Product And Services

Products are anything that can be offered to a market for attention, acquisition
& consumption that might satisfy a need or want.

To differentiate G&S, firms are creating value by creating & managing customer
experiences with their brand or company.
Product Levels
Core Product refers to the use-benefit, problem-solving service that the
consumer is really buying
o QANTAS Time Critical Transportation
Actual Product tangible product or intangible service that serves as the
medium for receiving the core product benefits.
o Quality Level (performance), Features (attributes), Styling, Brand Name
(position/promote), Packaging (protect/promote)
o QANTAS Seat Allocation, Safety Record, Meals, Booking System
Augmented Product consists of measures taken to help the consumer
put the actual product to sustained use.
o E.g. Credit, Delivery, Warranties, Installations & After Sale Service
o QANTAS Frequent Flyer Scheme, Holiday Packages, Car Rental
Booking Help, Qantas Club

Product And Service Classifications

Consumer Products bought by final consumers for personal consumption
Convenience Products buy frequently, little comparison, tend to be
low price & widely available e.g. Sweets, groceries.

Shopping Products less frequently purchased, effort to compare on

suitability/quality/price/style e.g. Furniture/Hotels
Specialty Products unique characteristics or brand identification,
special purchase effort e.g. designer clothes, Ferrari
Unsought Products not normally considered by the buyer e.g. blood
donations, funeral services, life insurance.

Industrial Products bought by firms/individuals for further processing or for

use in conducting a business
The distinction between consumer & industrial products is based on the purpose
for which the product is bought.
Materials & Parts - raw materials, manufactured materials & parts
(wheat, timber, iron ore, tyres, motors)
Capital Items - aid the production process/operations, installations &
accessory equipment (drill presses, forklifts)
Supply & Services - operating supplies, repair/maintenance services,
advisory services (pencils, pc repair, consulting)
Services Intangible Activities, Benefits Or Satisfactions
Some services are capital intensive & some are people based. These service
characteristics distinguish almost pure G&S:
Intangibility services have little physical element, cannot be tasted,
felt, heard or smelled before they are bought
Inseparability services cannot be separated from their providers
Perishability cannot store for later sale or use (only a memory is left)
e.g. rock concert
Variability people based services are almost never exactly the same,
quality depends on provider
High Involvement & Personal Nature of Services services are
personalised e.g. dentist
Synchronous Delivery & Consumption delivery & consumption of the
service in real time (RT interaction e.g. L2Drive)

Marketing Strategies for Service Firms

The ServiceProfit Chain
In a service business, the customer and frontline service employee interact to create
the service. Hence service firms profit comes from effective employee and customer
satisfaction. Hence, it is necessary to understand the serviceprofit chain consisting
of five key aspects of a the service business:
1. Internal service quality: superior employee selection and training, a quality work
environment, and strong support for those dealing with customers, which in turn
results in.

2. Satisfied and productive service employees: more satisfied, loyal, and

hardworking employees, which results in.
3. Greater service value: more effective and efficient customer value creation and
service delivery, which results in.
4. Satisfied and loyal customers: satisfied customers who remain loyal, repeat
purchase, and refer other customers, which results in.
5. Healthy service profits and growth: superior service firm performance.
Internal marketing means that the service firm must orient and motivate its customer
contact employees and supporting service people to work as a team to provide
customer satisfaction. Interactive (frontline) marketing means that service quality
depends heavily on the quality of the buyerseller interaction during the service
encounter.
There are three major marketing tasks that service marketers face in this context:
Managing Service Differentiation: Service companies can differentiate their service
delivery by having better trained and reliable customercontact people.
Managing Service Quality: Service quality will always vary, depending on the
interactions between employees and customers and is harder to define and judge
than product quality.
Managing Service Productivity: Service firms are under great pressure to increase
service productivity. They can train current employees better or hire new ones who
will work harder or more skilfully.

Product And Service Decisions

Product Attributes
Marketers are constantly involved in making individual product and service decisions
relating to the development and marketing of individual products. The important
decisions relate to product attributes, branding, packaging, labelling and product
support services.
Product and service attributes
Developing a product or service involves defining the benefits that will be offered to the
marketplace. These benefits are communicated and delivered by product attributes
such as quality, features, style and design. Decisions about these attributes greatly
affect consumer reactions to a product.

