WEEK 7&8

FOOD & BEVERAGE

 LEARNING OUTCOMES

UNDERSTAND THE IMPORTANCE IDENTIFY AND APPLY BRAND

OF THE DEVELOPMENT OF STRATEGIES.
PRODUCTS AND SERVICES. UNDERSTAND AND APPLY
IDENTIFY THE ELEMENTS THAT STRATEGIES FOR THE LIFE-CYCLE
CAN AFFECT THE SERVICE. CURVE.
APPLY PRODUCT STRATEGIES.

PRODUCT AND There are many definitions of

SERVICE DECISIONS product, given by many authors.

Product is a set of attributes and

characteristics that satisfy a need or
that are able to give a benefit to the
consumer in relation to the use or
function seek.

The same definition can be use for a

service because it is something that
satisfy the customer ́s needs.

PRODUCT OR There are four product or service levels:

SERVICE LEVELS 1. Core Product:

Is the basic form of the product. It is the main
benefit sought by customers in an attempt to
satisfy their needs as recognized by the gap
between the ideal state and actual state.

2. Expected Product:
It is the set of attributes expected by the
consumer and which he approves at the
purchase stage or usage stage. In services,
accessibility is part of the expected product.

 3. Augmented product:
PRODUCT OR Includes additional goods and services
SERVICE LEVELS that can be bundled with the core
service in an attempt to increase overall
utility or value for consumers, and to
differentiate from competitors.

4. Potential Product:
It is very important in services because it
includes all the possible changes and
improvements that can be implemented
in the future. The interaction with the
consumer is needed.

 5 PRODUCTS LEVELS - PHILIP KOTLER

Potential Product Potential Product:

Provides adittional tangible and intangible features.
Augmented Product

Expected Product Augmented Product:

Gives more than physical product and sets it apart from
Generic Product competitors.

Expected Product:
Offers generic product plus other attributes customers want.
Core Product

Generic Product:
Provides actual product with tangible qualities.

Core Product:
Fulfish basic benefit customers want.
 WHOLE PRODUCT CONCEPT

Augmented Product:
Standards
Aumented Product Installation
Integration
Services
Warranties
Finance
Additional Software and Hardward
Actual Product
Customer Care
Delivery

Actual Product:
Features
Quality
Packaging
Core Product Brand
Style
Color
Fashion

Core Product:
Benefits.
 ELEMENTS AFFECTING
THE PRODUCT’S OFFERING

When rendering a service or offering a product, it should be taken into

consideration a group of elements. We can mention:

A. PHYSICAL ENVIRONMENT:
It is everything that surrounds the provision of service, and includes:
- Visual Dimensions: Color, size, form, luminosity.
- Auditory Dimensions: Volume and tone.
- Olfactory Dimensions: Smell, freshness.
- Tactile Dimensions: Texture, softness, temperature.
 ELEMENTS AFFECTING
THE PRODUCT’S OFFERING

The environment can affect purchasing behavior:

As a way to call attention.

As a medium to launch a specific message to
potential consumers.
To provoke reactions and create effects.
For example: playing with colors, lightening,
decoration, etc..
 ELEMENTS AFFECTING
THE PRODUCT’S OFFERING

B. CONSUMER’S INTERACTION WITH THE SERVICE OFFER:

There are three stages that a consumer must go thru:

1. Union Stage: It is when the first encounter with the consumer takes place and
he must learn about the product or service offered.

2. Consumption Stage: It is the moment in which the service is used. It is when

the most interaction happens and the environment’s perception increases.

3. Separation Stage: It is when the rendering of the service has ended and the
interaction stops.
 ELEMENTS AFFECTING
THE PRODUCT’S OFFERING

C. CONSUMER’S INTERACTION WITH OTHER

CONSUMERS:
When a service is sold, take into consideration
the presence of other people interacting as
clients at a given time. Different type of guests
should not be mixed because it could generate
discomfort. Some tool for this: schedules, fares,
locations.
 Brands are a very powerful
BRANDING marketing tool, and if properlymanaged
they have the potential on increasing sales,
DECISIONS increasing profitability, and increasing
customer satisfaction.

A brand is the name, sign, symbol, design, or any

combination of these items that is used to identify
the product and establish an identity that is
separate and unique from competitors..

A brand name is the part of the brand consisting of the

words or letters that can be used to identify the firm.

A brand mark is the symbol or logo design that is used to identify

the product. Brands are the most important assets for a firm and it
involves confidence, consistency and set of expectations.
 FACTORS THAT INFLUENCE THE BRANDING IMAGE

1. Transforms a product or service in easy to

identify:
The development of a brand name is a key
element for the brand identity. Some criteria used
to establish brand names:

A.Describes the benefits of the product or service.

