CHAPTER 11 Aesthetic Modification

Developing and Managing Goods and Services  Changes the sensory appeal of a product by altering the taste,
texture, sound, smell, or appearance
Managing Existing Products  Sensory elements may strongly affect customers’
 Line extension purchases
 Product modifications  Can help a firm
 Quality modifications  Differentiate its product from competing brands
 Functional modifications  Gain market share
 Aesthetic modifications  Drawback is that what is aesthetically appealing is subjective
and varies between consumers
Line Extension
 The development of a product closely related to existing Developing New Products
products in the line, but designed specifically to meet different  New products enhance a firm’s product mix and add depth to a
customer needs product line
 The term “new product” can have more than one meaning
 Many “new products” are really line extensions  Innovative benefits
 Are less expensive, lower-risk, and more common  Different and better than existing products
than totally new products  Never been sold by an organization before
 Downside is that unpopular line extensions may  Never been sold in a market before
result in negative evaluation of the core product
Phases of New Product Development
Reasons for Line Extensions 1) Idea Generation
 Focus on a different segment 2) Screening
 More precisely satisfy needs of current segment 3) Concept Testing
 Capture market share from competitors 4) Business Analysis
5) Product Development
Product Modifications 6) Test Marketing
 Changing one or more characteristics of a product 7) Commercialization
 Differs from line extension in that the original product
does not remain in the line Idea Generation
 Some requirements  Seeking product ideas that help to achieve organizational
• Product must be modifiable objectives
• Customers must be able to perceive a  Very few ideas are good enough for commercial
difference success
• Modifications should produce greater  Some ideas come from pure chance
customer satisfaction  Sources for new product ideas
 Drawback is that customers accustomed to the original may  Internal (Managers, researchers,
resist the modified version employees, sales personnel)
 External (Customers, competitors,
Quality Modifications advertising agencies, consultants)
 Changes related to a product’s dependability and durability
 Reducing a product’s quality allows for a lower price Screening
and is appealing to a new target market  Selecting the ideas with greatest potential for further review
 Higher quality allows a company to charge a higher  Do product ideas match organizational objectives and
price, build loyalty, and reduce price sensitivity resources?
 Some firms look for ways to increase quality while cutting costs  Cannibalization of existing products
 Capable of producing and marketing the product
Functional Modifications  Nature and wants of buyers
 Changes affecting a product’s versatility, effectiveness,  Some firms use checklists of new product requirements when
convenience, or safety making screening decisions
 Benefits
 Makes a product more useful and enlarges its market Concept Testing
 Places a product in favorable competitive position by  A small sample of potential buyers is presented with a product
providing benefits that competing brands do not offer idea to determine their attitudes and buying intentions
 Helps an organization achieve a  Low-cost procedure to determine customers’ initial
progressive image reaction to the product idea
 Modifications sometimes are made to reduce the possibility of  Identification of important product attributes and
product liability lawsuits benefits
 Input from online communities can be helpful
Business Analysis
 The product idea is evaluated to determine its potential
contribution to sales, costs, and profits
 Does product fit in with existing product mix?
 Is demand strong and enduring enough to justify
entering the market?
 What types of environmental and competitive
changes can be expected?
 Is the firm capable of developing the
product?
 What are the costs for developing and marketing?
Product Development
 The phase in which the organization determines if it is feasible
and cost effective to produce the product
 A prototype is used to reveal the tangible and
intangible attributes associated with the product in
the consumers’ minds
 A product’s overall functionality must be tested
 Is a lengthy and expensive part of the
process
 Only some products make it through this stage
Test Marketing
 A limited introduction of a product in geographic areas chosen
to represent the intended market
 Test markets must be a representative sample of the
target market
 The aim is to determine the extent to which
customers will buy the product
Test Marketing Benefits and Risks
 Benefits
 Let’s marketers measure sales performance in a
natural marketing environment
 An opportunity to identify weaknesses in the product
or marketing mix
 Allows for experimentation with advertising, pricing,
and packaging
 Risks
 Expensive
 Competitors may interfere
 Gives competitors time to copy the
Product
 Simulated test marketing is a way to reduce costs and risks
Commercialization
 Refining and finalizing plans and budgets for full-scale
manufacturing and marketing of a product
 Marketing managers analyze test marketing results
and refine product/marketing mix before full-scale
release
 Decisions about warranties, repairs, and replacement parts are
made early in this stage
 Expenditures from this stage may not be recovered for years
Rollout
 Introducing a product in stages across geographic areas
 Benefits
 Reduces the risks of introducing a new product
 No product can be introduced simultaneously
everywhere because of distribution considerations
 Allows time to increase production capacity
 Risks
 Allows competitors to observe a firm’s tactics and
introduce competing products
Product Differentiation
 The process of creating and designing products so customers
perceive them as different from competing products
 Customer perception is critical in differentiating
products
 Perceived differences include
 Quality
 Features
 Styling
 Price
 Image
Product Quality
 Quality: Characteristics of a product allowing it to perform as
expected in satisfying customer needs
 Level of quality: The amount of quality a product possesses
 Consistency of quality: The degree to which a product has the
same level of quality over time
Product Design and Features
 Product design
 How a product is conceived, planned, and produced
 The total sum of a product’s physical characteristics
 Styling
 Physical appearance of the product
 Involves functionality and usefulness
 Product features
 Specific design characteristics that allow
the product to perform certain tasks
 Helps a company differentiate its products
Product Support Services
 Support services can help a company differentiate itself from
competitors
 Customer services: Human or mechanical efforts or activities
that add value to a product
 All marketers of goods sell some degree of customer
services