Product quality refers to the characteristics of a product or service that bear on its
ability to satisfy stated or implied customer needs. Level and consistency of quality

are the two dimensions used in the measurement of product quality. Quality is a
major positioning tool for marketers. In developing a product, the marketer must
first choose a quality level that will support the products position in the target
market.
Product features refer to technical characteristics of the offering. Consumers seek
value and needsatisfaction. A product can be offered with varying features. Product
feature decisions must reflect consumer needs and perceptions, affordable value
and company cost. Starting with a strippeddown model a company can create
higherlevel models by adding more features to suit diverse customer needs which
may help the company better compete in the marketplace.
Product style and design adds to product distinctiveness. While style simply
describes the appearance of a product, design is a much broader concept. A
sensational and eyecatching style may grab attention, but it does not necessarily
make the product perform better.

Branding
Brand is a name, term, sign, symbol, design, or a combination of these, that
identifies the goods or services of one seller or group of sellers and
differentiates them from those of competitors. Brand has become a buzzword in
modern marketing. Branding can add value to a product and as such, has
become a major issue in product strategy, requiring a number of decisions.
Brand Equity is the added value that knowledge about a brand brings to a
product over & above its functional qualities. It must have extensive awareness
& be strong, unique & favourable in the minds of consumers. Building a brand
name can cost $150M & the success rate is low. Coca Cola brand equity is
estimated to be $80bn.
Firms often acquire brands to build brand portfolios with strong brand equity.

Brand valuation is the process of estimating the total financial value of a brand.
Young & Rubicams Brand Asset Evaluator measures brand strength along four
consumer perception dimensions:
o differentiation (what makes the brand stand out),
o relevance (how consumers feel it meets their needs),
o knowledge (how much consumers know about the brand), and
o esteem (how highly consumers regard and respect the brand).
Building Strong Brands

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Brand Positioning: Marketers can position brands at any of three levels. They
can position the brand (i) on product attributes; (ii) with a desirable benefit and
(iii) on beliefs and values.
Brand Name Selection: Desirable qualities for a brand name include the
following:
o It should suggest something about the products benefits and qualities.
It should be easy to pronounce, recognise, remember and distinctive.
Brand Sponsorship: A manufacturer has four sponsorship options: (i) he can
launch the product as a manufacturers brand (or national brand); (ii) may sell to
resellers who give it a private brand (also called a store brand or distributor
brand); (iii) can market licensed brands; and finally (iv) can join forces with
another company and cobrand a product.
National brands (or manufacturers brands) have long dominated the retail
scene.

Brand Development: A company has four choices when it comes to developing brands.

Packaging
Packaging involves designing & producing the container or wrapper for a
product. It is an important marketing tool (attract attention, describing the
product) in addition to holding & protecting the product
Labelling
Labelling identifies (distinguishes from competitors), describes (content
information) & promotes (arouse attention) the product & brand by supporting
its positioning.
Product Line Decisions
A Product Line is a group of products that are closely related because they
function in a similar manner, sold to the same customer groups, are marketed
via the same outlets or fall within the same price range
1. Product line length is influenced by the companys objectives and has to be
carefully decided. A product line is too short if adding items increases profits, it is
too long if dropping items increases profits. The company must plan line growth
carefully; it can increase the length either by line filling or line stretching.
Companies that want to be positioned as fullline companies or that are seeking
high market share and market growth, are likely to carry longer lines.

2. Line Filling is the process whereby a product line can also be lengthened by
adding more items within the current range. Line filling is overdone if it results in
cannibalisation or customer confusion. The new items should be noticeably
different from the current items.
3. Line stretching occurs when a company lengthens its line beyond its current
range; downwards or upwards. Many companies initially locate at the high end of
the market and later stretch their lines downward. Companies in the middle may
decide to stretch the lines in both directions, employing a twoway stretch
strategy.
4. Featuring selecting a few items to receive special marketing attention to

increase sales volume or draw customers to other products in the line

(loss leadership)

Product Mix Decisions

The Product Mix/Portfolio consists of all the product lines & items that a firm
sells. For long term growth the mix must be expanded (replaced or modified). It
is optimised according to engineering, production & marketing skills available
resources & objectives.
1. Width the number of different product lines marketed by a firm
2. Length the number of items sold by a firm within each product line
3. Depth number of shapes, models, designs & versions of the product
4. Consistency how closely related the various product lines are in end use,
production requirements, distribution channels or other ways.
A company can adapt its product strategy in four ways:
1. It can add new product lines, widening its product mix.
2. It can lengthen its existing product lines.
3. It can add more versions of each product, deepening its product mix.
4. It can pursue more product line consistency.