For example: Pizza Hut, Easy Jet, Cheap
Tickets.com.

B.Easy to pronounce, recognize and remember.s.

 FACTORS THAT INFLUENCE THE BRANDING IMAGE

C. Can be translated into foreign

languages. Many firms have been
short-sighted in choosing brand
names, overlooking name-related
problems that could occur if they
expand into foreign markets.

D. Distinctive and capable of legal

protection.
 FACTORS THAT INFLUENCE THE BRANDING IMAGE

2. The brand adds value to the products or

service:
When a brand becomes prestigious, because of
a good performance, it makes the brand a
synonym of quality.

For hotels and restaurants, the brand must built

through strict building norms, promotional
coordination, preserving historic buildings,
fighting against the environment’s pollution, for
example.
 FACTORS THAT INFLUENCE THE BRANDING IMAGE

3.Facilitates the maintenance of quality and

high standards :

When international brands create a quality

image, it is easier for them to enter in new
markets because the consumers have a good
perception of them.

Also, a good brand strategy will ensure that the

products/services are always available for the
consumers.
 Because of the changing markets,
NEW PRODUCT firms must constantly search for new
options of products or services to
OR SERVICE maintain their market share or to
DEVELOPMENT grow, accordingly to their objectives

PROCESS A firm must do a thorough analysis of a new

product idea to determine if it is compatible with
the firm’s goals, if the firm has the necessary
resources, and if the environment is favorable..

The life span concept becomes very important since new

options can be searched to meet new or different

needs or to replace obsoletes products..

New product or service development involves:

 1. SEARCH AND GENERATION OF IDEAS

It is the firs step, and the firm could get

information from the following sources:

A.Internal sources: Ideas from

management, employees’ suggestions,
research within the company, etc.

B.Customers: Opinions gathered by

surveys, suggestions, complaints.

C. Competition: Benchmarking
 1. SEARCH AND GENERATION OF IDEAS

D. Distributors and suppliers: Many times

they are in direct contact with the final
client and know more about their tastes,
preferences and needs.

E. Other sources: Includes industry

magazines, fairs, government offices,
universities, consulting, market research,
Internet, etc.
 2. SELECTION OF IDEAS

Reduce the number of ideas generated in

the first steps, focusing in the best ones
and the ones possible to realize with the
resources available or according to the
strategic planning.

Resources to take into consideration:

number of employees, financial resources,
competitive advantages, coherence with
the firm’s objectives, etc.
 3. CONCEPT TESTING

The chosen ideas must develop into

product or service concepts. Product idea
is to imagine something that the firm can
offer to the market.

Product concept is a more detailed version,

thought on terms of the target consumer.

Product image is the way that consumers

perceive a real or imaginary product.
 3. CONCEPT TESTING

Before the test, the concepts must be

assessed with scales and assign desirable
variables to the service or product to
develop.

The concept test is performed with a group

of target consumers, who will participate in
a focus group and give their opinions about
the new product.
 4. MARKETING STRATEGY

Develop a marketing mix to introduce the

product to the market.

1.Establish the target market, positioning

and market share.

2.Establish the proper pricing, distribution

and marketing budget for the first year.

3. Make long-term plans and strategies.

 5. BUSINESS ANALYSIS

New products and services should be analyzed

within the context of the company strategy and
existing products and services.

Estimate sales, cost and profit to assess their

attractiveness.

Think about developing the product after

determining that the product is attractive and
has a good fit with the company’s strategy.
 6. PRODUCT TESTING

Develop one or more prototypes for the new

product (or pilots for the new service)

The prototype is developed from the product

concept and will suffer variations. An assigned
cost budget will constrain its development.

The development of a final prototype might

take years to complete.
 7. MARKET TESTING

After the prototype has been developed, a

limited deployment serves to test the
market.

Market testing is used to modify the

product or service as needed before the
final launch.
 8. PRODUCT LAUNCH

The last stage of the process is launching

the product or service to the market.

Consider:
When to launch
Where (globally, regionally, locally)
Which channels to use
How to promote the launching
STRATEGIES FOR
Once a new product or service has
PRODUCT been developed, the firm must take its
LIFE-CYCLE life cycle into consideration and plan
(PLC) accordingly the marketing strategies.

