MARKETING 3.01

Product/Service Management

Intro• Who is responsible for the last product you

bought?

• Did you know…..

-It took over 3 years to develop Google’s search engine

-It took over 4 years to develop the famous chicken sandwich at Chick-fil-a

Product/Service Management

• A marketing function that involves obtaining, developing, maintaining, and improving a product or service mix in response to market opportunities.

Product and Service Classification System

• Convenience goods - little effort, relatively inexpensive

• Shopping goods - e.g ‘white goods’, DIY equipment, more expensive, infrequent

• Speciality goods - extensive search e.g Jewellery, gourmet food

• Unsought goods - e.g. double glazing,

• Industrial goods• Installations - ‘speciality’ goods of industrial

markets - plant and machinery• Accessories - maintenance and office

equipment• Raw materials• components • Business to business e.g. consultants,

accountants

Product/Service Management• Factors affecting Product/Service

Management:1. Customer Needs and Wants

2. Company Goals and Strategies

3. Cost and Available Resources

4. Competition

5. Product Itself

6. Government Regulation

7. Stages in Life Cycle

8. Business and Economic Trends

Product/Service Management

• What are Benefits to Product/Service Management?

-Offer products consumers want and company’s profits increase

-When developing the right products, a company can gain new customers

-When products are well managed there is less of a chance for failure

Product/Service Management

• What role does Product/Service Management play in Marketing?

1. Affects positioning of product-what image do you want to create about the product in the minds of consumers?

2. Improves product success

3. Gives product an image -what impressions do you have of certain brands

Product/Service Management• Who is responsible for managing

product/service management?-Several employees of a company, certain departments, 1 employee or just the boss. Normally depends on size of company.

• 3 Main Phases of Product/Service Management

1. Developing New Products

2. Monitoring Existing Products - Sales, Profit, Market Share

3. Eliminate Weak Products

Now let’s see if you got it…

• 8 student groups• Assign each group one factor (remember –

there are 8 factors?) that affect product/ service management.

• Allow each group to choose a product.• Discuss how their assigned factor affects that

product.• Present their findings to the class.

Product Life Cycles

Stage 1 of Product life cycle – Introduction of the Product

• Product is launched. A product launch is always risky. You never know how the market will receive the product. There have been numerous failures in the past to make marketers nervous during the launch of the product. The length of the introduction stage varies according to the product.

• If the product is technological and receives acceptance in the market, it may come out of the introductory phase as soon as it is launched. Whereas if the product is of a different category altogether and needs market awareness, it may take time to launch.

Characteristics of Introductory Stage

• Higher investment, lesser profits• Minimal Competition• Company tries to Induce acceptance and gain

initial distribution• Company needs Promotions targeted towards

customers to increase awareness and demand for product

• Company needs Promotions targeted towards channel to increase confidence in the product

Stage 2 of Product Life CycleGrowth of the Product

• Product starts showing better returns on investment.

• Your customers and channels begin responding.

• There is better demand in the market and slowly the product starts showing profits.

Growth (CONT.)• This is a stage where competition may step in to

squash the product before it has completely launched.

• Any marketing mistakes done at this stage affect the product considerably as the product is being exposed to the market and bad news travels fast.

• Thus special care has to be taken in this stage to ensure competition or bad decisions do not affect the growth stage of the product.

Characteristics of Growth Stage

• Product is successfully launched• Demand increases• Distribution increases• Competition intensifies• Company might introduce secondary

products or support services.• Better revenue generation and ROI

Stage 3 of Product Life Cycle Maturity Stage

• One of the problems associated with maturity stages in a technologically advanced environment is the problem of duplication.

• Not only is the product available in duplicate markets, but also there are several competing products which arise with the same features and capabilities.

• As a result, the product becomes less attractive.

