PRODUCT AND SERVICE STRATEGIES Professor Chip Besio Cox School of Business Southern Methodist University What Is the Product? Augmented Product Installation Packaging Brand Name Delivery & Credit Quality Level Core Features Benefit or Design Service AfterSale Service Actual Product Warranty Core Product Types of Products Consumer Industrial Other Entities Organizations Persons Places Ideas Types of Products CONSUMER PRODUCTS Convenience Products Shopping Products > > > > > > > > Buy frequently & immediately Low priced Many purchase locations Includes: • Staple goods • Impulse goods • Emergency goods Buy less frequently Gather product information Fewer purchase locations Compare for: • Suitability & Quality • Price & Style Specialty Products Unsought Products > > > > > New innovations > Products consumers don’t want to think about > Require much advertising & personal selling Special purchase efforts Unique characteristics Brand identification Few purchase locations Types of Products INDUSTRIAL PRODUCTS Materials and Parts Capital Items Supplies and Services Characteristics of Services Intangibility Can’t be seen, tasted, felt, heard, or smelled before purchase Inseparability Can’t be separated from service providers Variability Perishability Quality depends on who provides them and when, where and how Can’t be stored for later sale or use Individual Product Strategy Decisions Attributes Packaging Labeling Product Support Product Attributes - Where Do They Come From? Quality Design Features Packaging Competitive Advantages Sales Tasks Packaging Product Safety Identifies Labeling Promotes Describes Multi-Product Strategy Decisions Branding Product Lines Product Mix Variety Assortment Major Brand Decisions Brand Name Selection Protection Brand Sponsor Manufacturer’s Brand**Co-branding Private Brand**Licensed Brand Brand Strategy Line Extensions***Brand Extensions Multi-brands***New Brands Brand Strategy Brand Name Product Category Currently Served New Existing Line Extension Brand Extension New Multi-brand New Brand Brand Strategy Line Extension Existing brand names extended to new forms, sizes, and flavors of an existing product category Brand Extension Existing brand names extended to new product categories Multi-brands New brand names introduced in the same product category New Brands New brand names in new product categories Brand Strategy BRAND EXTENSION Brand associations determine which brand extensions will be successful B 8 Close-Up Cheerios Crest C Froot Loops 6 4 4 2 2 0 REALITY Breath Mint Coors IBM Budweiser E 8 Higher price, 6 & benefits C 4 0 Moisturizer Deodorant 8 6 4 2 E 0 Source: Wes Hutchinson Lollipops Apple Segment 2 2 D Waffles Irish Spring 6 4 0 Higher income Toothbrush Camay 8 D 8 Original 6 Market 2 New VideoMarket Games Cellular Phone 0 Bottled Water Scotch Brand Strategy BRAND EXTENSION Close-Up's singles-oriented, "romantic" image extended best to breath mints; Crest's family-oriented "dental health" image extended best to toothbrushes. B Close-Up 8 Original 6 Market 4 4 2 2 Breath Mint Lollipops Coors Irish Spring IBM Budweiser 6 2 D Waffles Apple Segment 2 0 Higher income Toothbrush Camay 8 4 Froot Loops 8 6 0 REALITY D Cheerios Crest C E E 8 Higher price, 6 & benefits Moisturizer Deodorant Source: Wes Hutchinson 6 C 4 4 2 2 0 0 8 New Video Market Games CellularPhone 0 Bottled Water Scotch Apple's "user-friendly" image extended best to video games; IBM's "serious business" image extended best to cellular phones. Product Mix Variety - number of different product lines Product Mix all the product lines offered Assortment number of items within product lines Services are now a larger part of the U.S. gross domestic product (GDP) THE UNIQENESS OF SERVICES THE FOUR I’S OF SERVICES Four I’s of Services • Intangibility – Cannot perceive with 5 senses • Inseparability – cannot separate from provider • Inconsistency – can vary with each occasion • Inventory – in people based services, inventory goes home each night The result - Idle Production Capacity Inventory carrying costs of services depend on the cost of employees and equipment THE UNIQENESS OF SERVICES THE CONTINUUM & CLASSIFICATION OF SERVICES Service Continuum Classifying Services • Delivery by People or Equipment • Profit or Nonprofit Organizations • Government Sponsored The service continuum shows how offerings can vary in their balance of goods and services Services can be classified as equipment-based or people-based