Product and Services Management
Products can be tangible or intangible, tangible products often refer to products and intangible products are often services. Every product has marketing activities which consist of decisions about distribution channels, the price and promotion. The product is always the starting point.
Until 1930 competitive advantage was about the price (quantity) of homogeneous products. After 1930 it was more about differentiation and therefore heterogeneous products (quality and choice).
Product levels (defined by Levitt):
Core benefit (main benefit for the customers; for instance buying a car for ‘transportation’)
Basic product (the products basic attributes or characteristics; for instance tyres of a vehicle)
Expected product (products characteristics taken for granted; for instance the good condition of tyres)
Augmented product (product characteristics that exceed expectations; for instance road assistance)
Potential product (product characteristics that could be added later and offer customer enrapture)
Product hierarchy (defined by Kotler):
Need family (the presence of a product family as a basic need; for instance safety)
Product family (product classes that can gratify basic needs efficient; for instance savings and income)
Product class or category (inside a product family a group of products; for instance investment products)
Product line (closely related group of products inside a product class; for instance investment accounts)
Product type (group of items that operate in a similar way inside a product line; for instance capital guaranteed accounts)
Other categories are brand (the name of product) and an item which is a unit inside a brand or product line but is differentiated by size, price, etc.
Products should be managed at all levels.
Product life cycle (PLC)
PLC consists of four stages (see figure 1.1 page 5), each stage has marketing implications for marketing actions.
Sales grow slowly but there are expenses involved in communicating, etc. Therefore profits aren’t high in this stage, despite the high prices. Four strategies can be determined from which management has to select. The variables for those strategies are promotion and price, if they are both high a high profile strategy should be followed. On the other hand if they are both low a low profile strategy should be followed, the other two strategies are selective penetration strategy and pre-emptive penetration strategy (see figure 1.2 page 5). The basic factors management should consider in selecting any of those strategies are market size, market awareness of the product, price sensitivity in market, type and nature of competition in the market and company’s cost structure.
The profits increase and management should focus on best-selling versions (improvement, elimination unnecessary specifications, etc.)
Maturity stage (longest stage):
Market acceptance and expectation of competition entering the market. Management should change tangible and intangible characteristics that will attract new users and/or more usage from current users. The product should as well change features of quality to improve the product and reduce costs. Also the price should be reduced (lower profits) and attention of customers must be gathered by promotions, deals and contests.
Product stops to be profitable, due to new technologically advanced products or changes in buyer’s economic environment and habits. Management should eliminate the product or a few items (different versions for example). It could also adopt a concentration strategy in which it concentrates resources on strongest market, a milking strategy in which it strongly reduces expenditures for marketing to increase profits (as ultimate also death of product) or if a hard-core loyalty remains strong, the product can stay with high price and thus high profits.
Product positioning (perceived position of a product in the customer’s mind)
Perceptual maps can be developed which uses data about the perceptions of customers about products. Those maps make use of multidimensional scaling techniques. There are some implications relating to perceptual mapping:
Identification of important attributes (to evaluate a specific product class)
Identification of close substitutes-main competitors (which brands perceived as similar?)
Identification of differentiated brand (which brands perceived as different?)
Market segmentation (based on desired combinations)
Identification of gaps in the market new product opportunities (when no product is in a box)
An example of a perceptual map is for instance about car brands positioning with the attributes price and sporty looking (see figure 1.3 page 8).
Companies can create a position in the minds of customers of their product by following positioning strategies:
Attributes (specific for a product)
Competitor (by differentiating)
Application (product use)
Product user (segmentation is important)
Product class (a differentiated product class)
Hybrid positioning (use more than one of the strategies)
If competition in market is intense those strategies has to be made more carefully.
The following mistakes can be made by positioning:
Underpositioning: differences between brands of the company and competitors aren’t understood by customers
Overpositioning: the brand has in the eyes of the buyers a narrow image
Confused positioning: usually because of many different communication posts or changes in positioning strategies (due to changes in competitors activities, customer needs and wants or the environment, for example legislation)
Doubtful positioning: doubt about receivables of products in view of the price of the products, the distribution, features, etc.
