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| Product strategy, services, new offerings and life cycle |
1. Setting Product Strategy
| The product is the first and most important element of the marketing mix. If the product is weak, no amount of clever pricing or advertising will save it for long. Product strategy means making coordinated decisions about the product mix, product lines, brands, and packaging and labelling. Kotler defines a product as anything that can be offered to a market to satisfy a need or want: physical goods, services, experiences, events, persons, places, properties, organisations, information and ideas. |
1.1 The five product levels
Marketers must look beyond the physical item and think about what the customer is really buying. Imagine a hotel room:
| Level | Meaning | Hotel example |
| Core benefit | The fundamental need the customer is really buying | Rest and sleep |
| Basic product | The core benefit turned into a basic version | A bed, bathroom, towels, desk |
| Expected product | The attributes and conditions buyers normally expect | Clean bed, fresh towels, working lights |
| Augmented product | Extra features that go beyond expectations and set the brand apart | Free Wi-Fi, quick check-in, a good breakfast |
| Potential product | All the possible augmentations and transformations the product might undergo in future | Automated rooms, personalised smart services |
Competition today happens mainly at the augmented level, and as customers get used to extras, they turn into expectations, so firms must keep innovating.
1.2 Product hierarchy
From broad need to specific item: need family → product family → product class → product line → product type → brand → item (stock-keeping unit).
1.3 Classifying products
By durability and tangibility
- Nondurable goods: consumed in one or a few uses (soap, food). They need frequent purchase and heavy advertising.
- Durable goods: used over a long time (refrigerators). They need personal selling, service and guarantees.
- Services: intangible and inseparable (covered in Chapter 14).
Consumer goods
| Type | Description | Examples |
| Convenience goods | Bought frequently and with minimal effort. Three sub-types: staples (regular), impulse (unplanned) and emergency (urgent need) | Milk, chocolate at the checkout, umbrellas in the rain |
| Shopping goods | Compared on quality, price and style. Homogeneous (similar quality, price decides) versus heterogeneous (features and style matter more) | Washing machines, furniture, clothes |
| Specialty goods | Unique characteristics or brand identification; buyers will make special effort | Luxury cars, designer watches |
| Unsought goods | Consumers do not know about them or do not normally think of buying them | Life insurance, smoke alarms |
Industrial goods
| Type | What it includes |
| Materials and parts | Raw materials (farm products, natural products) and manufactured materials and parts (components such as tyres, steel) |
| Capital items | Long-lasting goods that facilitate production: installations (big machinery) and equipment (tools, office equipment) |
| Supplies and business services | Operating supplies, maintenance and repair items, plus repair and advisory services |
1.4 Differentiating products
Products can stand apart on many dimensions. For physical products:
- Form, features, performance quality, conformance quality (how closely every unit matches the promised spec), durability, reliability, repairability, style and customisation.
And on service dimensions: ordering ease, delivery, installation, customer training, customer consulting, maintenance and repair.
Design deserves special mention. It is the totality of features that affect how a product looks, feels and functions. A well-designed product gives both functional and aesthetic benefits and can be a major source of differentiation. Think of how a good design makes a product easier to use, cheaper to produce and more pleasing to own.
Luxury brands are a special case. They command premium prices, often come with a strong lifestyle component, and need special handling in how they are sold and communicated (exclusivity must be protected).
1.5 Product and brand relationships
The product mix (product assortment)
A firm usually sells more than one product. The product mix is the set of all products and items it offers. It has four dimensions:
| Dimension | Meaning | Example (a soap company) |
| Width | How many different product lines the company carries | Soaps, shampoos, toothpaste = 3 lines |
| Length | Total number of items across all lines | All items in all three lines combined |
| Depth | How many versions of each product in a line are offered | Three sizes and two fragrances of one shampoo |
| Consistency | How closely related the lines are in end use, production, distribution or other ways | All personal-care items = high consistency |
These four dimensions let the firm expand its business in four ways: add new lines (more width), lengthen existing lines, add more versions (depth), or pursue more or less consistency.
Product-line analysis
Product-line managers study sales and profits (how much each item contributes, and how concentrated the line is) and market profile (how the line is positioned against competitors) to decide where to invest, hold, harvest or divest.
Product-line length decisions
- Line stretching: moving beyond the current range. Down-market stretch (add cheaper models, perhaps to block entrants), up-market stretch (add premium models for growth and prestige), or two-way stretch.
- Line filling: adding more items within the current range to use excess capacity, satisfy dealers, or plug gaps competitors might fill. Avoid overdoing it so items do not cannibalise each other.
- Line modernisation: updating the line piece by piece or all at once.
- Line featuring: promoting one or a few items to draw traffic.
- Line pruning: removing the weakest items.
Co-branding and ingredient branding
- Co-branding (dual branding): two or more well-known brands combined in one offer (for example, a credit card jointly issued by a bank and an airline). It works when the brands have equity and fit well.
- Ingredient branding: a special type of co-branding where a component is marketed as a brand in its own right (“Intel Inside”).
1.6 Packaging, labelling, warranties and guarantees
Packaging is often called the “fifth P”. A good package protects the product, attracts attention, describes and promotes it, and adds convenience. Labelling identifies the brand, grades the product, describes it (who made it, where, contents, how to use it) and promotes it through attractive graphics. Legal requirements for labels vary by country.
