Chapter Eight: Product and Service Strategy

8/12/2019 Chapter Eight: Product and Service Strategy

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CHAPTER EIGHT

Product and Services StrategyEvery year, cosmetics companies sell billions of dollars’ worth of potions, lotions and fragrances

to consumer around the world. In a sense, these products are no more than careful mixtures of

oils and chemicals that have nice scents and soothing properties. But to the cosmetics company

they are selling more than just mixtures of ingredients – they sell the promise of what the

products does for the people who use them. Quality and Performance

Cost

Packaging

Name (Obsession, Passion, Gossip, Joy, Linen, Youth Eternity and Love) – they suggest

more than just smelling better.

PRODUCT – anything that can be offered to a market for attention, acquisition, use or

consumption that might satisfy a want or need.

SERVICE – any activity or benefit that one party can offer to another that is essentiallyintangible and does not result in the ownership of anything.

PRODUCTS, SERVICES AND EXPERIENCES

Pure Tangible Good – products like soap, toothpaste and salt – no services accompany

the product.

Pure Services – offers consists of mainly just services.

Tangible good with accompanying services

Hybrid offer – equal parts of goods and services

Service with accompanying minor goods

Products = Tangible

Service = Intangible

Experience = Memorable, more personal and take place in the minds of individual

consumers.

LEVELS OF PRODUCT



Core Product – the most basic level that addresses the question what is the buyer really

buying? E.g. problem solving benefits that consumers seek when they buy a product or

service.

Ritz- Carlton Hotel “memorable travel experiences”

Cosmetics “We sell hope”

Marketers must first define the core benefits the product provides to consumer

Understand the total customer experience that surrounds the purchase and useof the product.

Actual Product

Quality Level

Features

Design

Brand Name

Packaging

Augmented Product – offering additional consumer services and benefits.

PRODUCT CLASSIFICATIONS

Consumer Products – products bought by final consumer for personal consumption.

1. Convenience Products – consumer products that consumers buy frequently,

immediately and with a minimum of comparison and buying effort. They are usually low

priced and available when you need them. E.g. Personal care products, fast food, etc.

2. Shopping Product – consumer products that the customer, in the process of selection

and purchase, characteristically compares on such basis as suitability, quality, price and

style. E.g. Clothing, appliances, furniture, etc.

3. Specialty Product – consumer product with unique characteristics or brand

identification for which a significant group of buyers is willing to make a specialpurchase effort. E.g. Cars, Designer Clothing, Photographic equipment, etc.

4. Unsought Product – consumer product that the consumer either does not know about

or knows about but does not normally think of buying. E.g. Innovations, life insurance,

etc.

MARKET

CONSIDERATIONS

TYPE OF CONSUMER PRODUCT

Convenience Shopping Specialty Unsought

Customer Buying

Behavior

Frequent Purchase

Little Planning

Little Comparison

Low customer

involvementLittle Shopping Effort

Not usually

purchased

Much planning and

shopping effort

Comparison ofbrands on price,

quality & style

Strong brand

preference &

loyalty

Special effort

Little comparisonof brands

Low price

sensitivity

Little product

awareness and if

aware, little interest

or negative interest

Price Low Price Higher Price High Price Varies

Distribution Widespread,

convenience

locations

Selective distribution

in fewer outlets

Exclusive

distribution

Varies

Promotion Mass advertising and

sales promotion

Personal Selling and

Segment Marketing

Very careful

targeted

Aggressive

Advertising and



promotions personal selling

Examples Toothpaste,

detergent, shampoo,

etc.

Appliances, furniture,

clothing

Luxury goods,

cars, Rolex watch,

cars

Life Insurance

Industrial Product – products bought by individuals and organizations for further processing or

for use in conducting a business.

1. Materials and Parts – raw materials, manufactured materials, component materials and

parts. Price and service are the major marketing factors; branding and advertising tend

to be less important.

2. Capital Items – industrial products that aid in the buyer’s production or operations like

installations and accessory equipment.

3. Suppliers and service – operations, maintenance and repair materials and equipments.

Organizations, Persons, Places and Ideas – marketable entities

1.

Organization Marketing – consists of activities to create, maintain or change attitudesand behavior of target consumers toward an organization.

2. Corporate Image Advertising – major tool companies use to market themselves to

various publics.

3. Person Marketing – consist of activities to create, maintain or change attitudes or

behavior towards a particular person or group of people.

4. Place Marketing – activities consist to create, maintain or change attitude towards a

certain place.

5. Idea Marketing – in a sense, marketing is already an idea.

6. Social Marketing – the design, implementation and control of programs seeking to

increase the acceptability of a social idea, cause or practice among a target group.

INDIVIDUAL PRODUCT DECISIONS

The diagram above shoes the important decisions in the development and marketing of

individual products and services.

Product Attributes – the benefits of a product are communicated to the market using those

attributes.

1. Product Quality – the ability of a product to perform its functions; it includes the

product’s overall durability, reliability, precision, ease of operations and repair, and

other valued attributes.

Quality Level = Performance Quality = Conformity Quality = Consistency

2. Product Features – can be offered with varying features and a competitive tool for

differentiating the models by adding more features.



3. Product Style and Design

Style – appearance of the product

Design – skin deep – goes to the very heart of the product.

Branding – ability to create, maintain, protect, and enhance brands of their product and

services

Brand – is a name, term, sign, symbol, design or combination of these, intended to identify the

goods and services of one of the seller or group of sellers and to differentiate them from those

of competitors.

