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Chapter 10

Product and Service Strategies

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McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
 After studying this chapter you
should be able to:
• Understand the different characteristics
of a product mix.

• Recognize the stages and

characteristics of the product life cycle.

• Identify appropriate marketing strategies

for products in different life cycle stages.

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 After studying this chapter you
should be able to:
• Describe the limitations of the product
life cycle concept.

• Discuss different product-mix and

product-line strategies.

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 Product Mix

•• Product
ProductMix:
Mix:
–– The
Thetotal
totalassortment
assortmentofofproducts
products
and
and services marketed byaafirm.
services marketed by firm.

•• Product
ProductLine:
Line:
–– AAgroup
groupofofindividual
individualproducts
productsthat
that
are
areclosely
closelyrelated
relatedininsome
someway.
way.

•• Individual
IndividualProduct:
Product:
–– Any
Anybrand
brandor orvariant
variantofofaabrand
brandinin
aaproduct
productline.
line.

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 Product Mix Characteristics
• Product Mix Width:
– The number of product lines in the
product mix.

• Product Line Length:

– The number of products in a
product line.

• Product Mix Consistency:

– The relatedness of the different
product lines in a product mix.

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 Product and Service Strategies

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 Individual Product Strategies
•• Product
Product Life
Life Cycle
Cycle (PLC):
(PLC):
–– Describes
Describes the
the advancement
advancement of of products
products through
through
identifiable
identifiable stages
stages of
of their
their existence.
existence.

Introductory Growth Maturity

Introductory Growth Maturity Decline Stage
Stage Stage Stage Decline Stage
Stage Stage Stage

Total
Total
Market
Market
Sales
Sales

Time
Time

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 The Product Life Cycle

Introductory
Introductory Growth
Growth Maturity
Maturity Decline
DeclineStage
Stage
Stage
Stage Stage
Stage Stage
Stage

Total
Total
Market
Market
Sales
Sales

Time
Time

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 The
The Product
Product Life
Life Cycle
Cycle Concept
Concept
is
is Based
Based on
on Four
Four Premises
Premises

Profits from a product

Products have a
vary at different stages
limited life.
in the life cycle.

Product sales pass through

Products require different
distinct stages, each with
strategies at different
different marketing
life cycle stages.
implications.

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 The Diffusion Process
Innovators
(2.5%)

Early Adopters
(13.5%)

Early Majority
(34%)

Late Majority
Innovators Early Adopters
Early
Majority
Late
Majority
Laggards
(34%)

"The Chasm" Laggards

(16%)
Technology Adoption Process

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 The Diffusion Process

Early Late
Innovators Early Adopters Laggards
Majority Majority

"The Chasm"

Technology Adoption Process

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 PLC Stages and Characteristics

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 PLC Length and Shape

Style Fashion Fad

Sales Sales Sales

Time Time Time

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 PLC Marketing Strategies
Stage
Stage Objective
Objective Marketing
MarketingStrategy
Strategy
Introduction
Introduction Awareness
Awareness&&trial
trial Communicate
Communicatebenefits
benefits

Growth
Growth Usage
Usageof
offirm’s
firm’sbrand
brand Specific
Specificbrand
brandcommunication,
communication,
lower
lowerprices,
prices,expand
expanddistribution
distribution

Maturity
Maturity Maintain
Maintainmarket
marketshare
share Sales
Salespromotion,
promotion,drop
dropprice,
price,
Extend
Extendlife
lifecycle
cycle expand
expanddistribution,
distribution,new
newuses
uses
&&new
newversions
versionsof ofproduct
product

Decline
Decline Decide
Decidewhat
whatto
todo
do Maintain,
Maintain,harvest,
harvest,or
ordivest
divest
with
withproduct
product

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 Limitations of the PLC
1.
1. The
The life
life cycle
cycle concept
concept applies
applies best
best to
to product
product
forms
forms rather
rather than
than to
to classes
classes of
of products
products oror
specific
specific brands.
brands.

2.
2. The
The life
life cycle
cycle concept
concept may
may lead
lead marketers
marketers to to
think
think that
that aa product
product has
has aa predetermined
predetermined life,life,
which
which may
may produce
produce problems
problems inin interpreting
interpreting
sales
sales and
and profits.
profits.

3.
3. ItIt is
is only
only aa descriptive
descriptive way
way ofof looking
looking atat the
the
behavior
behavior of of aa product
product and
and the
the life
life cycle
cycle can
can
not
not predict
predict the
the behavior
behavior of
of aa product.
product.
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 Product-Line Strategies
•• Strategic
Strategic Alternatives:
Alternatives:
1.
1. To
To increase
increase the
the length
length of
of aa
product
product line.
line.

2.
2. To
To decrease
decrease thethe length
length of
of aa
product
product line.
line.

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 Increasing the Product Line

• Downward-stretch Strategy
• Upward-stretch Strategy
• Two-way-stretch Strategy
• Line-filling Strategy

Cannibalization occurs when a new

Product takes sales away from
existing products.

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 Decreasing the Product Line
• Product Line Contraction:
– Firms must consider deleting products
when:
• They are not successful.

• They reach the decline stage of PLC.

• Long product line marketing costs are

too high.

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 Product-Mix Strategies

The Product Mix consists of all

product lines and individual products
marketed by the firm.

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 Strategic Alternatives

Add New
Product Lines?

Delete Existing
Product Lines?

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 Branding Strategies

Individual
IndividualBrand
Brand Family
Family&&Individual
Individual
Name
NameStrategy
Strategy Brand
BrandName
Name

Product
ProductMix
Mix Family
FamilyBrands
Brandsor
or
Branding
BrandingStrategies
Strategies Product
ProductTypes
Types

Family
FamilyBrand
Brand Company
Company
Name
NameStrategy
Strategy Name
Name

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 Ethical Issues in Product and
Service Strategies
•• Is
Is the
the product
product safe
safe when
when
used
used asas intended?
intended?

•• Is
Is the
the product
product safe
safe when
when
misused
misused in in aa way
way that
that is
is
foreseeable?
foreseeable?

•• Have
Have any
any competitors’
competitors’
patents
patents or
or copyrights
copyrights
been
been violated?
violated?

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 Ethical Issues in Product and
Service Strategies
•• Is
Isthe
theproduct
productcompatible
compatiblewith
withthe
the
physical
physicalenvironment?
environment?

•• Is
Isthe
theproduct
productenvironmentally
environmentally
compatible
compatiblewhen
whendisposed
disposedof?
of?

•• Do
Doany
anyorganizational
organizational
stakeholders
stakeholdersobject
objectto
tothe
the
product?
product?

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