LESSON SEVEN
PRODUCT AND SERVICE DECISIONS
PRODUCT AND SERVICE DECISION
When placing a product within a market many factors and decisions have to be taken into
consideration. These include:
 Individual product decision
 Product line decision
 Product mix decision
1. Individual Product and Service Decision
The figure below shows the important decision in the development and marketing of
individual products and services. This section will focus on discussions about product
attributes, branding, packaging, labeling and product support services.
Illustration:
Product/Service
attributes
a.
Branding
Packaging
Labeling
Product support
services
Products and Service Attributes
Developing a product/ service involves defining the benefits that the product will offer. These
benefits are communicated and delivered by the product attribute such as quality, features and
styles and design.
Product quality: Product quality is one of the major marketers tool. Quality has a direct
impact on product or service performance thus, its’ closely linked to customer value and
satisfaction. In simple term, quality can be defined as; “freedom from defects.” Thus, most of
the customers’ centered governance goes beyond this simple definition; instead they define
quality in terms of creating customer value and satisfaction.
Total Quality Management (TQM) is an approach in which all companies, people are
involved in constantly improving the quality of the product services and business processes.
In addition, a premium based pricing strategy has to reflect the quality a product offers.
Product features: A product can be offered with varying features. Features are the
competitive tool for differentiating the companies’ products from the competitor’s products.
Here, marketers will ask questions on; what features will the company add so that it may
increase the benefit offered to the target market? Will the organization use a discriminatory
pricing policy for offering these additional benefits? It is important to note that; valuing new
feature is the most effective ways to compete.
Product design and style: Another way of adding customer value is through distinctive
product styles and design. Design is another concept than style and style describes the
appearance of the products. Styles can be eye-catching while design is more than skin deep
and it goes to the very heart of the product. Good design can improve product or service
performance, cut costs and create strong competitive advantage in the target market.
b.
Branding
Perhaps, the most important decisions a professional marketing manager can make is to build
and manage the brand. The value of brands in today’s environment is phenomenal. Brands
have the power of instant sales; they convey a message of confidence, quality and reliability
to their target market. Therefore a brand is a name, termed, sign, symbol or design or
combination of these that identifies the maker or seller of a product/service.
Consumers view a brand as an important part of the product and branding can add value to
the product. Branding has become so strong that today, nothing hardly goes un branded.
Branding helps buyers in many ways;
 Brand names help the consumers identify products that might benefit them easily
 Branding goods also tell the buyer something about the product quality
 Buyers who always buy the same brand know that they will get the same features,
benefits and quality each time they buy
Branding also gives the seller several advantages:
 The brand name becomes the basis on which the whole story can be build about the
product special quality
 The seller’s brand name and trade mark provide legal protection for unique product
features that otherwise it might be copied by the competitors
 It also helps the seller to segment markets
 Branding facilitates promotional efforts since branded product indirectly promotes all
the other products that are branded
c.
Packaging
Packaging involves designing and producing the container or wrapper for a product.
Traditionally, the primary function of the package was to contain and protect the product. In
recent times however, numerous factors have made packaging an important marketing tool.
With the increased competition, it means packages must now perform many sales tasks, these
range from attracting attention to describing a product.
Innovative packaging can give a company an advantage over competitors. In contrast, poorly
designed packages can cause headache for the consumer and loss sales for the customers. In
making packages decision, the company also must heed growing environment concerns.
d.
Labeling
Labels may range from simple tags attached to product to complex graphics that are packed
on the package. Labels perform many functions some of which include the following;
 The label identifies the product/brand
 The label might also describe several things about the product for instance, who made
it? Where was it made? When it was made? It contains how it is used and how to use
it safely.
 The label also promote the product through attractive graphics
Therefore, sellers must ensure that their labels contain all the required information that
customers may require. There has been a long history of labels concern about packaging and
labels. However, the Federal Trade Commission Act, 1914 held that false, misleading/or
deceptive labels/ packages constitute un fair competition.
e. Product support service
Customer service is another element of product strategy. A company’s offers usually include
some support services which can be a minor or a major part of the total offering.
2. Product Mix Decisions
A product mix also called product assortment is the set of all product lines and items that a
particular seller offers to sale. A company’s product mix can be described as having a certain
width, length, depth, and consistency.
 The width of the product mix refers to how many product lines the company carries.
 The length of product mix refers to the total number of items in its product mix.
 The depth of product mix refers to how many product variants are offered of each
product item in the line.
 The consistency of the product mix refers to how closely related the various product
lines are in end use, product requirements, distribution channels or some other way.