 May be the only way to differentiate between
competing products
Product Positioning
 Creating and maintaining a certain concept of a product in
customer’s minds
 Marketers seek to position a product so that it
appears to have the characteristics the target market
most desires
Perceptual Mapping
 A product’s position is the result of customers’ perceptions of
the product's attributes relative to those of competitive brands
 A perceptual map is created by questioning a sample of
consumers about their perception of products, brands, and
organizations with respect to two or more dimensions
 Ideal clusters: Consumer consensus about desired product
features
 Ideal points: An indicated preference for specific product
features
Bases for Positioning
 Head-to-head competitor positioning
 Product attributes or features
 Price positioning
 Quality-level positioning
 Benefit positioning
Repositioning
 Positioning decisions are for all products, existing and new
 Existing brands must be reevaluated and sometimes
repositioned
 Can be accomplished by changing
 Price
 Distribution
 Image through promotion
 Packaging
 Benefits
Product Deletion
 Eliminating a product from the product mix, usually because it
no longer satisfies a sufficient number of customers
 Declining products reduce a firm’s profitability and monopolize
resources that should be distributed elsewhere
 It can be difficult to delete a product
 Some firms wait too long to delete
 A systematic review of products helps determine
when to make a deletion
Three Ways to Delete a Product
 Phase-out: Allows the product to decline without a change in
marketing strategy
 No attempt is made to give the product new life
 Run-out: Exploits any strength left in the product
 Intensifying marketing efforts in core markets or
eliminating some marketing expenditures
 Immediate drop: The best strategy when losses are very great
Product Deletion Process
Managing Services as Products
 Nearly all products have some service element
 Services are very important to the U.S. economy
 Represent 70% of United States GDP
 Long-term economic growth and lifestyle changes have
encouraged service sector expansion
 Business services have grown as the business environment
becomes more complex
Nature and Importance of Services
 Intangibility
 Inseparability of production and services
 Perishability
 Heterogeneity
 Client-based relationships
 Customer contact
Intangibility
 The major characteristic that distinguishes a service from a
good
 A service is not physical and cannot be touched
 Services cannot be physically possessed
Inseparability of Production and Consumption
 Production of a service cannot be separated from its
consumption by customers
 Customers must be present at the consumption of the service
and cannot take the service home
 Implies a shared responsibility between the customer and
service provider in giving and receiving the service
Perishability
 Unused service capacity from one time period cannot be stored
for future use
 Service marketers have to balance supply and demand
 Must plan for predictable periodic and seasonal
fluctuations in demand
Heterogeneity
 Manufactured goods are easier to standardize
 Human behavior leads to inconsistent quality
 There can be wide variations in service consistency
 Heterogeneity increases as labor intensiveness increases
 Equipment-based services have great homogeneity
 Automation reduces inconsistency
Client-Based Relationships
 Interactions resulting in satisfied customers who use a service
repeatedly
 Important for service providers to maintain customers/clients
over the long term
 Build trust
 Demonstrate customer commitment
 Satisfy customers
 Word-of-mouth communication has a key role in client-based
relationship-building
Customer Contact
 The level of interaction between provider and customer needed
to deliver the service
 The look of facilities plays an important role in high-
contact industries
 Well-trained, satisfied employees are essential
Development of Services
 The characteristics of services create marketing challenges and
opportunities
 Services generally come bundled
 Core service: The basic service experiences a
customer expects to receive
 Supplementary service: One or more supportive
services used to differentiate the service bundle from
competitors
 Heterogeneity allows for customization, which creates a
competitive advantage
Service Characteristics and Marketing Challenges
Intangibility
 Difficult for customer to evaluate
 Customer does not take physical possession
 Difficult to advertise and display
 Difficult to set and justify prices
 Service process usually not protectable by patents
Inseparability of production and consumption
 Service provider cannot mass produce services
 Customer must participate in production
 Other consumers affect service outcomes
 Services are difficult to distribute
 Prices can be based on
 Performance of specific tasks
 Time
 Level of demand (Peak demand: When demand is
highest)
 Marketers must decide whether to bundle options and how to
price bundles
 Consumers often rely on price as an indicator of service quality
Distribution of Services
 Marketers deliver services in various ways
 Customers go to service provider’s facility
 Services may be provided at customer’s home or
business
 “At arm’s length,” with no face-to-face contact
 Marketing channels for services are usually short and direct
 Some services use intermediaries
 Inventory management is a serious concern for services
Promotion of Services
 Intangibility results in promotion-related challenges
 Tangible cues are a typical way to promote services
 Service marketers are likely to promote
 Price
 Guarantees
 Performance documentation
 Availability
 Training/certification of personnel
 Personal selling can help customers visualize the service
experience
 Word-of-mouth communication is important

Organizing to Develop and Manage Products

Perishability
 Product manager: Responsible for a product, a product line, or
 Services cannot be stored
several distinct products that make up a group
 Balancing supply and demand are very difficult
 Brand manager: Responsible for a single brand
 Unused capacity is lost forever
 Market manager: Responsible for managing the marketing
 Demand may be very time sensitive
activities that serve a particular group of customers
 Venture teams: A cross-functional group that creates entirely
Heterogeneity
new products that may be aimed at new markets
 Service quality is difficult to control
 Service delivery is difficult to standardize

Client-based relationships
 Success depends on satisfying and keeping customers over the
long term
 Generating repeat business is challenging.
 Relationship marketing becomes critical.

Customer contact
 Service providers are critical to delivery
 Requires high levels of service employee training and
motivation
 Changes a high contact service into a low contact service to
achieve lower costs without reducing customer satisfaction.

Pricing of Services
 Pricing should consider
 Consumer price sensitivity
 Nature of the transaction
 Costs