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