Strategic decisions to be made in the marketing plan, the design, development, branding, and positioning of the product are perhaps the most critical. Product-something that buyers can acquire via exchange to satisfy a need or a want (food, entertainment, information, people, places, ideas, etc.) Products are not created and sold as individual elements; rather than products are developed and sold as offerings. Organization’s product offering is composed of tangible goods, services, ideas, images, or even people. Due to complexity, we prefer to discuss products as offerings, or the bundle of physical (tangible), service (intangible), and symbolic (perceptual attributes) designed to satisfy customers’ needs and wants. Organizations strive to enhance the service and symbolic elements. Focusing primarily on the intangible aspects of a product, not on its tangible or physical elements. Product Strategy needs to be fully integrated with pricing, distribution, and promotion, as these components of the marketing program add value to the product offering. Product offerings in and of themselves have little value to customers. Rather, an offering’s real value comes from its ability to deliver benefits that enhance a customer’s situation or solve a customer’s problems.
The Product Portfolio
Products purchased for personal use and enjoyment are called consumer products, whereas those purchased for resale, to make other products, or for use in a firm’s operations are called business products. Marketing strategy for consumer convenience products must max availability and ease of purchase-both important distribution considerations. The strategy associated with consumer shopping products often focuses more on differentiation through image and symbolic attributes-both important branding and promotion issues. For commodities such as raw materials conformance to exacting product specifications and low acquisition costs are the keys to effective strategy. Many business products are also characterized by derived demand, where demand of product is derived from the demand for other business or consumer products. The products sold by a firm can be described with respect to product lines and product mixes. A product line consists of a group of closely related product items. Most companies sell a variety of different product lines. A firms product mix or portfolio is the total group of products offered by the company.
Types of Consumer and Business Products
Convenience Products-inexpensive, routinely purchased products that consumers spend little time and effort in acquiring. Ex: Soft Drinks, Candy and Gum, Gasoline
Shopping Products-products that consumers will spend time and effort to obtain. Consumers shop different options to compare prices, features, and service. Ex: Dry cleaning, appliances, furniture, clothing, and vacations
Specialty Products-unique, one-of-a-kind products that consumers will spend considerable time, effort, and money to acquire. Ex: sports memorabilia, antiques, plastic surgery, luxury items
Unsought products-products that consumers are unaware of….
Important decision is the number of product lines to offer, referred to as the width or variety of the product mix. By offering a wide variety of product lines, the firm can diversify its risk across a portfolio of product offerings. Assortment-product line depth is an important marketing tool. Firms can attract a wide range of customers and market segments by offering a deep assortment of products in a specific line
- Economies of scale-offering many different product lines can create economies of scale in production, bulk buying, and promotion. Many use umbrella theme.
- Package uniformity-customers can locate the firms products more quickly. Also becomes easier for the firm to coordinate and integrate promotion and distribution.
- Standardization-same component parts
- Sales and Distribution Efficiency-firm offers many different product lines, sales personnel can offer a full range of choices and options to customers. Channel intermediaries are more accepting of a product line than they are of individual products.
- Equivalent Quality Beliefs-Customers typically expect and believe that all products in a product line are about equal in terms of quality and performance.
The Challenges of Service Products
Products can be intangible services and ideas as well as tangible goods. All firms develop and implement marketing strategies designed to match their portfolio of intangible products to the needs of target markets. Intangible services face unique challenges in developing marketing strategy. Services cannot be stored for future use. The demand for services is extremely time-and-place dependent because customers must typically be present for service to be delivered. Due to intangibility of service, it is quite difficult for customers to evaluate a service before they actually purchase and consume it. Customers can ask friends and family for recommendations. Some service companies provide satisfaction guarantees to customers.
Unique Characteristics of Services and Resulting Marketing Challenges
It is difficult for customers to evaluate quality, especially before purchase and consumption.
It is difficult to convey service characteristics and benefits in promotion. As a result, the firm is forced to sell a promise. Many services have few standardized units of measurement. Therefore, service prices are difficult to set and justify. Customers cannot take possession of a service.
Simultaneous Production and Consumption
Customers or their possessions must be present during service delivery.
Other customers can affect service outcomes including service quality and customer satisfaction. Service employees are critical because they must interact wit customers to deliver service. Converting high-contact services to low-contact services will lower costs but may reduce service quality. Services are often difficult to distribute.
Services cannot be inventoried for later use. Therefore, unused service capacity is lost overview. Service demand is very time-and-place sensitive. As a result, it is difficult to balance supply and demand, especially during periods of off-peak demand. Heterogeneity
Service quality varies across people, time, and place, making it very difficult to deliver good service consistently.
