PRODUCT AND SERVICE

STRATEGY
TOPIC 6
Learning Objectives

1.1 Define product and describe the major classifications of products and services.
1.2 List and define the steps in the new product development process and the major
considerations in managing this process
1.3 Describe the stages of the product life cycle and how marketing strategies change during a
product’s life cycle.
1.4 Discuss branding strategy—the decisions companies make in building and managing their
brands.
Learning Objectives 1.1

1.1 Define product and describe the major classifications

of products and services.
What is Product?

 Product is anything that can be offered in a market for

attention, acquisition, use, or consumption that might
satisfy a need or want.
 Service is a product that consists of activities, benefits, or
satisfactions and that is essentially intangible and does not
result in the ownership of anything.
 What Is a Product?

Levels of
Product and
Services
 What Is a Product?

Level 1 Level 2 Level 3

Core Product Actual Product Augmented Product
The core level stands for the main The actual product turns the core Additional service provided by
benefit a product delivers and is the product into a perceivable set of manufacturer which comes along
core function of the product. characteristics. Product planners with the product
need to develop product and service
features, a design, a quality level, a
brand name, and packaging

Example: when a customer buys a The physical feature and The extended product features and
dreamland double bed, he/she is not characteristics of a dreamland attributes, for a dreamland double
only buying the bed but is buying a double bed include high quality bed include : two year warranty, free
‘comfortable night’s sleep’ made, modern design, durable and delivery and installation, options for
the well known brand name an instalment payment and free
pillow gift
ACTIVITY 1

Provide examples
of core, actual and
augmented
product
What Is a Product?

Product and Service Classifications

 Consumer products
 Industrial products
Product and Service Classifications

 Consumer products are products and services bought

by final consumers for personal consumption.
‒ Convenience products
‒ Shopping products
‒ Specialty products
‒ Unsought products
Product and Service Classifications

Marketing Type of Consumer Type of Consumer Type of Consumer Type of Consumer

Considerations Product Product Product Product
Convenience Shopping Specialty Unsought

Customer Frequent Less frequent Strong brand Little product

buying purchase; little purchase; much preference and awareness or
behavior planning, little planning and loyalty; special knowledge (or, if
comparison or shopping effort; purchase effort; aware, little or
shopping effort; comparison of little comparison of even negative
low brands on price, brands; low price interest)
Customer quality, and style sensitivity
involvement

Price Low price Higher price High price Varies

Product and Service Classifications

Marketing Type of Consumer Type of Consumer Type of Consumer Type of Consumer

Considerations Product Product Product Product
Convenience Shopping Specialty Unsought
Distribution Widespread Selective Exclusive Varies
distribution; distribution in fewer distribution in only
Convenient outlets one or a few
locations outlets per market
area
Promotion Mass promotion Advertising and More carefully Aggressive
by the producer personal selling by targeted advertising and
both the producer promotion by both personal selling by
and resellers the producer and the producer and
resellers resellers
Examples Toothpaste, Major appliances, Luxury goods, such Life insurance and
magazines, and televisions, furniture, as Rolex watches Red Cross blood
laundry detergent and clothing or fine crystal donations
Product and Service Classifications

Product and Service Classifications

 Convenience products are consumer products and
services that the customer usually buys frequently,
immediately, and with a minimum comparison and
buying effort.
‒ Newspapers
‒ Candy
‒ Fast food
Product and Service Classifications

Product and Service Classifications

 Shopping products are less frequently purchased
consumer products and services that the customer
compares carefully on suitability, quality, price, and
style.
‒ Furniture
‒ Cars
‒ Appliances
 Product and Service Classifications

Product and Service Classifications

 Specialty products are consumer products and services with
unique characteristics or brand identification for which a
significant group of buyers is willing to make a special purchase
effort.
‒ Medical services
‒ Designer clothes
‒ High-end electronics
Product and Service Classifications

