Product Strategy

1
APPLIED MARKETING MANAGEMENT
7
Product Strategy
2
Overview

• Product Strategy Considerations
• Defining Products
• The Role of Branding
• Product Life Cycle Considerations
• Distinguishing Between Goods and Services
• Assessing Quality

3
Product Strategy Considerations

• Have a clear understanding of the target market
  and the positioning objectives.
• Know what the product communicates to the market.
• Take a holistic view of current and potential
  competitor offerings.
• Determine the products role in providing
  satisfaction.

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The Product or Offering Is

• Anything that satisfies a need or want.
• The element of the firms marketing mix that is
  most responsible for meeting the needs and wants
  of its target markets.
• Evaluated on the relative degree of customer
  value it delivers.

5
Product Classification (1 of 3)

• Consumer Product Classifications
• Convenience Products
• Shopping Products
• Specialty Products
• Unsought Products

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Product Classification (2 of 3)

• Business Product Classifications
• Raw/Process Materials
• Component Parts
• MRO Supplies
• Accessory Equipment
• Installations (PPE)
• Business Services

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Product Classification (3 of 3)

• Product Lines and Mixes (within a BU)
• Product Line Group of related items
• Product Mix Set of product lines
• Benefits of offering a broad variety ( of
  product lines) and deep assortment ( of item in
  a line) of products
• Economies of Scale
• Package Uniformity
• Standardization
• Sales and Distribution Efficiency
• Equivalent Quality Beliefs

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Discussion Question

• In virtually every product category in the U.S.
  consumer market, consumers have many options to
  fulfill their needs.
• Are all of these options really necessary?
• When is having many choices a bad thing?

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Products Exist at 3 Levels Core, Actual and
Augmented
Channel services -- delivery, installation,
repair, training
Augmented Product
Warranty Financing
Packaging
Actual Product
Product features, brand and quality
Core Benefit
The need satisfied
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Brands

• Often legal, identify products through name,
  symbol or design.
• Convey price, quality and status info.
• Brand Images are influenced by a firms
  positioning activities and the degree of value
  customers perceive in its offerings.
• Are intended to simplify the purchase decision
  process.

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Advantages of Branding
Exhibit 7.4
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Branding Strategies

• None (generics)
• Private label / Retailer
• Lucerne, Kirkland
• Individual
• Tide, Gain, Mr. Clean
• Family
• DODGE Durango, Caravan, Neon
• Co-branding
• Eddie Bauer Explorer (SUV), Qwest Kyocera (Cell
  phone).

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The Worlds Twenty-FiveMost Valuable Brands
Exhibit 7.5
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Branding

• When well executed, branding moves users from
  recognition to preference to insistence.
• When not, problems arise.
• Pontiac Banshee, sporty car
• Banshee is a female spirit that wails outside a
  house indicating that a death will occur.
• Reebok Incubus, womens running shoe
• Incubus is a mythical demon who has sex with
  women in their sleep.
• Chevy Nova, car marketed in South America
• In Spanish, No va, means doesnt go.

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Branding Practices Examples from the Auto
Industry

• GM Never give up.
• Rides Oldsmobile into the grave. Buick to follow?
• Acura Copy the Germans.
• Eliminated the Legend, Vigor and Integra brand
  names in favor of the initials RL, TL and RSX.
• Ford Change is good.
• Aerostar, then Windstar, now Freestar minivans.
• Suzuki Branding broadly is better.
• The Forenza A Japanese car, designed in Italy,
  built in Korea (by GM-Daewoo) and sold in the USA
  by Suzuki.

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Product Life Cycle
Exhibit 7.2
17
Marketing Mix Strategies at Stages in the
Product Life Cycle
Exhibit 7.3
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New Product Development Motives

• Six product development options
• (1) New-to-the-world products (discontinuous
• innovations)
• (2) New product lines
• (3) Product line extensions
• (4) Improvements or revisions of existing
• products
• (5) Repositioning
• (6) Cost reductions
• Customer perception of differentiation is
  critical for success.

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New Product Development Process

• Idea generation
• Concept screening
• Product development
• Opportunity assessment
• Test market
• Roll out/Launch
• Follow-up

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Unique Characteristics of Servicesand Resulting
Marketing Challenges
Exhibit 7.6
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Good - Service Differences Intangibility

• Difficult for Customers to Evaluate.
• Firm Sells Promises to Perform.
• Difficult to Advertise and Display.
• Prices are Difficult to Set and Justify.

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Good - Service Differences Perishability

• Services cannot be inventoried.
• Unused capacity is lost forever.
• Demand is very time sensitive.
• Difficult to balance supply and demand.

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Good - Service Differences Simultaneous
Production Consumption

• Customers influence service quality (ATM).
• Employees are critical to service delivery.
• Training and motivation of employees is key to
  consistent service quality.
• Contact with humans is expensive.

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Good - Service DifferencesVariability
(Heterogeneity)

• Service quality is difficult to control.
• Service delivery is difficult to standardize.

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Evaluating Product Quality

• Performance
• Conformance
• Features
• Durability
• Reliability
• Serviceability
• Esthetics
• Perceived Quality

How well does the washing machine wash
clothes? How well will the SUV haul my 7,000 lb.
trailer? Does an airline flight offer a movie
and dinner? How long will the lawn mower
last? Will the restaurant be as good on my next
visit? How often will the TV be in the shop? Is
the product easy to repair? Is the service system
efficient, competent, and convenient? Do I like
the look/feel/sound/smell of the product? Is
this a brand that I identify with and can afford?
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Assessing Service Quality

• Tangibles
• Reliability
• Responsiveness
• Assurance
• Empathy

Appearance of physical facilities, equip.,
personnel, and communications materials. Ability
to perform the promised service dependably and
accurately. Willingness to help customers and
provide prompt service. Knowledge and courtesy of
employees and their ability to convey trust and
confidence. Caring about and understanding of
individual customers needs.
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Assessing Service QualityThe GAP Model
Word-of-mouth communications
Personal needs
Past experience
Expected service
Gap 5
Customer
Perceived service
External communication to consumers
Actual service delivered
Gap 1
Gap 3
Gap 4
Policies Procedures
Marketer
Gap 2
Mgmt. perceptions of consumer expectations