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Essentials of Health Care Marketing 2nd Ed.

Eric Berkowitz

Chapter 8

Product Strategy

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Learning Objectives

• Objective 1 – Learn the range of product and service variation.

• Objective 2 – Understand the issues of product line formation.

• Objective 3 – Identify the strategy considerations over the product life cycle.

• Objective 4 – Know the strategic implication of alternative branding strategies.

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Learning Objective 1

• The Focus of marketing revolves around the products and services to meet customers need.

• Products can be divided into two groups.– Nondurable goods– Durable goods

• A wide range of health care activities involve services which are intangible activities or processes offered to customers to solve problems.

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Learning Objective 1

• The 5 I’s of service:– Intangibility – services cannot be felt,

touched, or heard before they are encountered.

– Inconsistency – health services are delivered by people – nurse practitioner, the physician, or the admitting clerk in the group practice.

– Inseparability – services cannot be separated from the individuals who deliver them.

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Learning Objective 1

• The 5 I’s of service continued:– Inventory – is a concept that is common to

product business and is often ignored.– Interaction with customers – a service is the

quality of the interaction between the customer and the service provider.

• Customer contact Audit – is a flow chart of the point of interaction between the customer and the service offering.

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Learning Objective 1

Products are classified by type of users• Consumer goods – products purchased by the

ultimate consumer.– Convenience goods are products that the consumer

purchases frequently that require little deliberation of search prior to purchase.

– Shopping goods are products in which the consumer engages in significant amount of research to compare competing brand on selected attributes.

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Learning Objective 1

Products can be classified by type of user• Industrial products – purchased for use in the

manufacture of other products which will, at some point, be purchased by the ultimate consumer.– Production goods are those that are used to

become part of a final product.– Support goods are items used to assist in the

producing of other products.

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Learning Objective 1

Services can be classified by how they are delivered: by people or equipment.

• Equipment based has fewer problems with inconsistency.

• Health care industry: for profit or non-profit – In for-profit businesses, some portion of profit often is

directed to the shareholders.– In non-profit service organizations, excess revenues

are redirected back to the organization to continue the maintenance of the service.

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Learning Objective 2

• All businesses must decide which products are service to offer.

• Companies must determine the breadth and depth of the product mix.

• Most companies manage multiple product lines and items.

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Learning Objective 3

• Product life cycle – refers to the stages a product goes through as it exists in the market from its first introduction to its final withdrawal.

• Four Stages– Introduction, Growth, Maturity, Decline

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Learning Objective 3

• Introduction – occurs when the product is first rolled out into the marketplace.

• Growth – sales of the product begin to increase rapidly.

• Maturity sales of the product begin to slow.

• Decline – the organization must recognize that the service cannot continue to grow.

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Learning Objective 3

• Product Life Cycle Issues– Alternative Product Life Cycles– Length of the Life Cycle– Product Life Cycle Concerns

• Modifying the Product Life Cycle– Product Modification– Market Modification– Repositioning the Product

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Learning Objective 4

• Brand – any name, term, color, or symbol that distinguishes one seller’s product from another.

• Trademark – a brand name or trade name given legal protection.

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Learning Objective 4

Branding Strategies• Multiproduct Strategy – the company places one

brand name on all of the products in its line.– Ex: A hospital puts its name on an outpatient surgery

center or walk-in emergency center.• Multibrand Strategy – the company places a

different name on each item.– Ex: Proctor and Gamble: Tide, Cheer, Ivory Snow

• Reseller and Mixed Strategy – one company sells its product under the name of another company.– Ex: Sears sells Craftsman tools and Kenmore.

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Learning Objective 4

Branding Strategies

• Reseller and Mixed Strategy – one company sells its product under the name of another company.– Sears sells Craftsman tools and Kenmore.

• Co-branding – organization markets its name along side another brand name– Lexus with Coach Luggage leather seats

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Learning Objective 4

• The Diffusion of Innovation– The rate at which a product is adopted by the

market– Innovators– Early Adopters– Early and Late Majority– Laggard

– See Figure 8-9, page 234

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Learning Objective 4

• Factors affecting adoption– Relative advantage– Compatibility– Complexity– Divisibility– Communicability

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Summary• Products and services differ in terms of

tangibility.• Consumer goods can be differentiated by the

amount of effort and manner of search the consumer uses in purchasing the product.

• Industrial goods are classified as either production or support goods.

• When establishing the product element of the marketing mix, a company must decide its product mix, line, and its breadth and depth.

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Summary continued

• All products and services have life cycles consisting of four stages: introduction, growth, maturity, and decline.

• The length of the product life cycle is affected by uncontrollable forces such as technology and demographics. An organization can impact its sales in each stage relative to competition through its marketing mix strategy.

• In the early stages of the product life cycle, a new entrant can price high to skim only the most likely buyers, or penetrate the largest market by pricing low.

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Summary continued• Organizations can stretch the life cycle in the mature

phase through either product or market modification• An organization’s brand name can have value or equity

in the marketplace. In deciding on a brand, a firm can pursue a multiproduct, multibrand, reseller, or co-branding strategy.

• Acceptance of a product is the result of diffusion through the population. Individuals differ in the rate of adoption of new products.

• The rate of adoption of a new product is affected by perception of relative advantage, compatibility, complexity, divisibility, and communicability.