Chapter 12: Products and services strategies
Product Extensions
Line Extension: Improvement; new and improved; new colors Brand Extensions: Current brand to new product class
Product Strategies
- Consumer Products - New Products - New Product Development - New Product Failures - Product Lifestyles
Concept Development
- Creation of prototype - Marketing strategy - Packaging, branding, labeling - Manufacturing feasibility - Final government approvals if needed
Idea Generation: Sources of New-Product Ideas
- Customers - Employees - Distributors - Competitors - R & D - Consultants - Creative Thinking
Business Analysis: Considerations in Business Analysis Stage
- Demand - Cost - Sales - Profitability
New Product Development
- Idea Generation - Idea Screening - Concept Development - Business Analysis - Market Testing - Commercialization
Service Strategies
- Importance of Services - Distinguishing Characteristics of Services - Three Additional P's of Services - Gap Model - Service Quality - Marketing Mixes (Product/Promotion) - Understanding the Service Experience
New Product Development Implications
- New Product Failure is Rampant: 30-50% of new consumer products - Reasons for failure include ignoring unfavorable market research, overestimating market size, marketing mix decision errors, and stronger than anticipated competitive actions, bad pricing decisions
Why New Products Fail
- No discernible benefits - Poor match between features and customer desires - Overestimation of market size - Incorrect positioning - Price too high or too low - Inadequate distribution - Poor promotion - Inferior product
Successful New Products
- Offer a strong relative advantage - Reflect better understanding of customer needs, and beat the competition to market - Exhibit higher performance-to-cost ratios and higher contribution margins - Are launched with larger budgets - Have stronger top management support
Commercialization: Steps in Marketing a New Product
- Production - Inventory Buildup - Distribution Shipments - Sales Training - Trade Announcements - Customer Advertising
Why do firms focus on Services?
- Services frequently provide higher profit margins than products - Customer satisfaction and loyalty are driven by service excellence - Services can be used as a differentiation strategy in competitive markets
Product/Services Continuum
-Ranging from Pure Product to Pure Service -Most services are hybrids Goods are tangible Services are intangible - experience attributes - credence attributes Adding service aspects to a product often transforms the product form a commodity into a compelling experience
Understanding the Service Experience
All products, be they goods or services, deliver a bundle of benefits to the consumer The benefit concept is the encapsulation of these benefits in the consumer's mind The service experience demonstrates that consumers are an integral part of the service process
Services Marketing
Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything (In fact many businesses are becoming services businesses)
Levels of a Product
Augmented Product - Network - Warranty - Customer Support - Service - Delivery - Financing Actual Product - Brand Name - Style - Packaging - Design - Attributes Core Benefits
Brand Archetypes
Carl Jung suggested that humans are not a "blank slate" but rather a combination of archetypes; "universal, archaic patterns and images that derive from the collective unconscious and are the psychic counterpart of instinct"
Types of Consumer Products
Convenience Product- A relatively inexpensive item that merits little shopping effort Shopping Product: A product that requires comparison shopping, because it is usually more expensive and found in fewer stores Specialty: A particular item that consumers search extensively for and are reluctant to accept substitutes Unsought Product: A product unknown to the potential buyer or a known product that the buyer does not actively seek
Diffusion and Adoption
Diffusion - The process by which the acceptance of an innovation is spread by communication to members of social system over a period of time Adoption - The stages through which an individual consumer passes in arriving at a decision to try (or not to try), to continue using (or discontinue using) a new product - The five stages of the traditional adoption process are awareness, interest, evaluation, trial, and adoption
Creating Compelling Experiences
Economic value progresses from commodities to goods to services to experiences
The Gap Model of Service Quality
Gap 1: Knowledge gap Gap 2: Standards gap Gap 3: Delivery gap Gap 4: Communications Gap 5: Service gap
Adopter Categories
How early (or late) a consumer adopts a new product on relation to other adopters - Innovators (2.5%) - Early Adopters (13.5%) - Early Majority (34%) - Late Majority (34%) - Laggards (16%) Percentage of adopters by Category Sequence
Product Life Cycle
Introductory Stage Growth Stage Maturity Stage Decline Stage
Three Additional P's
Participants (People) Process Physical Evidence (Surroundings)
Types of "Products
Physical Objects People Organizations Services Places Ideas Information
Product Characteristics that Influence Diffusion
Relative Advantage: The degree to which potential consumers perceive a new product as superior to existing substitutes Compatibility: The degree to which potential consumers feel a new product is consistent with their present needs, values, and practices Complexity: The degree to which a new product is difficult to understand or use Trialability: The degree to which a new product is capable of being tried on a limited basis Observability: The degree to which a product's benefits or attributes can be observed, imagined, or described to potential customers
What is Service Quality?
Reliability: perform promised service dependably and accurately Responsiveness: willingness to help customers and provide prompt service Assurance: employees must be knowledgeable, courteous, convey trust and confidence Empathy: caring, individualized attention Tangibles: appearance of physical facilities, equipment, personnel, communication material
Decline Stage
Sales Volume - Declining Product Features - Reduced Retail Outlets - Reduced Marketing Goal - Survival
Maturity Stage
Sales Volume - Flat Product Features - Leveling Off Retail Outlets - Maximum Marketing Goal - Preference
Growth Stage
Sales Volume - Growing Product Features - Increasing Retail Outlets - Increasing Marketing Goal - Preference
Introduction Stage
Sales Volume - Low Product Features - Basic Retail Outlets - Limited Marketing Goal - Trial
Idea Screening
Screening: The filter which eliminates ideas that are inconsistent with the organization's new-product strategy or are inappropriate for some other reason
Service Can Mean
Service as a product: For example, hotels, telecommunication, banking, consulting, healthcare, software services Customer Service: For example taking requests, answering customer questions, responding to complaints Service as value-added for manufactured products: For example training, installation, repair services connected with a physical product
Important to long-term success
Strong correlation between new product success and a company's profitability ands sales growth Industry leaders (Apple, Sony, 3M) obtain about 30% of revenues from products developed in the last 5 years
Product Life Cycles for Styles, Fashions, and Fads
Style- up, down, up, down Fashion- Slowly up and slowly down Fad- Fast up and fast down
Market Testing
Test Marketing: The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation
Managing Service Quality
The effective marketing of services requires that managers learn what customers want and expect in their interaction with the service provider (service encounter) If expectations do not equal experience, a gap exists Expected service-perceived service gap analysis
Unique Differences between Goods and Services
The majority of the differences between goods and services are attributed to four unique characteristics - Intangibility: the primary source from which the other three characteristics emerge Services cannot be seen, felt, tasted, or touched in the same manner that goods can be sensed Difficult to evaluate even after consuming the service - Inseparability: the simultaneous production and consumption of the service In English, have to be there at the same time as the service provider to experience the optimal service (even self-service technologies) - Variability: the difference in consistency from one service transition to the next It makes it impossible for a service operation to achieve 100% perfect quality on an ongoing basis - Perishability: means that a service cannot be saved, its unused capacity cannot be reserved, and it cannot be inventoried "Use it or lose it" Anything with capacity; if unsold, lost revenue
Service Providers
The public face of a service firm is its service providers (front line employees) Seven categories of complaints about service providers - apathy - Brush-off - Coldness - Condescension - Robotics - Rulebook - Runaround
Managing the Servicescape
The term servicescape refers to the use of physical evidence to design service environments - Ambient conditions - Inanimate objects - Other physical evidence