MRKT20052 Marketing Management and Digital Communications
Lecture 6: Setting Product Strategy;
Designing and Managing Services; and
Introducing New Market Offerings
• In today’s lecture we will discuss:
• The Nature of Products;
• The Nature of Services; and
• New Product Development.
Lecture 6 Overview
Products
• Products are more than simply tangible items for sale.
• A product is anything that can be offered to a market to satisfy a need or
want.
Physical Products
goods
Services
Experiences
Events
Persons Places
Properties
Organizations
Information
Ideas
Product Classifications
Superior
product
quality and
service
results in a
superior
brand.
Product Classifications Continued…
• Non-durable goods are:
“tangible goods normally consumed in one or a few uses”.
• Durable goods are:
“tangible goods that normally survive many uses”.
• Services are:
“intangible, inseparable, variable and perishable products”.
Consumer and Industrial Goods Classifications
Consumer
Goods
Convenience
Goods
Shopping
Goods
Specialty
Goods
Unsought
Goods
Industrial
Goods
Raw
Materials
Manufactured
Materials &
Parts
Capital Items
Supplies &
Business
Product and Brand Relationships
Need
Family
• The core need.
Product
Family
• All of the product classes that can satisfy the
core need.
Product
Class
• The product category – a group of products in
the product family that have functional
coherence.
Product
Line
• A group of products (product class) that are
closely related due to performing a similar
function and target the same customers.
Product
Type
• A group of items within the product line that
share one of several possible forms of the
product.
Item
• A distinct unit within a brand or product line
distinguishable by size, price, appearance, or
some other attribute.
Product
Systems
& Mixes
System:
is a group of
diverse but
related items
that function in
a compatible
manner.
Mix:
is the set of all
products and
items a
particular
seller offers for
sale.
Product Line Analysis & Product Line Length
Product Line
Analysis
Sales
Profits
Market Profile
Product
Line Length
Line
Stretching
Down-Market
Stretching
Up-Market
Stretching
Two-Way
Stretching
Line Filling
• Lengthens the line by adding more items within the present range.
• Entering and filling new market needs.
• Could cause cannibalization of the business’s existing products.
Co-Branding and Ingredient Branding
• Products are often combined with products from other
companies.
• Co-branding can generate greater sales, reduce costs
and build awareness.
• For co-branding to be successful both brands need
brand equity and have a logical fit.
• Ingredient branding is a special case of co-branding and
involves brand equity of components.
Packaging, Labeling, Warranties and Guarantees
• Packaging is critical for products.
• It must be fit for purpose;
• Assist in identifying the brand;
• Be descriptive and persuasive; and
• Aid product consumption.
• Labeling is important: a simple tag that is part of the package adds value.
• Warranties and guarantees provide confidence through sellers being
legally responsible for fulfilling a buyer’s normal or reasonable
expectations.
Creating Marketing Excellence
Interactive marketing describes the employees’ skill
in serving the client. Clients judge service not only by
its technical quality (Was the surgery successful?), but
also by its functional quality (Did the surgeon show
concern and inspire confidence?).
Managing Service Quality (SERVQUAL)
SERVQUAL Attributes
Types of New Products
• These range from new-to-the-world products that create an entirely new
market to minor improvements or revisions to existing products.
• Less than 10% of all new products are truly innovative and new-to-theworld.
• Radical innovations can hurt the company’s bottom line in the short-run,
but if they succeed, they create a greater sustainable competitive
advantage than ordinary products, and produce significant financial
rewards.
New-Product Failure
• New products continue to fail at rates as high as 50 percent or even 95
percent in the U.S. and 90 percent in Europe.
• They fail for many reasons:
a. ignoring or misinterpreting market research;
b. overestimating market size;
c. high development costs;
d. poor design;
e. incorrect positioning,
f. ineffective advertising or wrong price;
g. insufficient distribution support;
h. competitors who fight back hard; and
i. inadequate return on investment or payback.
Lenovo, introduced in China
in 2011, faced disappointing
sales of LePad even though it
offered distinctive
advantages over the iPad.
With no price advantage—it
was priced almost similarly
to the iPad—the more
functional LePad lost to
Apple because Chinese
consumers would rather own
a high-status Apple product.
The Consumer Adoption Process
• Adoption is “an individual’s decision to become a regular user of a product
and is followed by the consumer-loyalty process”.
• The “consumer-adoption process focuses on the mental process through
which an individual passes from first hearing about the innovation to final
adoption”.
• Consumer is
aware of it, but
has no
information.
Awareness
• Consumer is
stimulated to
seek
information.
Interest
• Consumer
considers
whether to try
the innovation.
Evaluation
• Consumer tries
the innovation to
improve value
estimation.
Trial
• Consumer
decides to make
full and regular
use of the
innovation.
Adoption
Adopter Categories
To Sum Up
• Products are classified s either non-durable goods, durable goods or
services.
• Consumer goods are classified as either convenience goods, shopping
goods, specialty goods or unsought goods.
• Industrial goods are classified as either raw materials, manufactured
materials and parts, capital items or supplies and business.
• Product and Service differentiation are both important for businesses.
To Sum Up Continued…
• Brand extensions can be achieved through a number of different
approaches including: product line analysis, product line length, line filling,
co-branding, ingredient branding and pricing.
• Packaging, labeling, warranties and guarantees are critical for businesses
in fulfilling a buyer’s normal or reasonable expectations.
• Services have the distinctive characteristics of: inseparability, variability,
perishability and intangibility.
To Sum Up Continued…
• Measuring service quality is important and SERVQUAL is a validated
instrument for doing so.
• New product failure rates are always high and a new product development
decision process is very important for businesses.
• The customer adoption rate of new innovations vary from innovators to
laggards.
End of Lecture 6.