In existing customers, for instance to be more modern a change in the packaging of a product
In new customers, for instance energy drink what was first a child’s health drink
A company depositions if it stresses negative points of competitors so that they receive a worse position.
Six categories of innovating products
New to the world products (new market creation)
New product lines (not new to market but only for the company)
Additions to existing product lines (new products added to product line that already exists)
Revisions/improvements to existing product lines (existing products of a company are substituted)
Repositionings (a new target market for existing products of a company)
Cost reductions (existing products substituted with the same benefits, but the costs are lower)
Wheelwright and Clark proposed a typology of a development project or map, dependent on two dimensions which are the amount of change of the product and the amount of change of manufacturing process), five types are developed:
Breakthrough projects: a high amount of change to already existing products and processes, the new technologies or materials are radical and need a revolutionary manufacturing process
Platform projects: new product lines created; focus on product-market differentiation
Derivative projects: the changes are incremental (product and process perspective), for instance lowering costs
Research and advanced development projects: these projects not within development map, it’s about creating know-how and know-why of new materials and technologies
Alliances and partnership projects: also not within development map, can be made to chase all kinds of projects
Crawford described three types of innovation:
Pioneering that addresses first-to-market products
Adaption for improving the product
Imitation or emulation that addresses me-too products
Service innovativeness categories:
New to the market services
New tot the company services
New delivery processes
Service line extensions
The first ones are more innovative than the latter ones (see figure 1.4 page 12).
Product classification schemes
Different sorts of products are aiming at different target markets, because of that products have to be classified in classification schemes. The schemes are based on the following three basic characteristics:
Tangible goods often refers to goods (for example Japanese restaurant and a motorcycle) and intangibles often refer to services (for example also a Japanese restaurant and a car repair). Services and goods have three characteristics that distinct them from each other:
Inseparability of service: production and consumption is happening at the same time
Heterogeneity of service: services are different from each other depending on the person who provides the service
Perishability of service: a service can’t last forever
Durable products can gratify a need for a long time (for instance a washing machine). On the other hand non-durable products serve a certain need for one time only (for instance water)
Product use (B2C and B2B classification)
Types of consumer products (see table 1.1 page 15):
Convenience goods: customers don’t want to make too much time or money available for those goods and they feel little risk for making a decision about which product to choose. Examples of those products are umbrellas, batteries etc. For industrial users raw materials or supplies are an example. Buyer behaviour is impulse or habit and marketer’s objective is move to preference, or shopping, or dominate via low cost.
Shopping goods: customer do want to make a significant amount of time and money available and here they feel an increase level or risks for making a decision about which product to choose. Examples of those products are vehicles, clothing, furniture, etc. For industrial users equipment and component parts are an example. Buyer behaviour is limited and marketer’s objective is source or store loyalty.
Specialty goods: those goods are unique and therefore need special efforts at the time and money perspective. Examples of those products are rare vintage, imported wines, expensive sport cars, etc. For industrial users installation of buildings is an example. Buyer behaviour is extensive and marketer’s objective is source and brand loyalty.
Preference goods: those goods have low shopping effort, low ego involvement but high brand preference. Buyer behaviour is routine and marketer’s objective is brand loyalty.
Types of industrial products:
Entering goods: raw materials and manufactured materials and parts. The raw materials can be divided in farm products (for instance fruit) or natural products (for instance oil). Manufactured materials and parts can be divided in component materials (processed further; for instance cement) and component parts (no further change; for instance batteries).
Foundation goods: these facilitate the development and management of the finished goods, so these goods are for the long-term. It can be divided in installations (major purchases and comprise buildings) and equipment. Equipment can again be divided in portable factory equipment and tools (for instance lift trucks) and office equipment (for instance notebooks or desks).
Facilitating goods: those goods are supplies (which can be divided in operating supplies, for instance stationary, and maintenance and repair, for instance nails) and business services (which can also be divided, into maintenance and repair services, for instance photocopier repair and business advisory services, for instance accountancy, legal).
Industrial goods can also be classified in the following types:
Proprietary of catalogue products
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