Topic 5: Product Flashcards
What is a product?
as anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need
Services
are a form of product that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.
Levels of products and services
The most basic level is the core customer value, which addresses the question: What is the buyer really buying? people who buy a Samsung Galaxy S7 Edge smartphone are buying more than a mobile phone, email device or camera. They are buying freedom and on-the-go connectivity to information, people and communities.
At the second level, product planners must turn the core benefit into an actual product. They need to develop product and service features, design, a quality level, a brand name and packaging. For example, the Samsung Galaxy S7 Edge is an actual product.
Finally, product planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits. The Galaxy S7 Edge provides consumers with a complete solution to mobile connectivity problems. Thus, when consumers buy a Galaxy S7 Edge, the company and its dealers also might give buyers a warranty on parts and workmanship, instructions on how to use the device, quick repair services when needed, and a toll-free telephone number and website to use if they have problems or questions.
Products and services fall into two broad classes based on the types of consumers that use them
consumer products and industrial products
company must consider four special service characteristics when designing marketing programs:
(1) intangibility,
(2) inseparability,
(3) variability and
(4) perishability
Service intangibility
means that services cannot be seen, tasted, felt, heard or smelled before they are bought
Service inseparability
means that services cannot be separated from their providers, whether the providers are people or machines
Service variability
means that the quality of services depends on who provides them, as well as when, where and how they are provided
Service perishability
means that services cannot be stored for later sale or use
The service–profit chain
which links service firm profits with employee and customer satisfaction.
service–profit chain consists of five links:
- Internal service quality, which results in …
- Satisfied and productive service employees, which results in …
- Greater service value,which results in …
- Satisfied and loyal customers, which results in …
- Healthy service profits and growth:
service marketing requires more than just traditional external marketing using the four, service marketing also requires
internal marketing and interactive marketing
. Internal marketing
means that the service firm must orient and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction.
Interactive marketing
means that service quality depends heavily on the quality of the buyer–seller interaction during the service encounter.
A business can obtain new products in two ways
One is through acquisition
The other is through the firm’s own new-product development efforts.
acquisition
by buying a whole company, a patent or a licence to produce someone else’s product
new-product development
By new products we mean original products, product improvements, product modifications and new brands that the business develops through its own research and development (R&D) efforts
The main steps in the new-product development process
Idea Generation Idea Screening Concept Development and Testing Marketing Strategy Development Business Analysis Product Development Test Marketing Commercialisation
Customer-centred new-product development
focuses on finding new ways to solve customers’ problems and create more customer-satisfying experiences.
team-based new-product development
Under this approach, company departments work closely together in cross-functional teams, overlapping the steps in the product-development process to both save time and increase effectiveness
Systematic new-product development
Finally, the new-product development process should be holistic and systematic
The product life cycle has five distinct stages
- Product development begins when the company finds and develops a new-product idea. During product development, sales are zero and the company’s investment costs mount.
- Introduction is a period of slow sales growth as the product is introduced in the market. Profits are non-existent in this stage because of the heavy expenses of product introduction.
- Growth is a period of rapid market acceptance and increasing profits.
- Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.
- Decline is the period when sales fall off and profits drop.
Strategies for Introduction stage
In this stage, as compared to other stages, profits are negative or low due to the combination of low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their inventories. Promotion spending is relatively high to inform consumers of the new product and get them to try it. Because the market is not generally ready for product refinements at this stage, the company and its few competitors produce basic versions of the product. These firms focus their selling on those buyers who are the most ready to buy.
market pioneer, must choose a launch strategy that is consistent with the intended product positioning. It should realise that the initial strategy is just the first step in a grander marketing plan for the product’s entire life cycle. If the market pioneer chooses its launch strategy to make a ‘killing’, it may be sacrificing long-run revenue for the sake of short-run gain. As the market pioneer moves through later stages of the life cycle, it must continuously formulate new pricing, promotion and other marketing strategies. It has the best chance of building and retaining market leadership if it chooses and implements the appropriate launch strategy correctly from the start.
Strategies for Growth Stage
Profits increase during the growth stage as promotion costs are spread over a large volume and as unit manufacturing costs fall. The firm uses several strategies to sustain rapid market growth for as long as possible. It improves product quality and adds new product features and models. It enters new market segments and new distribution channels. It shifts some advertising from building product awareness to building product conviction and purchase, and it lowers prices at the right time to attract more buyers.
In the growth stage, the firm faces a trade-off between high market share and high current profit. By investing in product improvement, promotion and distribution, the company can capture a dominant position. In doing so, however, it gives up maximum current profit, which it hopes to make up in the next stage.
Strategies for Maturity stage
should maintain an active product-management role, and consider modifying the market, product and marketing mix.
modifying the market, the company tries to increase consumption by finding new users and new market segments for its brands. For example, Lite n’ Easy is now reaching out to the elusive male market.
modifying the product – changing product characteristics, such as quality, features, style or packaging, to attract new users and to inspire more usage
modifying the marketing mix – improving sales by changing one or more of the marketing mix elements.
Strategies for Decline stage
management must decide whether to maintain, harvest or drop these declining products.
Management may decide to maintain its brand, repositioning or reinvigorating it in hopes of moving it back into the growth stage of the product life cycle.
Management may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, salesforce) and hoping that sales hold up. If successful, harvesting will increase the company’s profits in the short run.
or management may decide to drop the product from the line. It can sell it to another firm or simply liquidate the product at salvage value. If the company plans to find a buyer, it will not want to run down the product through harvesting.
