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CHAPTER EIGHT

Product and Services Strategy


Every 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 essentially
intangible 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 use
of 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 special
purchase 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
involvement
Little Shopping Effort
Not usually
purchased
Much planning and
shopping effort
Comparison of
brands on price,
quality & style
Strong brand
preference &
loyalty
Special effort
Little comparison
of 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 buyers 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 attitudes
and 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
products 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
Manufacturers Brand (national brand) selling the product under the
manufacturers 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 different
companies 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 companys 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


Labeling will range from simple tags attached to products to complex graphics that are part of
a package.

Functions
Identifies the product or brand (e.g. the orange with straw of Tropicana)
Describe several things about the product who made it, where it was made, when it is
made, its contents, how to use it, how to use it safely, expiration date, etc.
Promote the product through attractive graphics.

There are also some legal concerns about packaging and labels. Some labels can be false,
misleading or deceptive and can promote unfair competition. It can also mislead customers; fail
to describe ingredients and even safety warnings.

You can see the complete list of the Republic Act No. 7394, The Consumer Act of the Philippines
1991.

Product Support Services are simply augmented products. Many companies use this as a
major tool to gain competitive advantage.
1. Design the product and service support to profitably meet the needs of target market.
2. Assess the cost of these services.

PRODUCT LINE DECISIONS

Product Line a group of products that are closely related because they function in a similar
manner, are sold to the same customer groups, are marketed through the same types of
outlets or fall within given price ranges.

Product Line Length the number of items in the product line.
They can systematically increase the length of its product line in two ways: by
stretching its line and by filling its line.
Product Line Stretching occurs when a company lengthens its product line beyond its
current range.
Downward they are in the upper end but stretched their ends downward.
Upward lower end product lines stretched to upward or upper end products.
Both Directions those in the middle end products can stretch their product
lines either lines, upward or downward.
Product Line Filling adding more items within the present product range.

PRODUCT MIX DECISIONS

Product Mix (Product Assortment) the set of all product lines and items that a particular
seller offers for sale.

E.g. AVONs product mix consists of beauty, wellness products, intimate apparel, jewelry,
inspirational products and even kitchenware. Each of that product mix has their own subline.
For example in beauty we have make-up, skin and personal care, fragrances and outdoor care.
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 the
providers 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