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SECTION 6

Product mix and decisions

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INTRODUCTION:

•  “Products lie at the heart of a firm’s marketing strategy”: they are the “starting point in designing a firm’s marketing mix”.

•  Products can be tangible or intangible (services, ideas, events, persons, places, image and reputations etc);

•  Definition of a product: “Anything offered to a market for attention, acquisition, use or consumption that might satisfy a want or need”

(Kotler and Armstrong, 2014:248).

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2017 TOP 10 BEST BUSINESS CLASSES ON AIRLINES

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SERVICES

“Services are a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in ownership of anything” (Kotler and Armstrong, 2014:248).

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PRODUCTS, SERVICES AND EXPERIENCE

Company.’s market offering: •  Often includes both tangible goods and

intangible services. So, a combination of both products and services.

Pure service (e.g. doctor’s

visit) Mixture

Pure product (e.g.

toothpaste)

However, products and services are becoming more and more commoditised these days....so, what’s the solution?

(Kotler and Armstrong, 2014:249).

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POWER OF EXPERIENCE

•  New level of customer value creation: product + service + enjoyable, satisfying experience = the starting point of a long-term customer relationship.

•  A recent BMW ad: “We realized a long time ago that what you make people feel is just as important as what you make.”

•  Complete the Starbucks case study.

(Kotler and Armstrong, 2014:249).

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LEVELS OF PRODUCTS AND SERVICES

Augmented product

Actual product

Core customer

value

Adapted from Kotler and Armstrong, 2014:250)

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LEVELS OF PRODUCTS AND SERVICES

Core customer value •  It is the basic level of a product •  Answers the question: What is the buyer

really buying? •  Marketers must identify and define the core,

problem solving benefits or service that the consumers really seek.

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ACTUAL PRODUCT

•  Managers at this level must convert the core benefits into and actual product.

•  Brand name, product and service features are developed, a design, a quality level, packaging etc.

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AUGMENTED PRODUCT

•  Managers must build an augmented product around the core benefits and actual product offering by offering additional consumer services and benefits

•  Added service maybe a warranty.

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CLASSIFYING PRODUCTS & SERVICES

Product are classified into consumer products and industrial products Consumer products:

•  Classified based on how consumers go about buying them. •  Include:

Ø  convenience products; (everyday necessity eg grocery) Ø  shopping products; (Less frequently bought and consumer take time

to buy and compare prices, furniture) Ø  speciality products; (bought for social status and consumer invest in

time to contact dealers) Ø  unsought products. (consumer does not know about or use such

product and need persuasion)

•  See Table 8.1, p. 251 (prescribed text) for a detailed summary.

(Kotler and Armstrong, 2014:251).

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PRODUCT AND SERVICE DECISIONS

Made at three levels: 1.  Individual product decisions; 2.  Product line decisions; 3.  Product mix decisions.

•  See Fig. 8.2, p. 253 (prescribed text) for a detailed summary.

•  Also: Table 7 (SG): example of a Co.’s Total Product Mix

(Kotler and Armstrong, 2014:253-259).

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INDIVIDUAL PRODUCT DECISIONS

Decisions are made on: •  Product attributes •  Branding •  Packaging •  Labeling •  Product support service

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PRODUCT LINE DECISIONS

•  “It 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 a given price ranges” (Kotler and Armstrong, 2014:258)

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PRODUCT LINE DECISIONS

Decisions involve: •  Product line Length: number of products in product line. •  The line too short if profits are increased by adding more

items. •  The line line is too long if profits are made by dropping

items •  Product line can be expanded by line filling or line

stretching •  Line filling: Adding more items within the present range of

line. •  Line stretching: lengthens its product line beyond its

current range.

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PRODUCT MIX DECISIONS

•  An organisation with several products lines has a product mix (product portfolio).

Dimensions of a product mix involve: •  Width:# of different product lines the co. offers •  Length: total # of items a co. carries in its

product lines. •  Depth:# of versions offered for each product in

the line. •  Consistency: How closely related the various

product lines are in end-use, production requirements, distribution channels etc.

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WHAT IS AN IDEAL PRODUCT MIX?

•  An ideal product mix “is a dynamic concept” Company’s objectives to be realised include: •  Expected sales growth •  Market share •  Cash flow and •  profitability

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SERVICE MARKETING

Importance and Growth of Services:

•  Services now account for “close to 65 percent of the U.S. gross domestic product (GDP)”

•  “Worldwide, services make up around 64 percent of the gross world GDP”

•  Service industries vary greatly: by type, and who provides them.

(U.S. Bureau of Economic Analysis, 2012; Kotler and Armstrong, 2014:259-260).

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CHARACTERISTICS AND CHALLENGES OF SERVICES MARKETING:

•  Marketers must consider four special service characteristics when designing marketing strategies:

Ø  intangibility, inseparability, variability, and perishability (see Figure 8.3, p. 261 of the prescribed text).

(Kotler and Armstrong, 2014:260-261).

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SERVICE INTANGIBILITY

•  Service cannot be seen, tasted, felt, heard or smelt before they are bought.

•  Marketer must endorse tangibility by providing tangible evidence e.g. receipts, people, equipment etc.

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SERVICE INSEPARABILITY

•  Service cannot be separated from their providers, whether they are people or machines.

Service Variability •  The quality of the service depends on who

provides them as well as when, where, and how they are provided.

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SERVICE PERISHABILITY

•  Services cannot be stored for future use.

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MARKETING STRATEGIES FOR SERVICES

Strategies involve differentiation and positioning. The service profit chain The chain consist of five links namely: 1.  Internal service quality 2.  Satisfied and productive service employees 3.  Greater service value 4.  Satisfied and loyal customers 5.  Healthy service profits and growth

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INTERNAL MARKETING AND INTERACTIVE MARKETING

Internal marketing: The service firm orient and motivate its customers-contact employees and supporting service people to work as a team to provide customer satisfaction. Employees are also informed about new products/services to ensure ownership and team work. Interactive marketing: Service quality depends heavily on the quality of the buyer-seller interaction during the service encounter.