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PRODUCT SERVICE MGT 3.03
Understands the concepts and processes needed to obtain, develop, maintain, and improve a product or service mix in response to market opportunities
Employ product-mix strategies to meet customer expectations.
Explain the concept of product mix
Product Planning
How are decisions made to introduce new products and delete old ones?
What is Product Planning?
Product Planning: The decisions made about what features should be used in selling of a business’s products.
These decisions relate to:
packaging
labeling
warranties
guarantees
branding
product mix
Product Planning
Involves making decisions about those features that are needed to sell a business’s products, services, or ideas.
What is Product Planning? (cont.)
Product Mix: All the different products that a company makes or sells.
Product Line: A group of closely related products manufactured or sold by a business.
Product Item: A specific model, brand, or size of a product within a product line.
Product Width: The number of different product lines a business manufactures or sells.
Product Depth: The number of product items in a product line.
A well defined product plan allows a business to:
Create sales opportunities.
Design appropriate marketing programs.
Develop effective advertising campaigns.
Coordinate the product mix offered to customers.
Add new products.
Delete older products that no longer appeal to customers
What is Product Planning? (cont.)
4 P’s of the PRODUCT MIX
PRICE
PRODUCT
PLACE
PROMOTION
PRODUCT MIX
= all the types of products a company makes or sells. The particular assortment of goods and services that a business offers to meet the needs of its market(s) and its company goals.
Product Mix and Product Line
PRODUCT MIXThe set of all products offered
for sale by a company
PRODUCT MIXThe set of all products offered
for sale by a company
PRODUCT LINEA broad group of
products for similar usesand with similar characteristics
PRODUCT LINEA broad group of
products for similar usesand with similar characteristics
Product Mix
Includes all the different products that a company makes or sells.
Identify ways in which product lines can be organized.
Product Line = group of closely related products manufactured by a business
Product Item = specific model, brand, or size of a product within a line
Ex: P&G has over 250 products within 21 product lines
Dish care is a product line
Cascade, Dawn, Joy,
& Ivory are
product items
Describe product mix dimensions. Some companies have different brands
for different markets
Coca-Cola has different drinks for sparkling beverages, water, juice, performance, coffee, tea, and international flavors.
Product Line
A group of closely related products manufactured and/or sold by a business.
Product Item
A specific model, brand, or size of a product within a product line.
DIMENSIONS
WIDTH = number of product lines carried by a company.
NARROW = offering a limited number of product lines
BROAD = many different product lines carried
DEPTH = number of products and the assortment of sizes, colors, and models offered in a product line
SHALLOW = limited variety within a product line
DEEP = extensive variety within a product line
BREADTH The number of product lines carried
Product Mix
DEPTH
Varietyof
sizes, colors,
models within
a product
line
PRODUCT MIXPRODUCT MIX
Product Width
Oral Care
Blades & Razors
Personal Care
Batteries Appliances
Width of the Gillette Product Mix
The number of different product lines a business manufactures or sells.
Product Depth
Oral Care
Blades & Razors
Personal Care
Batteries Appliances
The number of product items offered within each product line.
NARROW PRODUCT MIX
= Limited product lines carried, typically very specialized. A description of the width of a business's product mix offering a limited number of product lines.
Broad Product Mix
= Many different product lines carried. A description of the width of a business's product mix offering many product lines.
Shallow Product Mix
= Limited variety within a product line. A description of the depth of a business's product mix offering few items in the product line.
Deep Product Mix
= Extensive variety within a product line. A description of the depth of a business's product mix offering a great many items in the product line.
Identify reasons that a business would offer a narrow product mix. Product Width – number of different product lines
CONTRACTING - Pruning weak brands can strengthen the remaining brands in the line.
Ease on management
Cost effective
Simplicity
Consistency
Identify reasons that a business would offer a broad product mix.
Product Width – number of different product lines
EXPANDINGReach all marketsCompetitive advantageEx: Red Lobster specializes in seafood, but offers
chicken and steak to broaden their product mix.