1. Brand Equity – the value of a brand, based on the extent to which it has high brand

loyalty, name awareness, perceived quality, strong brand associations, and other assets

such as patents, trademarks and channel relationships.

High brand equity provides a company with much competitive advantage.

2. Brand Sponsor

Manufacturer’s Brand (national brand) – selling the product under themanufacturer’s name.

Private Brand (store or distributor brand) – a brand created and owned by a

reseller of a product or service.

Slotting Fees – payments demanded by retailers before they will accept

new products and place them on shelves.

3. Licensing

Some companies license names or symbols previously created by other

manufacturers, like celebrities, characters from popular movies and books – for a

fee.

4.

Co-branding – the practice of using the established brand names of two differentcompanies on the same product.

Lays and Pepsi

Jollibee/McDonald and Coca-Cola

Nokia and Microsoft

This offers advantages because each brand dominates in a different category and

combined provide broader consumer appeal and greater brand equity.

But such relationship involves complex legal contracts and licenses.



Must carefully coordinate their advertisement and that the partner must trust

that the other partner will take care of their brand.

Brand Strategy

1. Line Extension – using a successful brand name to introduce additional items in a given

product category under the same brand name, such as new flavors, forms, colors, added

ingredients or package size. (E.g. Quaker – oatmeal, oatmeal cookies, cereals)

2. Brand Extension – using a successful brand name to launch a new or modified product

in a new category. (E.g. Barbie – home, cosmetics, electronics, books, movies, music,

etc.)

3. Multibrand – adding additional brands in the same category. Remember P&G?

4. New Brands – creating a new brand name when it enters a new product category

especially when the company’s current brand names is appropriate.

Some companies add brands through acquisition or in some cases called megabrand strategy –

weeding out weaker brands and focusing their financial efforts to brands that can be achieved

the number one or two market share position in the categories.

Packaging – the activities of designing and producing the container or wrapper for a product.

1. Primary Container – e.g. tube of a toothpaste

2. Secondary Container – e.g. the cardboard box that is usually thrown away once it is

used.

3. Shipping Package – necessary to store, identify and ship the product.

The primary function of a package was to contain and protect the product.

Good packaging = easily recognize from the consumers

Innovative packaging can give a company an advantage over competitors.

Developing a Package Process

1. Establish a package concept.

2. Specific Elements of the package

3. Support each elements

4. Consistent





Four Important Dimensions

1. Width – the number of different product lines the company carries. (P&G has lines in

baby care, laundry soaps, home care, etc.)

2. Length – total number of items a company carries within that product line. (The number

of brands in each line like the 8 laundry detergents offered by P&G)

3. Depth – number of versions offered of each product line. (Colgate total, Colgate

Sensitive Pro-Relief, Colgate Maximum Cavity Protection and Colgate Fresh Confidence)

4. Consistency – refers to how closely related to the various product lines are in end use,

production requirements, distribution channels, or some other way. (All the product

lines of P&G goes to the same distribution channels)

SERVICE MARKETING

Governments offer services like courts, employment services, hospitals, loan agencies,

military services, police and fire departments, postal services, regulatory agencies and

schools.

Private Non Profit Organizations services like museums, charities, churches, foundations

and hospitals.

Business Organizations – airlines, banks, hotels, insurance, consulting firms, medical and

law practices, real estate, entertainment industry, advertising and research agencies and

retailers.

Nature and Characteristics of Service

1. Service Intangibility – a major characteristic of services – they cannot be seen, tasted,

felt, heard, or smelled before they are bought. (E.g. airline passengers and cosmetic

surgery)

2. Service Inseparability – major characteristics of services where they are produced and

consumed at the same time and cannot be separated from their providers whether theproviders are machine or people. (E.g. employee and customers)

3. Service Variability – a major characteristic where their quality may vary greatly,

depending on who provides them and when, where and how.

4. Service Perishability – they cannot be stored for late sale or use.



Marketing Strategies for Service Firms

Because services are tangible products, they require additional marketing approaches. In a

product business, products are fairly standardized and can sit on shelves waiting for customers.

But in a service business, the customer and front line service employee has to interact to create

the service.

The Service Profit Chain – the chain that links service firms profits with employee and customer

satisfaction.

5 LINKS:

1. Internal Service Quality – superior employee selection and training, quality work

environment and strong support for those dealing with customers, which result in…

2. Satisfied and productive service employees – more satisfied, loyal, hardworking

employees, which result in…

3. Greater Service Value – more effective and efficient customer value creation and service

delivery which result in…

4. Satisfied and loyal customers–

satisfied customers who remain loyal, repeat purchases,and refer to other customers which result in…

5. Healthy service profits and growth – superior service firm performance.

Internal Marketing – marketing by a service to train and effectively motivate its customer-

contact employees and all the supporting service people to work as a team to provide customer

satisfaction.

Interactive Marketing – marketing by a service firm that recognizes that perceived service

quality depends heavily on the quality of buyer-seller interaction.

Today, as competition and cost increase and as productivity and quality decreases, more

service marketing sophistication is needed. Service companies faced three major marketing

tasks:

1. Competitive Differentiation

Offers

Delivery



Image

2. Service Quality

Recovery

Empowerment

Customer Obsessed

High Service Quality Standards

3. Productivity

Training

Quality Work

Quantity

Documents

Chapter Eight: Product and Service Strategy