There are limited opportunities to standardize service delivery.
Many services are customizable by nature. However, customization can dramatically increase the costs of providing the service.
Most services live or die by maintaining a satisfied clientele over the long term. Generating repeat business is crucial for the service frim’s success.
New Product Development +
Market characteristics and competitive situations will affect the sales potential of new products (GPS units now sold in cars, on phones, etc)
-Some firms base new product introductions on a product/ technological superiority, some minor tweak existing products
-New-to-the world products (discontinuous innovations)- creation of entirely new market; radical thinking by entrepreneur; Ex: Fred Smith’s idea for overnight packaging (UPS)
-New product lines- new offerings to the firm, but in established markets; Dells move to flat screens; not as risky as innovation
-Product line extensions- existing product line with new styles, models, features, and flavors; Budweiser’s introduction of Bud Light Lime; allow company to keep products fresh with minimal costs and risks
-Improvements or revisions of existing products- products that offer improved performance or greater perceived value; “new and improved”; anti-allergen or shampoo plus conditioner
-Repositioning- targeting existing products at new markets or segments; Carnival Cruise effort to attract senior citizens
-Cost reductions- modifying products to offer performance similar to competing products but at a lower price; convert hard cover to paper back
-First two options are most effective and profitable when firm wants to significantly differentiate its product
-Key to success is to create a differential advantage
-Customer perceptions are what matters in many cases
-Process of developing new products:
-Idea generation- ideas can be obtained from customers, employees, research, competitors, and supply chain partners
-screening and evaluation- ideas are screened for match with firms capabilities and ability to meet customers needs and wants
-development- product specifications are set, design is finalized, and initial production begins; full marketing plan is developed in order to acquire the resources and collaboration needed for full scale launch
-test marketing in real or simulated situations to determine performance
-commercialization- launched with complete marketing program
Strategic Issues in Branding Strategies +
-Branding makes the customer buying process more efficient because customers can locate and purchase products more easily
-Manufacturer vs. private-label brands: private label brands (store brands) range from well known products (Gap) to other products (Wal-Mart)
-both types of brands have key advantages- many stores carry both
-Brand loyalty- positive attitude toward a brand that causes customers to have a consistent preference for that brand over all other competing brands in a product category
-brand recognition- customer knows about a brand and is considering it as an alternative in evoked set; lowest form of brand loyalty
-brand preference- customer prefers one brand to competitive brands and will usually purchase this brand if it is available; customer has brand preference for Diet Coke but if unavailable will accept a substitute
-brand insistence- customer will go out of their way to find the brand and will accept no substitute; will drive far to get product
-Many products categories had brand loyal customers (especially products put on their bodies)
-Brand equity- the value of a brand; has ties to brand name awareness, brand loyalty, and other attributes; hard to measure but key asset for the firm; brand awareness and loyalty increase customer familiarity with a brand
-Brand alliances- relationships with other firms are among the most important competitive advantages that can be held by an organization; co-branding- leverages the brand equity of multiple brands to create distinct products with distinctive differentiation; ex: Hersheys and Betty Crocker
-brand licensing- contractual agreement where company permits an organization to use its brand on non competing products in exchange for licensing fee
-brand misidentification- Xerox, Band-Aid
Packaging and Labeling +
-color used is vital part of branding, size and shape of label
-packaging is important: protection, storage, convenience
-sometimes change in packaging can create major problem for the brand
-labels- product identification and promotion and contain valuable information
Differentiation Strategies +
-differences among brands can be based on real qualities or psychological qualities
-product features: factual descriptors of the product and its characteristics
-not what get the customer to buy
-Advantages- performance characteristics that communicate how the features make the product behave
-benefits- positive outcomes they acquire from purchased products
-Customer Support services- providing good customer support may be only way to differentiate products
-EX: many bookstores have gone out of business because of Barnes and Noble, ones that stay alive are due to good customer service
-assistance in customer needs, delivery, technical support, training, parking
-Image- overall impression (positive or negative) that customers have of it
-reality is not as important as perception
-can be lost over time
Positioning Strategies +
-Strengthen the Current Position- monitor constantly what target customers want and the extent to which customers perceive the product as satisfying those wants
-ex: firm known for good customer service must continue to invest time/money (Ritz Carlton)
-must constantly raise the bar of customer expectations
-Repositioning- fundamental change in any of the marketing mix elements
-Ex- its not just for breakfast anymore- OJ
-Reposition the competition- put competitors in less favorable light or force competitor to change positioning strategy
-Ex- Coke vs. Pepsi