Lesson 8 - Product and Service

8.1 Introduction

In this lesson, we look at how companies develop and manage products and
services. The product is usually the first and most basic marketing consideration. 

Product and Product Management is the process of working with designers and
developers to successfully build and launch digital products. In this class, we
introduce you to the key product management concepts. Learn how to analyze the
market, flesh out your ideas, identify risks, and validate assumptions. We’ll also
touch on the post-launch process of tracking performance, prioritizing development
of new features, and managing stakeholders.

We will also talk about services. Service is the action of doing something for
someone or something. It is largely intangible (i.e. not material), you cannot touch it,
you cannot see it, you cannot taste it, you cannot hear it, you cannot feel it.

Product characteristics and classifications.

Product classifications help marketers focus their efforts using consumers’ buying
behavior. Your business can use these buying habits to design your marketing
efforts for a clearly defined target audience. Although these classifications are
named as types of products, focusing on how your customers buy these goods is
equally important as you classify products and develop your marketing campaigns.

Product differentiation

How do you differentiate your services from that of the competition? It’s easier in
products where the variables are tangibles but quite different in case of services.
When the physical product cannot be differentiated easily, the key to competitive
success may lie in adding valued services and improving their quality. This is the
outlook of service differentiation.

The main factors which can be used for service differentiation are:

1. Ordering ease: Refers to how easy it is for you to place an order with the
company. Baxter Healthcare has eased the ordering process by supplying hospitals
with computer through which they send orders directly to Baxter; consumers can
now order and receive groceries without going to the supermarket through web-
based service such as peapod and net grocer. Thus these services have
differentiated themselves through ease of ordering.

2. Delivery: It is related to how well the product or service is delivered to the

customer, covering speed, accuracy and customer care. Deluxe Check Printer Inc.
has built an impressive reputation for shipping out its checks one day after receiving
an order- without being late once in 18 years.
3. Installation: refers to the work done to make a product operational in its planned
location. Buyers of heavy equipment expect good installation service. Differentiation
by installation is particularly important for companies that offer complex products
such as computers.

4. Customer training: refers to how the customer’s employees are trained to use

the vendor’s equipment properly and efficiently. General Electric not only sells and
installs expensive X-rays equipment in hospitals, but also gives extensive training to
users of this equipment.

5. Customer consulting refers to data, information system and advising services

that the seller offers to buyers. For example, the Rite Aid drugstore chain’s
communications program, called the Vitamin Institute, provide customers with
research so they can make more educated judgments and feel comfortable asking
for help. On the Web, Rite Aid has teamed with drugstore.com to offer even more
health-related information.

6. Maintenance and repair: describes the service program for helping customers
keep purchasing products in good working order, an important consideration for
many products

Product and brand relationships

Product Mix.

An organisation's product line is a group of closely related products that are

considered a unit because of marketing, technical or end-use considerations. In
order to analyse each product line, product- line managers need to know two factors.
These are:

i. Sales and profits

ii. Market profile

A product mix or assortment is the set of all products and items that a particular
seller offers for sale. A company’s product-mix has some attributes such as:

Product-Line Length:

Product-line managers are concerned with length of product line. If adding items to
the product line can increase profits, then we can say that the product line is too
short. On the contrary, the line is too long if dropping items can increase profits.
They have to consider these two extremes of the product line and have to strike a
balance between them.

Company objectives influence product-line length. Companies seeking high market

share and market growth will carry longer lines. Companies that emphasise high
profitability will carry shorter lines consisting of carefully chosen items.
A company can lengthen its product line in 2 ways viz. a) line stretching and b) line
filling.

Line Stretching:

This occurs when a company lengthens its product line beyond its current range.
This is a frequent measure taken by companies to enter new price slots and to cater
to new market segments. The product may be stretched by the addition of new
models, sizes, variants etc. The company can stretch in 3 ways:

1. Down-market stretch:

A company positioned in the upper market may want to introduce a lower price line.
They offer the product in the same product line for the lower end markets. A
company can take this strategy for 3 reasons:

i. Strong growth opportunities in the down-market

ii. Tie-up lower-end competitors who might try to move up-market

iii. Stagnating or declining middle market

The company has 3 choices in naming its down-market products.

i. Same name

ii. Sub-brand name:

iii. Different name:

ii. Up-market stretch:

Companies may wish to enter the high end of the market for more growth, higher
margins or simply to position themselves as full-line manufacturers. So they offer the
products in the same product line and cover the upper end market.

iii. Two-way stretch:

Companies serving the middle market may decide to stretch their line in both
directions.

a) Line filling:

As the name implies, filling means adding a product to fill a gap in the existing line.
The company wants to portray itself as full line company and that customers do not
go to competitors for offers or models in particular price slots. There are several
motives of line filling as follows:

i) Reaching for incremental profits

ii) Trying to satisfy dealers who complain about lost sales because of missing items
in the line

iii) Trying to utilise the excess capacity

iv) Trying to be the leading full-line company

v) Trying to plug holes in the product-line to keep out the competitors

 Packaging, Labeling and Warrenties

Whether you’re getting ready to create packaging for a product you’re selling or
you’re considering changing the packaging of an existing product, you may be
wondering if the appearance of a product’s package is important. Many product
providers may think that the product and its performance is more important than
what the packaging looks like, but the product packaging can play a role in the
success or failure of the sales of the product.

Services

A service is the action of doing something for someone or something. It is largely

intangible (i.e. not material). You cannot touch it. You cannot see it. You cannot taste
it. You cannot hear it. You cannot feel it. So a service context creates its own series
of challenges for the marketing manager since he or she must communicate the
benefits of a service by drawing parallels with imagery and ideas that are more
tangible.

Search quality is the perception in the mind of the consumer of the quality of

the product prior to purchase through making a series of searches. So this is simple
in relation to a tangible product because you might look at size or colour for example.
Therefore search quality relates more to products
and services.

Experience quality is easier to assess. In terms of service you need to taste the food
or experience the service level. Therefore your experiences allow you to evaluate the
level and nature of the service. You remember a great vacation because of the food
or service, but by the same token you remember an awful vacation because of the
hopeless food or poor service.

Credence quality is based upon the credibility of the service that you undertake. This
is down to the reputation of a dentist or of a decorator. Credence is used where you
have little knowledge of the topic and where you rely upon the professionalism of the
expert.

Perishable

Perishable – in that once it has occurred it cannot be repeated in exactly the same
way.

Variable
Variability- since the human involvement in service provision means that no two
services will be completely identical, they are variable.

Homogeneous

Homogeneity is where services are largely the same (the opposite of variability
above).

Inseparable

Inseparable – from the point where it is consumed, and from the provider of the
service.

Intangible

Intangible – cannot have a real, physical presence as does a product.

The new service realities

Service firms once lagged behind manufactures in their understanding and use of
marketing because they were small or they faced large demand or little competition.

The new realities are:

- Customer empowerment.

- Customer co-production

- Satisfying employees as well as customers

Excellence in service marketing

Services marketing strategy focuses on delivering processes, experiences, and

intangibles to customers rather than physical goods and transactions. It involves
integrating a focus on the customer throughout the firm and across all functions. All
company functions – marketing, selling, human resources, operations, and R&D –
must work together to create effective services marketing strategy. Rather than the
traditional goods marketing focus on transactions and exchange, services marketing
strategy is centered on the customer, usage, and relationships.