Characteristics of Maturity Stage

• Competition is high• Product is established and promotion expenditures

are less• Little growth potential for the product• Penetration pricing, and lower profit margins• The major focus is towards extending the life cycle

and maintaining market share• Converting customers product to your own is a

major challenge in maturity stage

Stage 4 of Product Life Cycle Stage of Decline

• 1 product, 10 competitors, minimum profits, huge amount of manpower and resources in use – A typical scenario which a product might face in its last stage. In this stage the expenditures begin to equal the profits or worse, expenses are more than profits.

• Typical scenario for the product to exit the market. It also becomes advantageous for the company as the company can use resources it was spending on the declining product on an altogether different project.

Characteristics of Decline Stage

• Market is saturated• Sales and profits decline• Company becomes cost conscious• A lot of resources are blocked in rejuvenating

the dead product.

DECLINE - Only three options left with the company

– Re positioning or Rebranding of the product to extend product life cycle

– Maintain the product as it is and reduce costs to get maximum profits till the product can produce profits

– Take the product off the market.

• What is a product that has been around for as long as you can remember?

• How has it changed over the years?

Product Life Cycle

• Product Life Cycle represents the stages that a product goes through during its life.

• There are 4 Stages of Life Cycle:1. Introduction

2. Growth

3. Maturity

4. Decline

Product Life Cycle

• What are the goals of the Introduction Stage?– To increase product awareness

– Get the customer’s attention thru promotion

– Lots of special promotion

• During Growth Stage:– Customers are aware of product, sales increase

– Companies focus on customer satisfaction

– Competition starts from other companies

Product Life Cycle

• What happens during Maturity Stage?– The product’s sales level off. More money is

spent on competition during this stage.

• Discussion: Have class to choose a mature product

• Discuss how company is managing: 1. Competition

2. Advertising

3. Distribution – Is it only sold at 1 place

4. Other Strategies they have put in place

Few:Few: trial of trial of early earlyadoptersadopters

Growing adopters:Growing adopters: trial of trial of product/service product/service

Entry of Entry of competitorscompetitors

Growing selectivityGrowing selectivity of purchase of purchase

May be manyMay be many

Saturation ofSaturation of users users

Repeat purchaseRepeat purchase reliance reliance

Fight to maintainFight to maintain share share

Drop-offDrop-offin usagein usage

Exit of someExit of somecompetitorscompetitors

DevelopmentDevelopment GrowthGrowth MaturityMaturity DeclineDecline

The life product cycle model

Product Life Cycle

• During the Decline Stage:– Sales start to decline. A company must decide to

alter the product, discount, or discontinue product.

How can you extend a product’s lifecycle?

• All businesses want to maximize their profits by ensuring that the lifespan of their product is as long as possible.

• Businesses can adopt several strategies to extend the life of their product.

Extending a Product’s Lifecycle

• make modifications to the product – eg new car model

• change the packaging • reduce the price • export to a new market • introduce new varieties

– eg lime-flavoured Coke

• increase the advertising

• Some businesses may decide not to employ any extension strategies, and simply withdraw the product from the market.

• At the decline stage, the business should be prepared and have a second product ready to replace the declining product.

Extending a Product’s Lifecycle (cont.)

• Consider how these products have had their life cycle extended:

– Coca-Cola

– Kit Kat

– Playstation console

Extending a Product’s Lifecycle (cont.)

4 IMPORTANT TERMS

• Product Mix

• Product Line

• Product Width

• Product Depth

Product MIX

= All the products a given company produces comprise the product mix, or product assortment.

Product LINE

= a group of these products associated by function, by consumer group, by distribution channel or by price range.

A company could have one line or several lines, but all the products within this line or lines would be the mix.

Product WIDTH

= Number of product lines that a company sells

• Small and upstart businesses will usually not have a wide product mix.

• It is more practical to start with some basic products and build market share.

Product DEPTH

= Total number of variations for each product.

• Variations can include size, flavor and any other distinguishing characteristic.

• For example, if a company sells three sizes and two flavors of toothpaste, that particular brand of toothpaste has a depth of six.