Identify reasons that a business would offer a deep product mix. Product Depth – number of items
offered within each product line
EXPANDINGVarietyQuantity
Ex: Kohl’s carries various quantities of sizes, colors, & styles of Levi Jeans.
Identify reasons that a business would offer a shallow product mix.
Product Depth – number of items offered within each product line
CONTRACTING
Cost effective
Satisfy small markets
Ex: Only 2 chicken items on Red Lobster’s menu.
REVIEW:
What are some key
product mix
strategies?
Product-Mix Strategies
Alteration of existing products
Alteration of existing products
ContractionContraction
Trading Up andTrading Down
Trading Up andTrading Down
ExpansionExpansion
Explain the importance of a business’s product mix.
Businesses must plan their product mix carefully because they cannot offer all the products that customers may want.
They should be a profitable market for product offered by a company
How do businessesdetermine which products to
produce and sell?
Businesses will use different product mix strategies to determine what to produce or sell.
Product mix strategies depend on:
Resources
Objectives
Past and current sales
Consumer trends
Product Mix Strategies
The plan for how the business determines which products it will make or stock
May develop completely new products
May expand or modify their current product lines
May drop existing products
EXPANSION
Developing New Products
Generating IdeasCome from a variety of sourcesCreativity is essential
Screening IdeasIdeas are evaluated and matched against the
company’s overall objectives.
Developing New Products (cont.)
Developing a Business Proposal
Consider a product’s potential sales, costs, and production requirements.
Developing the Product
The new idea takes physical shape
Marketers develop a marketing strategy.
Testing the Product with consumers
Developing New Products (cont.)
Introducing the ProductThe product has been researched
successfullyThis stage also is called
commercialization.
Evaluating Customer AcceptanceMarketers track new product
performance.
EXPANSION
ADVANTAGES Extend product
lifecycle
Adding items to a product line or introducing an entire product line can capture market share and meet customer’s needs and wants.
DISADVANTAGES Adding items to a
product line or introducing an entire product line can be expensive, be difficult to manage, and not always be successful.
Deleting a Product or Product Line
Obsolescence
Loss of appeal
Conflict with current company objectives
Replacement with new products
Lack of profit
Conflict with other products in the line
CONTRACTION
ADVANTAGES Cut losses
Reallocate resources to more profitable products
Deleting products from a product line or the entire product line can be cost effective and easier to manage while creating simplicity and consistency
DISADVANTAGES Deleting products from a
product line or the entire product line is conceding market share to your competitors.
It may be wiser to improve the existing product or line to recapture market share.
Describe alteration product-mix strategies.
Alteration of Existing Products: Making changes to meet customer
needs & wants
Improve an established product with new design, new package, new uses.
Ex: Jeep offering 4 doors
Developing Existing Products(ALTERATION)
Companies constantly review their product mix to see if they can further expand their product lines or modify existing products.
Two ways to do this:
Developing Existing Products (cont.)
Original Product
Newer Products
Line Extensions – new product lines, items, or services
Product Modifications – an alteration in a company’s existing product
Developing Existing Products (cont.)
ALTERATION
ADVANTAGES Improving an
established product can capture new customers and meet customer’s unmet wants as trends change. Ex: McDonald’s opening stores in India
DISADVANTAGES Improving an
established product is expensive and not always a success. Example: New Coke
Product Mix Strategies
Developing New Products
Follows seven steps:
Generate Ideas
Screen Ideas
Develop a Business Proposal
Test the product with consumers
Introduce the product
Evaluate customer acceptance
Product Mix Strategies (cont)
Developing Existing Products
Line Extensions: Adding new product lines, items or services.
Ex: Tylonol
Product Modifications: An alteration to an existing product:
New and different varieties
Formulations
Colors
Styles
Features
Sizes
Product Mix Strategies (cont)
Deleting a Product or Product Line
Obsolescence
Loss of Appeal
Changes in Company Objectives
Replacement with New Products
Lack of Profit
Conflict with other products in the line
Describe trading up / down product-mix strategies. Trading up: Adding a higher-priced
product to a line to attract a higher-income market and improve the sales of existing lower-priced products.
