PRODUCT SERVICE MGT 3.

03

Understands the concepts and processes needed

to obtain, develop, maintain, and improve a
product or service mix in response to market
opportunities

Employ product-mix strategies to meet

customer expectations.

Explain the concept of product mix

Product Planning

How are decisions made to

introduce new products and
delete old ones?

What is Product Planning?

Product Planning: The decisions made
about what features should be used in
selling of a businesss products.

These decisions relate to:

packaging

guarantees

labeling

branding

warranties

product mix

Product Planning
Involves making
decisions about
those features
that are needed to
sell a businesss
products,
services, or ideas.

What is Product Planning?

(cont.)
Product Mix: All the different products that a
company makes or sells.
Product Line: A group of closely related products
manufactured or sold by a business.
Product Item: A specific model, brand, or size of a
product within a product line.
Product Width: The number of different product
lines a business manufactures or sells.
Product Depth: The number of product items in a
product line.

What is Product Planning?

(cont.)
A well defined product plan allows a business
to:
Create sales opportunities.
Design appropriate marketing programs.

Develop effective advertising campaigns.

Coordinate the product mix offered to
customers.

Add new products.

Delete older products that no longer appeal
to customers

4 Ps of the PRODUCT MIX

PRICE
PRODUCT

PLACE
PROMOTION

PRODUCT MIX
= all the types of products a
company makes or sells. The
particular assortment of goods
and services that a business
offers to meet the needs of its
market(s) and its company
goals.

Product Mix and Product Line

PRODUCT MIX
The set of all products offered
for sale by a company

PRODUCT LINE
A broad group of
products for similar uses
and with similar characteristics

Product Mix
Includes all the different products that
a company makes or sells.

Identify ways in which

product lines can be
organized.
Product Line = group of closely related products manufactured
by a business

Product Item = specific model, brand, or size of a product

within a line
Ex: P&G has over 250 products within 21 product lines

Dish care is a product line

Cascade, Dawn, Joy,
& Ivory are
product items

Describe product mix

Some
companies have different brands
dimensions.
for different markets

Coca-Cola has different drinks for

sparkling beverages, water, juice,
performance, coffee, tea, and
international flavors.

Product Line
A group of closely related products
manufactured and/or sold by a
business.

Product Item
A specific model, brand, or size of a
product within a product line.

DIMENSIONS
WIDTH = number of product lines carried by a
company.
NARROW = offering a limited number of product
lines
BROAD = many different product lines carried
DEPTH = number of products and the assortment of
sizes, colors, and models offered in a product line
SHALLOW = limited variety within a product line
DEEP = extensive variety within a product line

Product Mix
PRODUCT MIX

BREADTH The number of product lines carried

DEPTH
Variety
of
sizes,
colors,
models
within
a
product
line

Product Width
The number of different product lines a
business manufactures or sells.
Width of the Gillette Product Mix
Oral
Care

Blades &
Razors

Personal
Care

Batteries Appliances

Product Depth
The number of product items offered
within each product line.
Oral
Care

Blades & Personal Batteries

Razors
Care

Appliances

NARROW PRODUCT MIX

= Limited product lines carried, typically

very specialized. A description of the
width of a business's product mix offering
a limited number of product lines.

Broad Product Mix

= Many different product lines carried.

A description of the width of a
business's product mix offering many
product lines.

Shallow Product Mix

= Limited variety within a product

line. A description of the depth of a
business's product mix offering few
items in the product line.

Deep Product Mix

= Extensive variety within a product
line. A description of the depth of a
business's product mix offering a
great many items in the product
line.

Identify reasons that a

business would offer a
narrow product mix.
Product Width number of different product lines
CONTRACTING - Pruning weak brands can strengthen the
remaining brands in the line.
Ease on management

Cost effective
Simplicity
Consistency

Identify reasons that a

business would offer a
broad product mix.
Product Width number of different product lines
EXPANDING
Reach all markets
Competitive advantage
Ex: Red Lobster specializes in seafood, but offers
chicken and steak to broaden their product mix.