REVIEW

• Teams of 2• Agree to use one of the 2 products you each wrote

down for the intro (“What is a product that has been around for as long as you can remember?”)

• Write down the 4 stages of the life cycle.• Write down how it changed over the years for each

of the 4 stages. If you believe it has not yet reached the stage, predict what you think the future holds for the product when it does hit this stage – what could be done?

Technology in Product/Service

Management

Intro

• Describe the use of technology in Product/Service Management

How technology is used to manage the product life cycle

• Technology provides a shared platform for collaboration among product

• The product lifecycle management (PLM) software market is evolving rapidly and growing fast.

How technology is used to manage the product life cycle

• Product Lifecycle Management (PLM) Systems enable technology for PLM to integrate people, data, processes, and business systems and provide a product information backbone for companies and their extended enterprise.

• Techonology allows integration of these tools with methods, people and the processes through all stages of a product's life

How technology is used to manage the product life cycle (cont.)

• Data Mining and Data Warehousing are two technology components which are collectively used for deriving valuable pieces of knowledge (in form of trends, patterns and rules) from hoards of data.

Technology in Product/Service Management

• Applications of Technology in Marketing:1. Point-of-Sale Systems

2. Interactive Touch Screen Computer

3. Interactive TV

4. Customer Relationship Management

5. Enterprise Resource Planning Systems

6. Internet

Technology in Product/Service Management

• Applications of Technology in Marketing:

1. Point-of-Sale Systems

2. Interactive Touch Screen Computer

– Scanners at cash registers, touch screens, –hand-held devices at checkout

– Example: Kiosks

Technology in Product/Service Management Continued

• 3. Interactive TV

• 4. Customer Relationship Management

– Where TV is like a computer- order movies,click on Ragu for recipes, order food

– A customer can track an order. The CRM orbusiness can track customer satisfaction

SIDE NOTE – Interactive TV

• Interactive TV helps marketers to develop a database of their uses

• This database analysis helps see the customer’s reaction to products

• They are testing Interactive TV for promotion

Technology in Product/Service Management Continued

5. Enterprise Resource Planning Systems

– Software that allows all parts of the company’s management to be integrated

Technology in Product/Service Management Continued

6. Internet– Wi-Fi– Search Engines– E-mail– E-commerce

Product Labeling & Packaging Technology

• Some packages and labels also are used for track and trace purposes

• Food packaging protects and preserves food. A range of materials can be used for packaging, some of which are environmentally friendly. Labels carry information for the consumer. Some of this information is required by law.

• A pack of pork from Tesco is labelled with a sticker that says "No Carbs per serving". This is clearly aimed at people on a low-carbohydrate diet.

Product Labeling & Packaging Technology (cont.)

Packaging Functions & Technology

• to preserve the product

• to protect the product from damage

• to make the product more attractive to the consumer

• to make it easier to transport the product

Packaging Technology

• Prototype Coca-Cola bottle, 1915.

• Later revised for better stability

• And mass production

Packaging (cont.)

•What other packaging does Coke Cola use?

•WHY?

How technology is used in market testing

• Virtual store simulations can be an indispensable tool for understanding in-store behavior and designing stores and merchandising programs that truly meet the needs of consumers.

• Use of computer-driven store simulation technologies to conduct market research and achieve other key business objectives is fast becoming a common practice among consumer product manufacturers and retailers

• If conducted properly, virtual store tests can deliver a more accurate representation of at-shelf product selection and other shopping behaviors than traditional methods of consumer research and a faster, more cost-efficient alternative to in-store field tests.

How technology is used in market testing (cont.)

• Startup costs can be significant, the use of virtual store simulations offers a wide variety of business benefits that practitioners say more than justify the initial expense.

• Valuable tool for new product development.

How technology is used in market testing (cont.)

• Virtual store simulations can be an indispensable tool for understanding in-store behavior and designing stores and merchandising programs that truly meet the needs of consumers

• Contribute to a better new product success rate.