Product life cycle stages:

A.Introduction
B.Growth
C.Maturity
D.Decline
E. Suppression

PRODUCT LIFE-CYCLE GRAPHIC

 STAGES OF THE PRODUCT LIFE CYCLE:
CHARACTERISTICS

STAGE

I STAGE

II STAGE

III STAGE

IV
INTRODUCTION GROWTH MATURITY DECLINE

SALES

LOW

RAPIDLY
RAISING PEAK

DECLINING

PROFITS NEGATIVE POSITIVE AND HIGH STARTING

DECLINING

INCRISING TO DECLINE

CASH
FLOW NEGLIGIBLE

MODERATE

HIGH

LOW

REMAINING EARLY REMAINING EARLY

INNOVATORS AND
CUSTOMERS

SOME EARLY ADOPTERS

ADOPTERS
AND SOME MAJORITY
AND LAGGARDS

EARLY MAJORITY LATE MAJORITY

INCRISING NUMBER DECLINING

COMPETITORS

FEW

AND STRENGHT
MANY

IN NUMBER
 STAGES OF THE PRODUCT LIFE CYCLE: STRATEGIES

STAGE

I STAGE

II STAGE

III STAGE
IV
INTRODUCTION GROWTH MATURITY DECLINE

INCREASE SALES INCREASE DECREASE MARKET

CREATE TRIAL
MARKETING AND MAXIMIZE PROFITS
AND EXPENDITURES AND

AND

OBJECTIVE MARKET SHARE MAINTAIN MAXIMIZE SHORT-

AWARENESS
MARKET SHARE TERM PROFITS

CORE PRODUCT
POSITIVE HIGH,
PRODUCT WITH SOME BASIC


AND

STARTING

TO DECLINING

PERIPHERAL
INCREASING DECLINE
SERVICES
 STAGES OF THE PRODUCT LIFE CYCLE: STRATEGIES

STAGE

I STAGE

II STAGE

III STAGE
IV
INTRODUCTION GROWTH MATURITY DECLINE

PRICE TO
SET INITIAL PRICE PENETRATE LOWER PRICES TO REDUCE PRICE
PRICE

BASED ON
COST AND MARKET
BASED INCREASE
MARKET TO MANTAIN

STIMATE DEMAND ON ACTUAL SHARE VOLUME

DEMAND

BUILD REDUCE
CREATE TRIAL AND USE TO
AWARENESS AND EXPENDITURES
PROMOTION AWARENESS
THROUG
DIFFERENTIATE

INTEREST

AND
AND FOCUS

ON
SALES PROMOTIONS AMONG MAJOR
REDUCE SALES LOYAL
COMPETITORS
PROMOTIONS CUSTOMERS
 INTRODUCTION STAGE

The product is available for the consumer’s purchase.

The goals for the firm are to develop product awareness and stimulate trial and
adoption.
A sizeable investment must be made even through sales will be initially low, leading
to negative profits.
Customers tend to be innovators who are willing to take risks to try new products and
services.
The distribution is selective in an attempt to build a customer base before adding new
units or distributors.
Sales grow slowly.
As the brand is known more widely, this stage could be shorter.
 GROWTH STAGE

The product has built and adequate customer base; the sales and profits rise rapidly;
the cost per unit for providing the product/service decreases.

Strategies to speed the growth:

1. Improve quality, add models, characteristics.
2. Obtain new market segments and develop loyal customers.
3. New distribution channels.
4.Aggressive emphasis on promotion, such as personal selling
and advertising.
5. Reduce the amount of sales promotions and discounts.
 MATURITY STAGE

Annual gross sales level off. The longer this stage lasts, the more successful the
product is.

The market is saturated and competition is increasing from alternative options.

There are “price wars”.

However there are still high profits due to large volume and the beginning of a
decline in the number of competitors (the weak ones, are leaving).

The best defense is to attack with the following alternatives:

 MATURITY STAGE

A.Market Modification: new consumers are targeted,

through attracting new market segments or increasing
the market share by increasing the sales from existing
consumers.

B.Product Modification: Change characteristics, increase

quality, increase performance, etc.

C.Marketing Mix Modification: advertising and promotions

focus on differentiating the product; distribution becomes
more intensive to ensure consumer convenience and
accessibility; better prices (at the market), etc.
 DECLINE STAGE

Sales and profits drop more rapidly, and the number of competitors is reduced to
those with very strong positions.
Prices are often cut even further; costs per unit have been driven down with
accumulated volume.
Distribution is selective as weaker outlets are closed.
Sometimes this can last a long time or happen quickly.
The main factors for decline:
1.Technological changes or obsolescence.
2.Changes in preferences and tastes.
3.Fashion trends
4.Improved products by the competitors.
It must be decided if the product is re launched, if it is kept or retired.
 SUPPRESSION STAGE

The firm decides that the product has no future.

A product can be suppressed by:

Progressive reduction, retiring it gradually by replacing it by another or until the

stock lasts.

Retiring it all at once, if maintaining the product can cause damage or deep
consumer dissatisfaction.