BK12e Ch11 Basic

Part 4: Product Decisions
11. Product and Service

Strategies
12. Category and Brand

Management, Product
Identification, and New-
Product Development
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Chapter 11
Product and
Service Strategies
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Chapter Objectives
1. Define the term product and distinguish between goods and
services and how they relate to the goods-services continuum.
2. Explain the importance of the service sector in today’s
marketplace.
3. List the classifications of consumer goods and services and
briefly describe each category.
4. Describe each of the types of business goods and services.
5. Explain how quality is used by marketers as a product
strategy.
6. Explain why firms develop lines of related products.
7. Describe the way marketers typically measure product mixes
and make product mix decisions.
8. Explain the concept of the product life cycle and identify the
different stages.
9. Describe how a firm can extend a product’s life cycle.
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 11-3
What is a Product?
 Product: bundle of physical, service, and
symbolic attributes designed to enhance
buyers’ want satisfaction
What are Goods and Services?
 Service: intangible task that satisfies
consumer or business user needs
 Goods-services continuum: device that
helps marketers to visualize the differences and
similarities between goods and services
 Characteristics that distinguish services from
goods:
Intangibility
Inseparability
Perishability
Difficulty of standardization
Frequent requirement of
interaction between buyer
and Seller
Variability
Importance of the Service Sector
 The service sector makes up more than two-

thirds of the economy.
 Services also play a crucial role in the

international competitiveness of U.S. firms.
 Concerns include offshoring service jobs such

as customer service call centers.
Classifying Goods and Services for
Consumer and Business Markets
 Consumer products:
products products destined for
use by ultimate consumers
 Business (or B2B) products:

products those that
contribute directly or indirectly to the output of
other products for resale
Also called industrial or organizational
products
Types of Consumer Products
 Convenience product:
product good or service that
consumers want to purchase frequently,
immediately, and with minimal effort
Impulse goods and services are
purchased on the spur of the moment.
Staples are convenience goods and services
that consumers constantly replenish to
maintain a ready inventory.
Emergency goods and services are bought
in response to unexpected and urgent
needs.
 Shopping product:
product good or service
purchased only after the customer compares
competing offerings from competing vendors
on such characteristics as price, quality, style,
and color
Typically cost more than convenience
purchases.
Include tangible items.
Shopper lacks complete information and
gathers information during the buying
process.
 Specialty product:
product good or service with
unique characteristics that cause the buyer to
value it and make a special effort to obtain it
 Unsought product:
product good or service
marketed to consumers who may not yet
recognized in the need for it
Types of Business Products
 Installation:
Installation major capital investment by a
business buyer that typically involves expensive
and relatively long-lived products, such as a
new factory or piece of heavy machinery
 Accessory equipment:
equipment capital product, usually
less expensive and shorter-lived that insulation,
such as a laptop computer
 Component parts and materials:

materials finished
business products that become parts of buying
firms’ final products, such as spark plugs for
new cars
 Raw materials:
materials business product, such as a
farm product (wheat, cotton, soybeans) or
natural product (coal, lumber, iron ore) that
become part of a final product
 Supplies:
Supplies products that represent regular
expenses necessary to carry out a firm’s daily
operations but are not part of the final product.
Supplies are sometimes called MRO items
MRO item:
item part of business supplies
categorized as maintenance items, repair
items, or operating supplies such as light
bulbs, nuts and bolts used in repairing
equipment, or pencils
 Business services:
services intangible product
purchased to facilitate a firm’s production
and operating processes such as financial
services, leasing of vehicles, legal advice
and consulting
Quality as a Product Strategy
 Quality is a key component to a firm’s success

in a competitive marketplace.
 Total quality management (TQM): approach

that involves all employees in continually
improving products and work processes to
achieve customer satisfaction and world-class
performance
 Worldwide Quality Programs
Malcolm Baldrige National Quality Award
ISO 9002: set of standards for quality
management and quality assurance
developed by the International Standards
Organization in Switzerland for countries in
the European Union
 Benchmarking: process in which an

organization improves performance by
continually comparing and measuring itself
against the leading firms in an industry and
implementing changes for quality
improvement
 Quality of Services
Service encounter
Service quality: Expected and perceived
quality of a service offering
Determined by five variables:
 Tangibles
 Reliability
 Responsiveness
 Assurances
 Empathy
Development of Product Lines
 Product Line:
Line a series of related products
Motivation
 Desire to Grow
 Enhancing the Company’s Position in
the Market
 Optimal Use of Company Resources
 Exploit the Product Life Cycle
The Product Mix
 A company’s assortment of product lines and
individual offerings
Product Width--the number of product lines
offered.
Product Length--the number of different

products a firm sells.
Product Depth--variations in each product that

a firm markets in its mix.
 Product Mix Decisions
A firm may lengthen or widen its product
mix
A Company may decide to add variations
that will attract new users
A product may be pruned or altered, and
new product may extend the product life
cycle
Line extension: introduction of a new
product that is closely related to other
products in the firm’s existing line
The Product Life Cycle
 Product life cycle:
cycle progression of products
through introduction, growth, maturity, and
decline stages
 Introduction Stage
Firm works to stimulate demand for the
new market entry
Promotional campaigns stress features
Additional promotions to intermediaries
attempt to induce them to carry the product
Although prices are typically high, financial
losses are common due to heavy
promotional and research-and-
development costs
 Growth Stage
Sales volume rises rapidly
Firm usually begins to realize substantial
profits
Success attracts competitors
Firm may need to make improvements to
the product
Additional spending on promotion and
distribution may be necessary
 Maturity Stage
Industry sales continue to grow, but
eventually reach a plateau
Many competitors have entered the
market, and profits began to decline
Differences between competing products
diminish
Available supplies exceed industry demand
for the first time
Competition intensifies and heavy
promotional outlays are common
 Decline Stage
Innovations or shifts in consumer
preferences cause an absolute decline in
industry sales
Industry profits fall -- sometimes become
losses
Firms cut prices in a bid for the dwindling
market
Manufacturers gradually drop the declining
items from their product lines
Extending the Product Life Cycle
 Marketers usually try to expand each stage of the
life cycle for their products as long as possible
 Product life cycles can stretch indefinitely as a
result of decisions designed to:
Increase the frequency of use by current
customers
Increase the number of users for the
product
Find new uses
Change package sizes, labels, or product
quality
Product Deletion Decisions
 Product lines must sometimes be pruned and

marginal products eliminated
 This decision is typically faced during the late
maturity and early declined stages of the
product life cycle
 An unprofitable item may be continued in
order to provide a complete line for
customers

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Part 4: Product Decisions

11. Product and Service

12. Category and Brand

 The service sector makes up more than two-

 Services also play a crucial role in the

 Concerns include offshoring service jobs such

 Business (or B2B) products:

 Component parts and materials:

 Quality is a key component to a firm’s success

 Total quality management (TQM): approach

 Benchmarking: process in which an

Product Length--the number of different

Product Depth--variations in each product that

 Product lines must sometimes be pruned and

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