These four dimensions of the product mix provide the bases for defining the company’s
product strategy. The company can grow its business in four ways. The company can add
new product lines, thus widening its product mix to capitalize the company’s reputation or
the company can lengthen its existing product lines to become a more full line company or
the company can add more product variants to each product and thus deepen its product mix.
Finally the company can pursue more product-line consistency or less, depending upon
whether it wants to acquire a strong reputation in a single field or participate in several fields.
3. Product Line Decisions
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 ranges. Product line managers have two important
information needs that is;
 They must know the sales and profits of each item in the line.
 They must know how the product line compares to competitor’s product lines in the
same markets (Product Positioning).
One of the major issues facing product-line managers is the optimal length of the product
line. The manager can increase the profits either by adding the product items if the line is too
short or by dropping the items if the line is too long.
The issue of product-line length is influence by company objectives. Companies that want to
be positioned as full-lines companies and/or are seeking high market share and market
growth will carry longer lines. They are less concerned when some items fail to contribute to
profit. Companies that are keen on high profitability will carry shorter lines consisting of
selected items.
Product lines tend to increase over time. Excess manufacturing capacity will put pressure on
the product-line managers to develop new items. The sales force and distributors will also
pressure for a more complete product lien to satisfy their customers.
Line-Stretching Decision
Every company’s product-line covers a certain pair of the total range offered by the industry
as a whole. For example, Maruti Udyog automobiles are located in the low-medium price
range of the automobile market. Line stretching occurs when a company lengthens its
product-line beyond its current range. The company can stretch its line downward, upward or
both ways.
a. Downward Stretch
Many companies initially locate at the high end of the market and subsequently stretch their
line downward. For instance, TATA who are the producers of medium and high price/big car
segment, now have stretched downward by entering into small car segment by releasing
TATA Indica.
 The company is attached at the high end and decides to counter attack by invading the
low end.
 The company finds that slower growth is taking place at the high end.
 The company initially entered the high end to establish a quality image and intended
to roll downward.
 The company adds a low-end unit to plug a market hole that would otherwise attract a
new competitor.
In making a downward stretch the company faces some risks. The new low-end item may
cannibalize higher-end items. Or the low-end items might provoke competitors to counteract
by moving into the higher end. Or the company’s dealers may not be willing or able to handle
the lower end products, because they are less profitable or dilute their image. For instance,
General Motors resisted building smellers cars and Japanese companies spotted a major
opening and moved in quickly. It is interesting that after seeing the success of Suzuki in small
car segment, the other leading companies such as Honda and Toyota are new entering into the
market.
b.
Upward Stretch
Companies in the lower end of the market might contemplate entering the higher end. They
may be attracted by a higher growth rate, higher margins or simply the chance to position
themselves as full-line manufacturers. Again, it is Maruti who initially entered in the small
car segment entered higher end by production Maruti 1000 and Maruti Esteem.
An upward decision can be risky. Not only the higher end competitor well entrenched but
they may counter attack by entering the lower end of the market. The company’s sales
representatives and distributors may lack the talent and training to serve the higher end of the
market.
c. Two-way Stretch
Companies in the middle range of the market may decide to stretch their line in both
directions.
d. Line-Filling Decisions
A product line can also be lengthened by adding more items within the present range of the
line. There are several motives for line-filling such as reaching for incremental profits; trying
to satisfy dealers to complain about lost sales because of missing items in the line; trying to
utilize excess capacity; trying to be the leading full-line company and trying to plug holes to
keep on competitors. If line-filling is overdone it may result in cannibalization and customer
confusion. The company needs to differentiate each item in the consumer’s mind. Each item
should possess a just noticeable difference. The company should check that the proposed
items enjoys more market demand as is not being added simply to satisfy an internal need.
Product Line Analysis
To support decisions about which items to build, maintain, harvest, or divest, product-line
managers need to analyze the sales and profits as well as the market profile of each i tem:
Sales and profits: The manager must calculate the percentage contribution of each item to
total sales and profits. A high concentration of sales in a few items means line vulnerability.
On the other hand, the firm may consider eliminating items that deliver a low percentage of
sales and profits unless these exhibit t strong growth potential.
Market profiles: The manager must review how the line is positioned against competitors’
lines. A useful tool here is a product map showing which competitive products compete
against the company’ s products on specific features or benefits. This helps management
identify different market segments and determine how well the firm is positioned to serve the
needs of each.
REVIEW QUESTIONS
1. What are the different components of product mix?
2. What are different types of products?
3. Explain product-line decisions.