Identify reasons that a

business would offer a
deep product mix.

Product Depth number of items

offered within each product line
EXPANDING
Variety
Quantity

Ex: Kohls carries various quantities of

sizes, colors, & styles of Levi Jeans.

Identify reasons that a

business would offer a
shallow product mix.
Product Depth number of items offered
within each product line
CONTRACTING
Cost effective
Satisfy small markets

Ex: Only 2 chicken items on Red Lobsters menu.

REVIEW:
What are some key
product mix
strategies?

Product-Mix Strategies

Expansion

Alteration of
existing products

Contraction

Trading Up and
Trading Down

Explain the importance of

a businesss product mix.
Businesses must plan their product mix
carefully because they cannot offer all the
products that customers may want.
They should be a profitable market for
product offered by a company

How do businesses
determine which products to
produce and sell?
Businesses will use different product mix
strategies to determine what to produce or
sell.
Product mix strategies depend on:
Resources

Objectives
Past and current sales
Consumer trends

Product Mix Strategies

The plan for how the business determines
which products it will make or stock
May develop completely new products

May expand or modify their current

product lines
May drop existing products

EXPANSION

Developing New Products

Generating Ideas
Come from a variety of sources
Creativity is essential

Screening Ideas

Ideas are evaluated and matched against the

companys overall objectives.

Developing New Products (cont.)

Developing a Business Proposal
Consider a products potential sales, costs,
and production requirements.
Developing the Product
The new idea takes physical shape
Marketers develop a marketing strategy.
Testing the Product with consumers

Developing New Products (cont.)

Introducing the Product
The product has been researched
successfully
This stage also is called
commercialization.

Evaluating Customer Acceptance

Marketers track new product
performance.

EXPANSION

ADVANTAGES

DISADVANTAGES

Extend product
lifecycle

Adding items to a
product line or
introducing an entire
product line can be
expensive, be difficult to
manage, and not always
be successful.

Adding items to a
product line or
introducing an entire
product line can
capture market
share and meet
customers needs
and wants.

Deleting a Product or Product Line

Obsolescence

Loss of appeal
Conflict with current company objectives
Replacement with new products
Lack of profit
Conflict with other products in the line

CONTRACTION

ADVANTAGES

DISADVANTAGES

Cut losses

Deleting products from a

product line or the entire
product line is conceding
market share to your
competitors.

Reallocate resources to
more profitable
products
Deleting products from
a product line or the
entire product line can
be cost effective and
easier to manage while
creating simplicity and
consistency

It may be wiser to
improve the existing
product or line to
recapture market share.

Describe alteration
product-mix strategies.
Alteration of Existing Products:
Making changes to meet customer
needs & wants

Improve an established product with

new design, new package, new uses.
Ex: Jeep offering 4 doors

Developing Existing Products

(ALTERATION)
Companies constantly review their
product mix to see if they can further
expand their product lines or modify
existing products.
Two ways to do this:

Developing Existing Products (cont.)

Line Extensions new product lines,

items, or services
Original Product

Newer Products

Developing Existing Products (cont.)

Product Modifications an alteration in

a companys existing product

ALTERATION

ADVANTAGES

DISADVANTAGES

Improving an
established
product can
capture new
customers and
meet customers
unmet wants as
trends change.
Ex: McDonalds
opening stores in
India

Improving an
established product is
expensive and not
always a success.
Example: New Coke

Product Mix Strategies

Developing New Products

Follows seven steps:

Generate Ideas
Screen Ideas
Develop a Business Proposal
Test the product with consumers
Introduce the product
Evaluate customer acceptance

Product Mix Strategies (cont)

Developing Existing Products
Line Extensions: Adding new product lines, items
or services.
Ex: Tylonol
Product Modifications: An alteration to an
existing product:
New and different varieties
Formulations

Colors
Styles
Features

Sizes

Product Mix Strategies (cont)

Deleting a Product or Product Line
Obsolescence
Loss of Appeal

Changes in Company Objectives

Replacement with New Products
Lack of Profit
Conflict with other products in the line

Describe trading up / down

product-mix strategies.
Trading up: Adding a higher-priced
product to a line to attract a higherincome market and improve the sales of
existing lower-priced products.
Trading down: Adding a lower-priced item
to a line of prestige products to encourage
purchases from people who cannot afford
the higher-priced product, but want the
status.