Trading down: Adding a lower-priced item to a line of prestige products to encourage purchases from people who cannot afford the higher-priced product, but want the status.
TRADING UP
ADVANTAGES Adding higher priced
items to a product line will attract the higher income market and may help increase the image and sales of the lower priced items.
DISADVANTAGES While sales may be generated for the new
product or line, sales of established products may decline.
If the business uses trading up to enhance its image, the business must be careful that present customers are not lost in the process of gaining new ones.
Customers may become confused as to what the company’s image is meant to be, or they may refuse to believe that better quality merchandise can be purchased from a business that had formerly sold budget goods.
Adding higher priced items to a product line is expensive and may not attract new customers while hurting the image and sales of the lower priced items.
TRADING DOWN
ADVANTAGES Adding lower priced
items to a product line of prestige products can capture a lower income market who cannot afford the higher priced items.
DISADVANTAGES Adding lower priced items to a product
line of prestige products can hurt the image and sales of the higher priced items in the line
Consumers may be confused about the new product or line.
Profits from the cheaper product may be eroded by reduced sales in the more expensive line.
Dealers may not be willing to add the lower priced product to their offering.
Competition may become stronger at the high end of the market.
Gaining short-term sales at the expense of long term sales
How are
products/services
positioned in the
market place?
POSITIONING is about bringing attention to products and DIFFERENTIATING them from similar ones.
Positioning the Product
COMPETITORCOMPETITORCOMPETITORCOMPETITOR
High price/high qualityor
low price
High price/high qualityor
low price
DifferentialadvantageDifferentialadvantage
Associated with attractive attribute
Associated with attractive attribute
PRODUCT CLASSPRODUCT CLASS OR ATTRIBUTEOR ATTRIBUTEPRODUCT CLASSPRODUCT CLASS OR ATTRIBUTEOR ATTRIBUTE
PRICE PRICE AND QUALITYAND QUALITY
PRICE PRICE AND QUALITYAND QUALITY
Product Positioning = the IMAGE a product projects
The goal is to set the product apart from the competition.
“The way you get into your customer’s mind.”
The efforts a business makes to identify, place, and sell its products.
Describe positioning product-mix strategies.
Positioning – is all about perception; actions marketers take to create a certain image of a product in the minds of the customers• In Relation to a Competitor
• In Relation to a Product Class or Attribute
• In Relation to a Target Market
• By Price and Quality
• Difficult to change
Product Positioning
Product positioning: Efforts a business makes to identify, place and sell its products in the marketplace.
Positioning by price and quality:
Ex: Ford Motor Company positions its Focus as an economical passenger car while still emphasizing quality.
Positioning by Price & Quality
Offer economy, mid-priced, and luxury lines
Product Positioning (cont)
Positioning by features and benefits:
Ex: Oil of Olay was positioned as a premium facial moisturizer and cleanser to keep skin soft and young.
Positioning by unique characteristics:
Ex: Cell phones that can text message or take pictures and send them.
Positioned by Features & Benefits
Unique characteristics
Product Positioning (cont)
Positioning in relation to the competition:
Ex: Warner-Lambert Company introduced Cool Mint Listerine by positioning against the “theraputic” benefits of Original Listerine and the “cosmetic” benefits of Scope.
Positioning in relation to other products in a line:
Ex: Binney & Smith introduced washable crayons and positioned them as a specialty item in the company’s Crayola crayon line.
Positioning inRelation to the Competition
Positioning in Relation to Other Products in a Line
POSITIONING STRATEGIES
ADVANTAGES Creating an identity
of a product helps find a place for the product in the marketplace while strongly identifying with a specific target market and possibly creating brand loyalty.
DISADVANTAGES Images of a product are
difficult to change once they are established and very expensive.
6 Steps to Successful Positioning
1. What position do you currently own?
2. What position do you want to own?
3. Whom you have to defeat to own the position you want.
4. Do you have the resources to do it?
5. Can you persist until you get there?
6. Are your tactics supporting the positioning objective you set?
