategies
Developing New Products
Follows seven steps:
Generate Ideas
Screen Ideas
Develop a Business Proposal
Test the product with consumersIntroduce the product
Evaluate customer acceptance
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Product Mix Strategies (cont)
Developing Existing Products
Line Extensions: Adding new product lines, itemsor services.
Ex: Tylonol
Product Modifications: An alteration to anexisting product:
New and different varieties
Formulations
Colors
Styles
Features
Sizes
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Product Mix Strategies (cont)
Deleting a Product or Product Line
Obsolescence
Loss of AppealChanges in Company Objectives
Replacement with New Products
Lack of ProfitConflict with other products in the line
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Describe trading up / downproduct-mix strategies.
Trading up: Adding a higher-pricedproduct to a line to attract a higher-income market and improve the sales of
existing lower-priced products. Trading down: Adding a lower-priced item
to a line of prestige products to encouragepurchases from people who cannot afford
the higher-priced product, but want thestatus.
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TRADING UP
ADVANTAGES Adding higher priced
items to a product linewill attract the higherincome market andmay help increase theimage and sales of thelower priced items.
DISADVANTAGES While sales may be generated for the new
product or line, sales of establishedproducts may decline.
If the business uses trading up to enhanceits image, the business must be careful thatpresent customers are not lost in theprocess of gaining new ones.
Customers may become confused as towhat the company’s image is meant to be,or they may refuse to believe that betterquality merchandise can be purchased froma business that had formerly sold budgetgoods.
Adding higher priced items to a product lineis expensive and may not attract newcustomers while hurting the image andsales of the lower priced items.
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TRADING DOWN
ADVANTAGES
Adding lower priceditems to a product
line of prestigeproducts can capturea lower incomemarket who cannot
afford the higherpriced items.
DISADVANTAGES Adding lower priced items to a product
line of prestige products can hurt theimage and sales of the higher priced
items in the line Consumers may be confused about the
new product or line.
Profits from the cheaper product may beeroded by reduced sales in the moreexpensive line.
Dealers may not be willing to add thelower priced product to their offering.
Competition may become stronger at thehigh end of the market.
Gaining short-term sales at the expense
of long term sales
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How are
products/services
positioned in the
market place?
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POSITIONING is about bringingattention to products and
DIFFERENTIATING them fromsimilar ones.
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Positioning the Product
COMPETITOR
High price/high quality
or
low price
Differential
advantage
Associated with
attractive attribute
PRODUCT CLASS
OR ATTRIBUTE
PRICE
AND QUALITY
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Product Positioning = the IMAGE aproduct projects
The goal is to set the product apart fromthe competition.
“The way you get into your customer’smind.”
The efforts a business makes to identify,place, and sell its products.
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Describe positioningproduct-mix strategies.
Positioning – is all about perception; actionsmarketers take to create a certain image of aproduct in the minds of the customers
• In Relation to a Competitor• In Relation to a Product Class or Attribute
• In Relation to a Target Market
• By Price and Quality
• Difficult to change
P d t P iti i
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Product Positioning
Product positioning: Efforts a businessmakes to identify, place and sell its productsin the marketplace.
Positioning by price and quality:
Ex: Ford Motor Company positions itsFocus as an economical passenger carwhile still emphasizing quality.
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Positioning by Price & Quality
Offer economy, mid-priced, and luxury lines
Product Positioning (cont)
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Product Positioning (cont)
Positioning by features and
benefits:Ex: Oil of Olay was positioned as a
premium facial moisturizer andcleanser to keep skin soft and
young.
Positioning by uniquecharacteristics:
Ex: Cell phones that can textmessage or take pictures and sendthem.
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Positioned by Features & Benefits
Unique characteristics
P d t P iti i ( t)
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Product Positioning (cont)
Positioning in relation to the
competition:Ex: Warner-Lambert Company
introduced Cool Mint Listerine bypositioning against the “theraputic”
benefits of Original Listerine andthe “cosmetic” benefits of Scope.
Positioning in relation to other
products in a line:
Ex: Binney & Smith introducedwashable crayons and positionedthem as a specialty item in the
company’s Crayola crayon line.
Positioning in
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Positioning inRelation to the Competition
Positioning in Relation to
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Positioning in Relation toOther Products in a Line
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POSITIONING STRATEGIES
ADVANTAGES Creating an identity
of a product helps
find a place for theproduct in themarketplace whilestrongly identifying
with a specific targetmarket and possiblycreating brandloyalty.
DISADVANTAGES Images of a product are
difficult to change once
they are established andvery expensive.
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6 Steps to SuccessfulPositioning
1. What position do you currently own?
2. What position do you want to own?
3. Whom you have to defeat to own theposition you want.
4. Do you have the resources to do it?
5. Can you persist until you get there?6. Are your tactics supporting the positioning
objective you set?
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