TRADING UP

ADVANTAGES

DISADVANTAGES

Adding higher priced

items to a product line
will attract the higher
income market and
may help increase the
image and sales of the
lower priced items.

While sales may be generated for the new

product or line, sales of established
products may decline.
If the business uses trading up to enhance
its image, the business must be careful that
present customers are not lost in the
process of gaining new ones.
Customers may become confused as to
what the companys image is meant to be,
or they may refuse to believe that better
quality merchandise can be purchased from
a business that had formerly sold budget
goods.
Adding higher priced items to a product line
is expensive and may not attract new
customers while hurting the image and
sales of the lower priced items.

TRADING DOWN
ADVANTAGES

DISADVANTAGES

Adding lower priced

items to a product
line of prestige
products can capture
a lower income
market who cannot
afford the higher
priced items.

Adding lower priced items to a product

line of prestige products can hurt the
image and sales of the higher priced
items in the line
Consumers may be confused about the
new product or line.
Profits from the cheaper product may be
eroded by reduced sales in the more
expensive line.

Dealers may not be willing to add the

lower priced product to their offering.
Competition may become stronger at the
high end of the market.
Gaining short-term sales at the expense
of long term sales

How are
products/services

positioned in the
market place?

POSITIONING is about bringing

attention to products and
DIFFERENTIATING them from
similar ones.

Positioning the Product

COMPETITOR

Differential
advantage

PRODUCT CLASS
OR ATTRIBUTE

Associated with
attractive attribute

PRICE
AND QUALITY

High price/high quality

or
low price

Product Positioning = the IMAGE a

product projects
The goal is to set the product apart from
the competition.
The way you get into your customers
mind.
The efforts a business makes to identify,
place, and sell its products.

Describe positioning
product-mix strategies.
Positioning is all about perception; actions
marketers take to create a certain image of a
product in the minds of the customers
In Relation to a Competitor

In Relation to a Product Class or Attribute

In Relation to a Target Market
By Price and Quality
Difficult to change

Product Positioning
Product positioning: Efforts a business
makes to identify, place and sell its products
in the marketplace.
Positioning by price and quality:
Ex: Ford Motor Company positions its
Focus as an economical passenger car
while still emphasizing quality.

Positioning by Price & Quality

Offer economy, mid-priced, and luxury lines

Product Positioning (cont)

Positioning by features and
benefits:
Ex: Oil of Olay was positioned as a
premium facial moisturizer and
cleanser to keep skin soft and
young.
Positioning by unique
characteristics:

Ex: Cell phones that can text

message or take pictures and send
them.

Positioned by Features & Benefits

Unique characteristics

Product Positioning (cont)

Positioning in relation to the
competition:
Ex: Warner-Lambert Company
introduced Cool Mint Listerine by
positioning against the theraputic
benefits of Original Listerine and
the cosmetic benefits of Scope.
Positioning in relation to other
products in a line:
Ex: Binney & Smith introduced
washable crayons and positioned
them as a specialty item in the
companys Crayola crayon line.

Positioning in
Relation to the Competition

Positioning in Relation to
Other Products in a Line

POSITIONING STRATEGIES

ADVANTAGES

DISADVANTAGES

Creating an identity
of a product helps
find a place for the
product in the
marketplace while
strongly identifying
with a specific target
market and possibly
creating brand
loyalty.

Images of a product are

difficult to change once
they are established and
very expensive.

6 Steps to Successful
Positioning
1. What position do you currently own?

2. What position do you want to own?

3. Whom you have to defeat to own the
position you want.
4. Do you have the resources to do it?
5. Can you persist until you get there?
6. Are your tactics supporting the positioning
objective you set?