New Products
Rapid changes in tastes, technology & competition, prompt consumers to want new &
improved products (causes life cycle).
New Product Development is the development of original products, product
modifications or new brands via own R&D (depends on buyer or sellers assessment).
Newness can mean new to the world, new product lines, line extensions,
improvements, repositioning & cost reductions. New Products can be obtained by
Acquisition or New Product Development. 80% of new products fail/underperform.
Reasons include poor research (overestimation), poor design, incorrect positioning
The New Product Development Process

1. Idea Generation the systematic search for new product ideas

o Internal employees, R&D team
o External customers, distributors, suppliers, competitors, shows, seminars
2. Idea Screening focusing on good ideas & dropping poor ones ASAP to avoid
development costs (via rough estimations)
3. Concept Development & Testing translating ideas into product concepts
o Product Concepts detailed version of the idea stated in meaningful consumer
terms
o Product Image the way consumers perceive actual or potential products
o Concept Testing testing new product concepts with a targeted consumers to
discover if the concept has appeal
4. Marketing Strategy Development designing a new marketing strategy for a
new product based on the product concept
o Target Market, Value Proposition, Planned Sales/MKT Share/Profit Goals
5. Business Analysis a review of the sales, costs & profit projections to see if it
satisfies firm objectives
6. Product Development converting the product concept into a physical product to
check viability
7. Test Marketing implementation of the marketing program in 1 or more realistic
market settings
8. Commercialisation introduction of the new product into the market place
o When (further improvements, cannibalism?), where (which market rollout), to
whom & how, Costly

Managing New Product Development (NPD)

Customer Centred NPD focused on new ways to solve customer problems &
create more customer satisfying experiences
Team Based NPD dept. work together in cross functional teams, overlapping
steps in NPD process to save resources & increase effectiveness
o Sequential NPD Process (Above) helps bring control to complex/risky
projects but can be slow (bottlenecks)
o Team Based NPD Process faster & effective, but can be confusing & bring
tension (good for rapid change)
Systematic NPD NPD process should be systematic & holistic to ensure new ideas
are generated & good ones dont falter, requires a good management system;
o Innovation Management System to collect, review, evaluate & manage new
product ideas
Can encourage all stakeholders to be involved in generating new
products
Common Organisational Arrangements
Product Managers - close to the market/knowledgeable but often preoccupied
with existing products, may lack NPD skills
New Product Managers (NPM) assigned the NPD task, may be to obsessed with
modifications & line extensions
New Product Committees specialists from several functional areas to evaluate
new product concepts & plans
New Product Departments separate departments with line staff authority to
develop new products, manager access to executives
New Product Venture Teams specialists from operating departments are
assigned to a venture team
Product Life Cycle (PLC)

The PLC can describe product classes (petrol cars) longer life, product forms
standard PLC (SUV) & brands (Toyota)
New Product Development finding & developing a new product idea
0 Sales & high expenses,
Introduction period of slow growth as the product is introduced
o Slow sales growth, very high costs (commercialisation expenses & heavy
promotion), no profits
o Strategy is intended to position the product
o Introduction Strategies
Price Skimming generate high profits now to offset expenses
Price Penetration build market share & create high profits later (after
stabilisation)
Growth period of rapid market acceptance & sales
o High sales growth, lower costs per unit (spreading overhead), increasing
profits, increasing competition
o Growth Strategies - New Features, Improving Quality, Increasing Distribution,
Entering New Market Segments
Maturity slowdown in sales growth as the product achieves acceptance by most
potential buyers. Longer stage.
o Slow sales growth, profits level off or decline (if marketing expense to defend
from many competitors)
o Maturity Strategies Modifying the target market to increase consumption,
modify product (quality, feature, style or packaging) & modify the Marketing
Mix (e.g. Price Promotion).
Decline sales fall off & profits drop
o Costs of managing & producing the product may exceed sales (low or no
profits)
Strategies Harvest profits whilst competitors drop out by lowering
costs, Divest
Product & Market Modification & Product Re-positioning Strategies can
manage the PLC (aim to grow long term - renewal). Consumer product tend to have a
shorter PLC than business products but there no exact time frame (depends on
technology).

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