chapter 9 - product and service strategies.docx

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Grant B Mc Clelland

Chapter 9 – Product and Service Strategies The Marketing Mix  Blending of the four strategy elements —product, distribution, promotion, and price — to fit the needs and preferences of a specific target market  Other variables: distribution channels, promotional plans, and pricing decisions  must accommodate the product strategy selected  Marketers develop strategies to promote tangible & intangible services.  strategy begins with investigation, analysis, and selection of a particular target market.  continues with the creation of a marketing mix designed to satisfy that segment.  Strategies to promote goods are often quite different from those designed to promote services What is a Product?  Bundle of physical, service, and symbolic attributes designed to satisfy a customer’s wants and needs  People buy want satisfaction, not objects What are Good and Services?  Services are intangible tasks—actually intangible products—that satisfy the needs of customers and business users.  Most service providers can’t transport or store their products, but instead customers simultaneously buy and consume them.  Goods are tangible products or items that customers can see, hear, smell, taste, or touch. The Goods-Services Continuum  The two types can be distinguished through the goods-services continuum.  This spectrum helps marketers visualize the differences and similarities between goods and services.  It also clarifies which purchases can be a mixture of both. Service Characteristics  Services are intangible – customers are asked to buy a promise  Services are inseparable from the service providers – consumer perception of a service provider becomes their perception of the service itself  Services are perishable – they’re created and consumed at the time of purchase, so providers cannot maintain inventories  Companies cannot easily standardize services. – though this is changing as firms attempt to promise certain qualities, amenities, or results  Buyers often play a role in the creation and distribution of services – interactions between buyer & seller are often required at the production and distribution stages  Service standards show wide variations – the quality and standards can vary greatly among service providers in the same industry Importance of the service sector  The service sector makes up more than 70 percent of the Canadian economy (production and jobs)  Shifting from a goods-oriented to a service-oriented economy Growth in services  Consumer desire for speed and convenience  Technological advances that allow firms to fulfill this demand  Bigger consumer demand for certain services, including those involving wireless communications, data backup and storage, financial consulting, insurance, even meal preparation Service firms emphasize marketing for two reasons  The growth potential of service transactions represents a vast marketing opportunity.  Increased competition is forcing traditional service industries to differentiate themselves, and providing superior service is one way to develop long-term relationships. Classifying Good and Services for Consumer and Business Markets  Choices for marketing depend on the offering and on the nature of the target market  Consumer (B2C) product — Product destined for use by ultimate consumers  Business (B2B) product — Product that contributes directly or indirectly to the output of other products for resale Type of Consumer Products  One distinction in classifying products focuses on the buyer’s perception of a need for the product as well as his or her buying behaviour.  Three groups (based on customer’ behavior)  Convenience  Shopping  Specialty Shopping Products  Products purchased only after the consumer compares competing offerings (price, quality, style, and colour)  differ from convenience products in several ways:  generally more expensive.  The purchaser lacks complete information prior to the buying trip, and gathers it in the process.  They often carry warranties and after-sale service terms.  A store’s name and reputation have considerable influence on consumer buying behaviour.  The personal selling efforts of salespeople provide important promotional support.  Homogeneous shopping products  To consumers, one brand often seems much like another.  Marketers try to differentiate homogeneous products from competing products in terms price and value, quality, appeal, or uniqueness. Ex. airplane flights, computers  Heterogeneous shopping products  To consumers, basic differences seem to stand out.  Differences in features separate competing heterogeneous shopping products in the minds of consumers.  Perceptions of style, colour, and fit can all affect consumer choices. Ex. child care, furniture, cruise, yoga instructor Specialty Products  Products that offer unique characteristics that cause buyers to prize those particular brands  Carry high prices and represent well-known brands  Includes specialty services  Purchasers know what they want -- and are willing to pay for it  Because purchaser are willing to exert the effort to buy specialty products, producers can promote them through few retail locations  Some firms limit the range of retailer that will carry their product  Highly personalized service and image advertising help promote Ex. lexus, infinit, luxury cars, botox injections, … Unsought Products  Products marketed to consumer who may not yet recognize any need for them  Few products in this category Ex. pre-need funeral plans, long-term healthcare insurance …  Unmet or undiscovered needs  steve jobs; ipad Convenience Products  Goods and services that consumers want to purchase frequently, immediately, and with minimal effort  Impulse products  spur of the moment Ex. magazines, snacks  Staples  bought constantly to replenish and maintain a ready inventory (many competitors) Ex. gas, milk  Emergency products  bought in response to unexpected and urgent needs Ex. vet visit, plumbing repair kit  Consumers devote little effort to these purchase decisions; marketers try to makes these exchanges convienent  Store location  can boost products visibility  Location within a store, and on a shelf makes a difference  Slotting fees  charged to firms in exchange for a guaranteed display of their merchandise in the most visible spot on shelf Classifying Consumer Services  services are also classified based on convenience, shopping, and specialty categories.  But several factors are unique to classifying services, and service firms may sell to business markets, consumer markets, or both.  Marketers can ask five questions to classify services:  What is the nature of the service?  What type of relationship does the firm have with its customers?  How much flexibility is there for customization and judgment on the part of the provider?  Do demand and supply for the service fluctuate?  How is the service delivered? Applying the Consumer Products Classification System  The three-way classification system (convenience, shopping or specialty) guides firms in developing a marketing strategy.  Buying behaviour patterns and marketing mix choices differ for the three different product types.  Problems:  Not all goods and services fit within one of the three categories; some share characteristics of more than one category.  Products might be more accurately classified on a continuum, depending on effort spent by consumers—at one end they casually pick up items, at the other end they search extensively for specific products.  Consumers differ in their buying patterns, but goods and services are classified based on purchase patterns of the majority of buyers Marketing Impact of the Consumer Products Classification System Types of Business Products  Categories emphasize product use rather than consumer buying behavior  Business buyers = professional customers  Their jobs require rational, cost-effective purchase decisions  B2B products will generally fall in one for the 6 categories for product uses:  Installations o are the specialty products of the business market, this classification includes major capital investments for machinery and telecommunications systems ex. airplane, office tower  Accessory equipment o capital items that cost less and last for shorter periods than installations. Ex. smartphone, computers  Component parts and materials o are finished business products of one producer that become part of the final products of another producer. Ex. fabric, computer chips  Raw materials o resemble component parts and materials in that they become part of the buyers’ final products. Ex. sugar, milk, iron ore  Supplies are regular expenses that a firm incurs in its daily operations, and are not part of a final product.  Supplies are called MRO items o fall into three categories: maintenance items, repair items, operating supplies ex. staples, tape  Business services o Include intangible products that firms buy to facilitate their production and operating processes Ex. railroad, oil rig services, trucking Marketing Impact of the Business Products Classification System Quality as a Product Strategy  Quality is the key component to a firms’ success  Poor quality discovered in a newly purchased item  can leave an impression that will lead customer to make different decision in future (same with poor service quality)
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