Warranties and guarantees reduce the buyer’s perceived risk and signal quality.
| Remember this Environmental responsibility. Products and packaging should be designed to reduce adverse environmental impact as much as possible. |
| Remember this Five levels of product: core benefit, basic, expected, augmented, potential.Consumer goods: convenience, shopping, specialty, unsought.Product mix: width, length, depth, consistency.Line decisions: stretch (down, up, two-way), fill, modernise, feature, prune. |
2. Designing and Managing Services
| A service is any act or performance that one party can offer to another that is essentially intangible and does not result in ownership of anything. Production may or may not be tied to a physical product. Services are now the biggest part of most economies: banks, airlines, hospitals, hotels, education, consulting and more. |
2.1 Categories of the service mix
Offers fall along a spectrum from pure goods to pure services. Five categories:
| Category | Example |
| Pure tangible good | Soap, toothpaste (no service attached) |
| Tangible good with accompanying services | A car sold with a warranty and servicing |
| Hybrid | A restaurant: food and service are equally important |
| Major service with accompanying minor goods and services | Air travel: transport, with snacks and magazines |
| Pure service | Babysitting, psychotherapy, consulting |
2.2 The four characteristics of services (and what to do about each)
| Characteristic | What it means | Marketer’s response |
| Intangibility | Services cannot be seen, tasted, felt or heard before purchase, so buyers feel more uncertainty. | Make the service tangible: build place, people, equipment, communication material, symbols and price cues that signal quality. |
| Inseparability | Services are produced and consumed at the same time, and the provider is part of the service. | Train providers to interact well, work with larger groups, work faster, and build a strong team. |
| Variability | Quality depends on who provides it and when and where. | Invest in selection and training, standardise the process through a service blueprint, and monitor customer satisfaction. |
| Perishability | Services cannot be stored. An empty airline seat today cannot be sold tomorrow. | Balance supply with demand: for demand, use differential pricing, off-peak discounts and reservation systems; for supply, use part-time employees, peak-time efficiency routines and shared facilities. |
2.3 New realities in service marketing
- Customer empowerment: customers now research, compare and share experiences online.
- Customer coproduction: customers help create the service (self-service, ATMs, online check-in).
- Satisfying employees as well as customers: happy employees deliver better service, so firms must look after both groups.
2.4 Achieving service excellence
Service marketing calls for three kinds of marketing, not just the usual one:
| Type | Who is involved | Purpose |
| External marketing | Company to customers | Setting the promise: price, distribution, promotion |
| Internal marketing | Company to employees | Training and motivating staff so they can keep the promise |
| Interactive marketing | Employee to customer | Skill of the employees at the moment of service delivery (the “service encounter”). Both high tech and high touch matter. |
Best practices of top service companies
- A strategic concept focused on customers.
- A history of top-management commitment to quality.
- High standards, and not just “good enough”.
- Profit tiers: They treat customers differently based on their profit value.
- Systems for monitoring service performance: comparison shopping, mystery shoppers, customer surveys, suggestion forms, and complaint systems.
- Satisfying both customers and employees.
Differentiating services
Services can be differentiated through primary service features (the main offer) and secondary service features (extras that add value), and through continual innovation. Because many service features are easy to copy, the main source of lasting difference is often superior delivery by people.
2.5 Managing service quality
Customers judge service by comparing expected service with perceived service. Firms should manage expectations carefully, because overpromising leads to disappointment, and look at every service encounter, since each “moment of truth” shapes the overall judgement.
Five determinants of service quality (SERVQUAL):
| Determinant | Meaning |
| Reliability | Ability to perform the promised service dependably and accurately |
| Responsiveness | Willingness to help and give prompt service |
| Assurance | Knowledge, courtesy and ability to inspire trust |
| Empathy | Caring, individualised attention |
| Tangibles | Appearance of facilities, equipment, personnel and materials |
The Gaps Model of service quality
This model identifies five gaps that can ruin service delivery:
- Gap 1: between consumer expectation and management perception. Management does not always understand what customers want.
- Gap 2: between management perception and service-quality specification. Management understands but fails to set a clear standard.
- Gap 3: between service-quality specifications and service delivery. Employees are poorly trained or cannot meet the standard.
- Gap 4: between service delivery and external communications. Promises made in ads and by salespeople create expectations the service cannot meet.
- Gap 5: between perceived service and expected service. The customer misjudges the quality or is not given the right experience. This gap is the end result of the first four.
Self-service technologies and complaint handling
Self-service technologies (SSTs) such as ATMs, online booking and kiosks can raise convenience and cut costs, but they need to be easy to use. When things go wrong, how a firm handles complaints matters: customers whose complaints are resolved quickly and fairly are often more loyal than those who never had a problem. This is called service recovery.
2.6 Managing product-support services
Even product-based companies must provide good support after the sale. A manufacturer should identify the services customers value most and the relative importance of each. The service mix has two parts:
- Presale services: facilitating services (such as credit, delivery, installation) and value-augmenting services (such as design help or training).
- Postsale services: customer-service departments, repair and maintenance.
| Remember this Four traits of services: intangible, inseparable, variable, perishable.Three types of marketing in services: external, internal, interactive.Five service-quality dimensions: reliability, responsiveness, assurance, empathy, tangibles.Five gaps in the Gaps Model; Gap 5 is the overall result. |
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