How technology is used in market testing (cont.)

Now you design some Technology!• Teams of 2 - Select a store & design a touch

screen computer interface for an in store kiosk.

• Write down: 1) What questions should be asked? 2) What data/ information should be collected? Think about:– How could the company use the information? – What information does the company need to save

about the transactions?– What information does the company need to save

about the customers?

Ethical Considerations in Product Packaging

Ethics & Packaging• Have you ever seen commercials for an item that

looks great, but when you actually buy one it doesn't look anything like it did on TV????

• Well that is sometimes what happens with packaged products.

• The product looks great on the outside of the box, but when the box is opened the product is completely different from the way the packaging described it.

• Many products are purchased sight unseen by how they are packaged.

• The consumer assumes that the picture and description of the product are a true and honest representation of it.

• The company who misrepresents its product by covering it up with a fancy box.

Ethics & Packaging (cont.)

• The company will develop a bad reputation as untrustworthy.

• Even if they do have a product that is superior in quality etc, the consumer will not buy it based on another products misrepresentation through the packaging.

• Once bitten, twice shy.

Ethics & Packaging (cont.)

• It is unethical to mislead the consumer, and depending on the severity, the company could face charges.

Ethics & Packaging (cont.)

Ethical Considerations in Product Packaging

• Business Ethics in Product/Service Management

Ethical Considerations in Product Packaging

• Why do you think companies package and label their products?Answer: Create a good impression Help sell product Communicate benefits

• Concerns for Product Packaging?Product Safety- Glass now plastic

Tamper-resistant packages Airtight containers for foods Wasteful packaging Switching for spray cans and pumps

Ethical Considerations in Product Packaging

• Product labeling must inform customers about a product’s contents and give directions for use.

1. Must have name of manufacturer

2. Quantity of contents

3. Nutritional info

4. Health claims are the same on all products; light, fat free, etc.

5. Warnings on products like alcohol and cigarettes

6. How to care for clothes

Ethical Considerations in Product Packaging

• Product labeling must inform customers about a product’s contents and give directions for use.

1. Must have name of manufactures

2. Quantity of contents

Ethical Considerations in Product Packaging

3. Nutritional info

4. Health claims are the same on all products; light, fat free, etc.

Ethical Considerations in Product Packaging

5. Warnings on products like alcohol and cigarettes

6. How to care for clothes

Ethical Considerations in Product Packaging

• In order for a product to say recycled it must show proof that it is retrieved a certain amount of scraps/ recycled materials.

• For a food to be organic it must meet certain standards

Ethical Considerations in Product Packaging

• What happens when a company fails to inform customers about product risks?1. Company can get sued (the company becomes liable)2. Harm to customer

• What is Planned Obsolescence?= Making products that are known to not last long, or change, so that people will need to replace them

–Example: Cell phones are always coming out with newer functions and it makes consumers want to purchase the new and improved cell phones

Ethical issues associated with changing a product’s quality.

• products that are unsafe • poor quality in construction or content • do not contain what is promoted • go out of style or become obsolete before

they actually need replacing

An organization that markets poor quality or unsafe products…

• is taking the chance that it will develop a reputation for poor products or service.

• may be putting itself in jeopardy for product claims or legal action.

Sometimes, however…

• frequent changes in product features or performance.

• such as those that often occur in the computer industry, make previous models of products obsolete.

• such changes can be misinterpreted as planned obsolescence.

Product/Service Management Decisions

• Product and Service Classification System?

• The Product Life Cycle stages?• Growth/Share?• Product Market?

BONUS POINT PROJECTField Trip to Grocery Store

(or VIRTUAL Field Trip)• Work in a team or alone• Requires either a PowerPoint, a movie, actual

product examples, or a board with pictures• Must meet ALL 13 criteria (200 BP’s!!!)• Must list/label the correct criteria with the

photo, product, or whatever you choose for the visual aid (not just random pictures…)

• Due Monday (9/10) – NO LATE WORK!!!