Product Decisions

Product Decisions
Product and Service Strategies Category and Brand Management, Product Identification, and NewNewProduct Development
Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
What is a Product?
Product: bundle of physical, service, and symbolic attributes designed to enhance buyers want satisfaction
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What are Goods and Services?

Service: intangible task that satisfies consumer or business user needs Goods-services continuum: device that Goodshelps marketers to visualize the differences and similarities between goods and services
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Characteristics that distinguish services from goods: Intangibility Inseparability Perishability Difficulty of standardization Frequent requirement of interaction between buyer and Seller Variability
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Classifying Goods and Services for Consumer and Business Markets

Consumer products products destined for products: use by ultimate consumers Business (or B2B) products those that products: contribute directly or indirectly to the output of other products for resale Also called industrial or organizational products
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Types of Consumer Products
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Convenience product good or service that product: consumers want to purchase frequently, immediately, and with minimal effort Impulse goods and services are purchased on the spur of the moment. Staples are convenience goods and services that consumers constantly replenish to maintain a ready inventory. Emergency goods and services are bought in response to unexpected and urgent needs.
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Shopping product good or service product: purchased only after the customer compares competing offerings from competing vendors on such characteristics as price, quality, style, and color Typically cost more than convenience purchases. Include tangible items. Shopper lacks complete information and gathers information during the buying process.
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Specialty product good or service with product: unique characteristics that cause the buyer to value it and make a special effort to obtain it Unsought product good or service product: marketed to consumers who may not yet recognized in the need for it
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Types of Business Products
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Installation major capital investment by a Installation: business buyer that typically involves expensive and relatively long-lived products, such as a new factory or piece of heavy machinery Accessory equipment capital product, usually equipment: less expensive and shorter-lived that insulation, such as a laptop computer Component parts and materials finished materials: business products that become parts of buying firms final products, such as spark plugs for new cars
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Raw materials business product, such as a materials: farm product (wheat, cotton, soybeans) or natural product (coal, lumber, iron ore) that become part of a final product Supplies products that represent regular Supplies: expenses necessary to carry out a firms daily operations but are not part of the final product. Supplies are sometimes called MRO items MRO item part of business supplies item: categorized as maintenance items, repair items, or operating supplies such as light bulbs, nuts and bolts used in repairing equipment, or pencils
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Business services intangible product services: purchased to facilitate a firms production and operating processes such as financial services, leasing of vehicles, legal advice and consulting
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Quality as a Product Strategy

Quality is a key component to a firms success in a competitive marketplace. Total quality management (TQM): approach that involves all employees in continually improving products and work processes to achieve customer satisfaction and world-class performance
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Benchmarking: process in which an organization improves performance by continually comparing and measuring itself against the leading firms in an industry and implementing changes for quality improvement
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Development of Product Lines

Product Line a series of related products Line: Motivation Desire to Grow Enhancing the Companys Position in the Market Optimal Use of Company Resources Exploit the Product Life Cycle
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The Product Mix

A companys assortment of product lines and individual offerings Product Width--the number of product lines offered. Product Length--the number of different products a firm sells. Product Depth--variations in each product that a firm markets in its mix.
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Product Mix Decisions A firm may lengthen or widen its product mix A Company may decide to add variations that will attract new users A product may be pruned or altered, and new product may extend the product life cycle Line extension: introduction of a new product that is closely related to other products in the firms existing line
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The Product Life Cycle

Product life cycle progression of products cycle: through introduction, growth, maturity, and decline stages
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Introduction Stage Firm works to stimulate demand for the new market entry Promotional campaigns stress features Additional promotions to intermediaries attempt to induce them to carry the product Although prices are typically high, financial losses are common due to heavy promotional and research-anddevelopment costs
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Growth Stage Sales volume rises rapidly Firm usually begins to realize substantial profits Success attracts competitors Firm may need to make improvements to the product Additional spending on promotion and distribution may be necessary
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Maturity Stage Industry sales continue to grow, but eventually reach a plateau Many competitors have entered the market, and profits began to decline Differences between competing products diminish Available supplies exceed industry demand for the first time Competition intensifies and heavy promotional outlays are common
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Decline Stage Innovations or shifts in consumer preferences cause an absolute decline in industry sales Industry profits fall -- sometimes become losses Firms cut prices in a bid for the dwindling market Manufacturers gradually drop the declining items from their product lines
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Extending the Product Life Cycle

Marketers usually try to expand each stage of the life cycle for their products as long as possible Product life cycles can stretch indefinitely as a result of decisions designed to: Increase the frequency of use by current customers Increase the number of users for the product Find new uses Change package sizes, labels, or product quality
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Product Deletion Decisions

Product lines must sometimes be pruned and marginal products eliminated This decision is typically faced during the late maturity and early declined stages of the product life cycle An unprofitable item may be continued in order to provide a complete line for customers
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Product Decisions

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Product Decisions

What are Goods and Services?

Classifying Goods and Services for Consumer and Business Markets

Types of Consumer Products

Types of Business Products

Quality as a Product Strategy

Development of Product Lines

The Product Mix

The Product Life Cycle

Extending the Product Life Cycle

Product Deletion Decisions

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