CHAPTER 5
Product and Services Strategy
Objective: defining and classifying products, in
addition discussing the decisions that marketers
make regarding products.
What is a product?
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A product is anything that can be offered to a
market for attention, acquisition, use, or
consumption that might satisfy a want or
need.
Products include more than just tangible
goods but intangible services e.g. banking,
home repair, consultancy.
A product has three levels: the core product,
actual product, and augmented product;
core product: is the basic problem-solving benefit
that consumers seek when they buy a product.
e.g. a woman buying a lipstick buys more than lip
color but hopes as well. That is why, when
designing products, marketers first define the
core benefit that the product will provide to
consumers.
 actual product: may have five characteristics - a
quality level, features, design, a brand name, and
packaging.
 augmented product: offers additional consumer
services and benefits. e.g. warranty, repair
services...
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Product Classification
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Products are divided into two as: consumer
products and industrial products:
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Consumer products; are those bought by final
consumers for personal consumption. Consumer
products include convenience products, shopping
products, specialty products, and unsought products.
These products differ in the way how consumers
buy and how marketers market them.
Convenience products: are bought frequently with minimum
comparison and effort e.g. soap, candy, newspapers... are
usually low priced and highly distributed.
 Shopping products: are less frequently purchased, compared
carefully on quality, price, style, suitability e.g. furniture,
clothing, used car… are less distributed but given more
sales support.
 Specialty products: have unique characteristic and brand
identification for some consumers who spend special effort
to purchase e.g. specific brands and types of cars, highpriced photographic equipment, custom-made men’s
suits… e.g. Rolls Royce buyers do not compare specialty
products, they only invest the time needed to reach the
sellers.
 Unsought products: are not known by the consumers or not
normally thought to be bought e.g life insurance, blood
donation …they require a lot of promotions and marketing
efforts
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Industrial products; are those purchased for
further processing or for use in conducting a
business. There are three groups of industrial
products: materials and parts, capital items,
supplies and services.
Materials and parts: include raw materials, sold directly
to industrial users. Price and service are the major
marketing factors rather than advertising.
 Capital items: are industrial products that aid in the
buyer’s production or operations including accessory
e.g. fax machines desk…
 Supplies and services: supplies include e.g. paper, pencils..
Services include e.g. window cleaning, computer
repair, legal consultancy … are usually supplied under
contract.
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Individual Product Decisions
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There are five important decisions to be made in
the development and marketing of individual
products;
product attributes
 branding
 packaging
 labeling
 product-support services
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Product Attributes
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The benefits that the product will offer would
be based on (1) quality, (2)features, and (3)
design.
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Product Quality
Product quality (customer value) has two dimensions
- level and consistency. Companies must choose a
quality level that matches target market needs and
the quality level of competing products.
Product Features
Features are a competitive tool for differentiation
the company’s product from competitor’s
products. In order to add new features to its
products, companies can survey its customers.
 Product Design
Product design contributes to a product’s
usefulness and appearance. Good design can
attract attention, improve product performance,
cut production costs, give the product a strong
competitive advantage.
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Branding
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A brand is a name, term, sign, symbol or design or a
combination of these to identify the goods and
services of one seller or group of sellers and to
differentiate them from those of competitors.
For the consumers; brand names help consumers
identify products, get an idea about the product
quality, promise consistency in quality.
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For the producers; brand names provide legal
protection for unique product features and
prevent them to be copied by competitors. Plus,
helps the seller to segment markets.
Brand Equity
Brand equity is the value of a brand. Brands
vary in the amount of power and value that they
have in the marketplace. A powerful brand has
high brand equity. If the brand has higher brand
loyalty, name awareness, perceived quality; the
brand is accepted to be having a strong brand
equity.
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Branding Decisions
Major branding decisions are (1) selecting the
brand name, (2) finding a brand sponsor, (3)
identifying the brand strategy, (4) repositioning
the brand.
Brand Name Selection: A good brand differentiates
the product, communicates its benefits, suits the
target market and marketing strategies.
 Brand Sponsor: A producer has four sponsorship
options. The product may be sold (1) as a
manufacturer’s (producer’s) brand, (2) to a
reseller (middleman) who give it a private
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brand (who create and own the brand), (3) as a
licensed brand (a company may be licensed to sell
its products under another company’s brand), or
(4) as a co-brand (two companies combine their
brands and create a new one).