Product and Service Classifications

 Unsought products are consumer products that the
consumer does not know about or knows about but
does not normally think of buying.
‒ Life insurance
‒ Funeral services
‒ Blood donations
Activity 2

Short Answer question:

Explain the four product classifications and
provide example for each. (8 marks)
Learning Objectives 1.2

1.2 List and define the steps in the new product development
process and the major considerations in managing this process
New Product Development Strategy

Ways to Obtain New Products

 Acquisition refers to the buying of a whole company, a
patent, or a license to produce someone else’s product.
 New product development refers to original products,
product improvements, product modifications, and
new brands developed from the firm’s own research
and development.
Step in New Product Development
New Product Development Process

Idea Generation
 Internal sources refer to the company’s own formal
research and development, management and staff,
and intrapreneurial programs.
 External sources refer to sources outside the company
such as customers, competitors, distributors, suppliers,
and outside design firms.
 New Product Development
Process

Idea Generation
 Crowdsourcing involves inviting broad communities of
people—customers, employees, independent scientists
and researchers, and even the public at large—into the
new product innovation process.
 New Product Development
Process

Idea Screening
 Identify good ideas and drop poor ideas
 R-W-W screening framework:
 Is it real?
 Can we win?
 Is it worth doing?
 New Product Development
Process

Concept Development and Testing

 Product idea is an idea for a possible product that the
company can see itself offering to the market.
 Product concept is a detailed version of the idea stated
in meaningful consumer terms.
 Product image is the way consumers perceive an
actual or potential product.
 New Product Development
Process
Concept Development
and Testing
 Concept testing refers
to testing new product
concepts with groups
of target consumers.
 New Product Development
Process

 Marketing Strategy Development

 Marketing strategy development is designing an initial
marketing strategy for a new product based on the
product concept.
 Marketing strategy statement consists of:
‒ Target market description
‒ Value proposition planned
‒ Sales, market-share, and marketing mix
 New Product Development
Process

Business Analysis
 Business analysis is a review of the sales, costs, and
profit projections for a new product to find out whether
these factors satisfy the company’s objectives.
 New Product Development
Process
Product Development
 Product development is
developing the
product concept into a
physical product to
ensure that the
product idea can be
turned into a workable
market offering.
 New Product Development
Process
Test Marketing
 Test marketing is the
stage of new product
development in which
the product and its
proposed marketing
program are tested in
realistic market settings.
 New Product Development
Process
Test Marketing
Marketing Strategy Development

When test marketing is likely When test marketing is unlikely

• New product with large
• Simple line extension
investment
• Uncertainty about • Copy of competitor product
product or marketing • Low costs
program • Management confidence
 New Product Development
Process

Commercialization/Market Entry
 Commercialization involves introducing a new product
into the market.
 When to launch?
 Where to launch?
 Planned market rollout?
Learning Objectives 1.3

1.3 Describe the stages of the product life cycle and how
marketing strategies change during a product’s life cycle.
Product Life-Cycle Strategies (1 of 11)
Figure 9.2 Sales and Profits over the Product’s Life from Inception to Decline
Product Life-Cycle Strategies

STAGES CHARACTERISTICS
Product Zero sales and increasing investment costs
development

Introduction Slow sales and nonexistent profits

Growth Rapid market acceptance and increasing profits

Maturity Slow sales growth and profits level off or decline

Decline Sales fall off and profits drop

Product Life-Cycle Strategies

Introduction Stage
 Slow sales growth
 Little or no profit
 High distribution and promotion expenses
Product Life-Cycle Strategies

Growth Stage
 Sales increase
 New competitors enter the market
 Profits increase
 Economies of scale
 Consumer education
 Lowering prices to attract more buyers
Product Life-Cycle Strategies

Maturity Stage
 Slowdown in sales
 Many suppliers
 Substitute products
 Overcapacity leads to competition
 Increased promotion and R&D to support sales and
profits
 Product Life-Cycle Strategies
Modification Strategies
Modify the the company tries to increase consumption by finding new users and new market
market segments for its brands

Modify the changing characteristics such as quality, features, style, or packaging to attract new
product users and inspire more usage. The company can improve the product’s styling and
attractiveness or improve the product’s quality and performance—durability,
reliability, speed, and taste.