 Brand strategy: A company has four choices;
line extension; using a successful brand name to
introduce additional items in an existing product
category under the same brand name, such as new
flavors, forms, colors, added ingredients, or package
sizes. Meets consumer desires for variety, works best
when it decreases competition.
 brand extension; using a successful brand name to
launch a new product in a new category. Helps the
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company introduce new product categories more
easily, provides instant recognition and acceptance,
decreases advertising costs. But may be dangerous if
it fails, because it may tarnish the company’s whole
image.
 multibrands; a strategy under which a seller develops
two or more brands in the same product category.
Offers a way to establish different features and appeal
to different types of buyers, therefore, may increases
the market share of the company.
 new brands; introducing new brand names in new
product categories. Demands lot of company
resources, that is why, nowadays some companies use
megabrand strategies - spending resources only on
brands that can achieve the number one or two
market share position in their categories and dropping
the weaker brands.
Four Brand Strategies
Product Category
Existing
Existing
Brand Name
New
Line
Brand
extention
extention
Multibrands
New
brands
New
Packaging
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The activities of designing and producing the container
or wrapper for a product.
There are three packages - the product’s primary
container; a secondary package that is thrown away
when the product is about to be used; and the shipping
package to ship and store the product.
Packaging decisions are based on cost and production.
Packages attract attention and describe the product.
Labeling
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Labels may range from tags attached to products to
graphics that are part of the package.
Labels may (1) identify, (2) grade, (3) describe, or (4)
promote (through attractive graphics) the product or brand.
Labels can mislead customers, fail to describe
important ingredients or fail to include important safety
warnings. That is why, laws regulate labeling in (1) unit
pricing, (2) shelf life, and (3) nutritional value
Product-Support Services
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The product-support services augment the actual
product, can help the product to gain a competitive
advantage and create customer loyalty.
The company should periodically survey its customers
to assess its customers’ satisfaction and to get new ideas
for product improvements.
E.g. services to handle complaints, credits, maintenance,
technical issues, customer information.
Product Line Decisions
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A product line is a group of products that are
closely related because they function in a similar
manner, are sold to the same customer groups,
are marketed through the same types of outlets
or fall within given price range. E.g. Nike
produces several lines of athletic shoes.
In developing product line strategies, marketers
decide on;
product line length; the number of items in the
product line. Product line length is influenced by
company objectives. If the company wants to
position itself as a full-line company or wants to
have high market share and growth, the company
prefers to carry a longer line. Product lines tend
to lenghten over time. However, such line
increases raise the costs of design, inventory,
production, promotion, that is why, pruning is
inevitable.
 increasing the length of the product line; there are two
ways - by streching and filling. Product line streching
occurs when a company
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lengthens (downward, upward or both ways) its
product line beyond its current range. E.g. Xerox,
Marriott Hotels... On the other hand, product line
filling occurs when a company adds more items
within the present range of the line. Reasons are;
reaching for extra profit, tyring to satisfy dealers,
use excess capacity, be the leading full-line
company, plug holes to keep out competitors.
E.g. Sony solar-powered and waterproof
Walkman.
Product Mix Decisions
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A product mix (or product assortment) includes all the
product lines and items that a particular seller offers for
sale. E.g. Avon’s product mix includes cosmetics,
jewellery, fashion each with sublines such as lipstick,
eyeliner…
A company’s product mix has four dimensions: width,
length, depth, and consistency.
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Width; refers to the number of different product lines the
company carries. E.g. Procter & Gamble has a product
mix of six lines as detergents, toothpaste, bar soap,
deodorants, fruit juice, and lotions.
Length; refers to the total number of items that the
company carries. E.g. P&G has 42 different products
under its six lines.
Depth; refers to the number of versions offered of each
product in the line. E.g. one of the products of P&G
may have different sizes and formulations.
Consistency; refers to how closely related the various
product lines are. E.g. P&G’s products are consistent in
the way that they are all consumer products, but
inconsistent in the way that they perform different
functions for buyers.
Services Marketing
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Service industries are quite varies: governmental
services - courts, hospitals, police, fire
departments, postal services, schools etc; private
nonprofit organizations - museums, colleages,
hospitals etc; business organizations - airlines,
hotels, restaurants, advertising, real estate etc.
Nature and Characteristics of a Service
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Service intangibility; means that services cannot be seen,
tasted, felt, heard or smelled before they are bought.
That is why, buyers look for “signals” for service quality
from the place, people, price, equipment and
communications that they can see.
Service inseparability; means that services cannot be
separated from their providers. If a service employee
provides the service, then the employee is part of the
service. Both the provider and the customer affect the
service outcome.
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Service variability; means that the quality of services
depends on who provides them, plus, when, where,
and how they are provided. E.g. within a given
Marriott hotel, one reception desk agent may be
cheerful and efficient, another would be unpleasant
and slow. Service providers’ service quality depends
on his energy and his frame of mind at the time of
each customer encounter.
Service perishability; means that services cannot be
stored for later sale or use. E.g. the demand for
public transportation during the rush-hour. Service
perishability is a serious problem when demand
fluctuates. Here, the marketer needs to design
strategies for producing better match
between demand and supply. E.g. hotels charge
lower rates in the off-season to attract more guests;
restaurants hire part-time employees to serve during
peak periods; tour operators and airline companies
have last-minute sales.
Marketing Strategies for Service Firms
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Services are different form tangible products,
that is why, additional marketing approaches are
needed to market services.
In service businesses, the customer and frontline service employees interact. Service
providers must interact effectively with
customers to satisfy them. That is why,
companies take care of their employees to make
profit. Because they believe that only
satisfied and productive service employees
can create satisfied and loyal customers.
Internal marketing; means that the service firm
must effectively train and motivate its customercontact employees to provide customer
satisfaction.
 Interactive marketing; means that service quality
depends on the quality of the buyer-seller
interaction during the service encounter.
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In order to increase the profit margin, there
are three major marketing tasks for service
companies;
Managing Service Differentiation
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Differentiated offer, delivery and image are the
keys for the solution to price competition.
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The offer can provide innovative features like e.g. inflight movies, advance seating, frequent-flyer award
programs in an airlines. British Airways offers a
sleeping compartment and hot showers.
The delivery can be differentiated by having
better customer-contact people, developing a
superior physical environment, or by designing a
superior deliver process like e.g. home banking
can be provided as a better way to deliver
banking services.
 The image can differentiate the service company
through symbols and branding.
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Managing Service Quality
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A service firm can also differentiate itself by
delivering consistently higher quality than its
competitors do.
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Service quality will always vary, depending on the
interactions between employees and customers. A
company cannot always prevent service problems
but can recover them. A good service recovery can
turn angry customers into loyal ones. Companies
empower front-line
service employees (giving authority to do
whatever it takes to keep customers happy) to
recover problems.
 Good service companies also communicate their
qualities to employees and provide performance
feedback.
Managing Service Productivity
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Service productivity can be increased by;
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training the employees better or hiring new and better
employees
industrializing the service with equipment and standardized
production as in McDonald’s
using technology to save time and money
Trying to increase the productivity would reduce quality
and diminish customer service. That is why, some
service providers accept to have lower productivity
levels.
Marketing Organizations,
Persons, Places, and Ideas
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Organization marketing; consists of activities
undertaken to create, maintain, or change the
attitudes and behavior of target customers toward
an organization. Corporate image advertising is a
major toolfor a company to build up or maintain its
favorable image in various publics over many years.
Person marketing; consists of activities undertaken
to create, maintain, or change attitudes or behavior
toward particular people. Politicians, entertainers,
business leaders etc. practice persons marketing.
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Place marketing; involves activities undertaken to
create, maintain or change attitudes or behavior
toward particular places. There are two basic types business site marketing and tourism marketing.
Business site marketing involves developing, selling,
or renting sites for factories, stores etc.Tourism
marketing involves attracting vacationers to tourist
locations and organizations e.g. “I love New York”.
Idea marketing; also called social marketing, involves
the marketing of social ideas such as public health
(e.g. drug abuse), family planning, environmental
(e.g. protecting the wild life) campaigns.
International Product and Service
Marketing
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International product and service marketers
must;
first; figure out what products and services to
introduce and in which countries
second; decide how much to standardize or
adapt their products and services
standardization helps a company to build a
consistent worldwide image, reduces production,
research and development, advertising and
product design costs.
 adaption helps a company to develop its product
offering in a way that satisfies customers with
different attitudes, buying behaviors and cultures.
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