Modify the involves improving sales by changing one or more marketing mix elements. The
marketing mix company can offer new or improved services to buyers. It can cut prices to attract
new users and competitors’ customers. It can launch a better advertising campaign
or use aggressive sales promotions—trade deals, cents-off, premiums, and
contests. In addition to pricing and promotion, the company can also move into new
marketing channels to help serve new users
Product Life-Cycle Strategies

Decline Stage
 Maintain the product
 Harvest the product
 Drop the product
Product Life-Cycle Strategies

Blank Introduction Growth Maturity Decline

Characteristics Blank Blank Blank Blank

Sales Low sales Rapidly rising sales Peak sales Declining sales

Costs High cost per Average cost per Low cost per Low cost per
customer customer customer customer

Profits Negative Rising profits High profits Declining profits

Customers Innovators Early adopters Mainstream Lagging adopters

adopters

Competitors Few Growing number Stable number Declining number

beginning to decline
Product Life-Cycle Strategies

Blank Introduction Growth Maturity Decline

Marketing Create product Maximize market Maximize profit Reduce
objectives engagement and share while defending expenditure and
trial market share milk the brand
Strategies Blank Blank Blank Blank
Product Offer a basic Offer product Diversity brand Phase out weak
product extensions, service, and models items
and warranty
Price Use cost-plus Price to penetrate Price to match or Cut price
market beat
competitors
Distribution Build selective Build intensive Build more Go selective:
distribution distribution intensive phase out
distribution unprofitable
outlets
Product Life-Cycle Strategies

Blank Introduction Growth Maturity Decline

Advertising Build product Build engagement Stress brand Reduce to level

awareness among and interest in the differences and needed to retain
early adopters and mass market benefits hard-core loyals
dealers

Sales Use heavy sales Reduce to take Increase to Reduce to minimal

promotion promotion to advantage of heavy encourage brand level
entice trial consumer demand switching
Activity 3

Essay Question:
Identify the features of each phase in the Product
Life Cycle (PLC) and analyse the different marketing
strategies that producers should use at each stage.
(25 marks)
Learning Objectives 1.4

1.4 Discuss branding strategy—the decisions

companies make in building and managing their
brands.
Branding Strategy: Building Strong
Brands

Brand Equity and Brand Value

 Brand equity is the differential effect that knowing the brand name
has on customer response to the product or its marketing.
 Brand value is the total financial value of a brand.
Branding Strategy: Building Strong
Brands
Building Strong Brands
Major Brand Strategy Decisions
Branding Strategy: Building Strong
Brands
Building Strong Brands
 Brand Positioning
 Marketers can position brands at any of three levels.
 Attributes

 Benefits

 Beliefs and values

Branding Strategy: Building Strong
Brands
Building Strong Brands
 Brand Name Selection
1. Suggests benefits and qualities
2. Easy to pronounce, recognize, and remember
3. Distinctive
4. Extendable
5. Translatable for the global economy
6. Capable of registration and legal protection
Branding Strategy: Building Strong
Brands
Building Strong Brands
 Brand Sponsorship
 Manufacturer’s brand
 Private brand
 Licensed brand
 Co-brand
Branding Strategy: Building Strong
Brands
 What did we learn from this topic?

1.1 Define product and describe the major classifications of products and services.
1.2 List and define the steps in the new product development process and the major
considerations in managing this process
1.3 Describe the stages of the product life cycle and how marketing strategies change during a
product’s life cycle.
1.4 Discuss branding strategy—the decisions companies make in building and managing their
brands.