PRODUCT SERVICE MGT 3.

03

 Understands the concepts and processes needed

to obtain, develop, maintain, and improve a
product or service mix in response to market
opportunities

 Employ product-mix strategies to meet

customer expectations.

 Explain the concept of product mix

Product Planning

 How are decisions made to

introduce new products and
delete old ones?
 What is Product Planning?

 Product Planning: The decisions made

about what features should be used in
selling of a business’s products.
 These decisions relate to:
 packaging  guarantees

 labeling  branding

 warranties  product mix

Product Planning

Involves making
decisions about
those features
that are needed to
sell a business’s
products,
services, or ideas.
What is Product Planning?
(cont.)

 Product Mix: All the different products that a

company makes or sells.
 Product Line: A group of closely related products
manufactured or sold by a business.
 Product Item: A specific model, brand, or size of a
product within a product line.
 Product Width: The number of different product
lines a business manufactures or sells.
 Product Depth: The number of product items in a
product line.
What is Product Planning? (cont.)

 A well defined product plan allows a business

to:
 Create sales opportunities.
 Design appropriate marketing programs.
 Develop effective advertising campaigns.
 Coordinate the product mix offered to
customers.
 Add new products.
 Delete older products that no longer appeal
to customers
4 P’s of the PRODUCT MIX

 PRICE

 PRODUCT

 PLACE

 PROMOTION
PRODUCT MIX

= all the types of products a

company makes or sells. The
particular assortment of goods
and services that a business
offers to meet the needs of its
market(s) and its company
goals.
Product Mix and Product Line

PRODUCT
PRODUCTMIX MIX
The
Theset
setof
ofall
all products
productsoffered
offered
for
forsale
salebybyaacompany
company

PRODUCT
PRODUCTLINELINE
AAbroad
broadgroup
groupofof
products
productsfor
forsimilar
similaruses
uses
and
andwith
withsimilar
similarcharacteristics
characteristics
Product Mix
Includes all the different products that
a company makes or sells.
 Identify ways in which
product lines can be
 organized.
Product Line = group of closely related products manufactured
by a business
 Product Item = specific model, brand, or size of a product
within a line
 Ex: P&G has over 250 products within 21 product lines
 Dish care is a product line
 Cascade, Dawn, Joy,
& Ivory are
product items
 Describe product mix
dimensions.
 Some companies have different brands
for different markets

 Coca-Cola has different drinks for

sparkling beverages, water, juice,
performance, coffee, tea, and
international flavors.
Product Line
A group of closely related products
manufactured and/or sold by a
business.
Product Item
A specific model, brand, or size of a
product within a product line.
 DIMENSIONS
 WIDTH = number of product lines carried by a
company.
 NARROW = offering a limited number of product
lines
 BROAD = many different product lines carried

 DEPTH = number of products and the assortment of

sizes, colors, and models offered in a product line
 SHALLOW = limited variety within a product line
 DEEP = extensive variety within a product line
Product Mix

PRODUCT DEPTH
PRODUCTMIX
MIX
Variety
of
sizes,
colors,
models
within
a
product
BREADTH The number of product lines carried line
Product Width
The number of different product lines a
business manufactures or sells.

Width of the Gillette Product Mix

Oral Blades & Personal Batteries Appliances

Care Razors Care
Product Depth
The number of product items offered
within each product line.
Oral Blades & Personal Batteries Appliances
Care Razors Care
 NARROW PRODUCT MIX

= Limited product lines carried, typically

very specialized. A description of the
width of a business's product mix offering
a limited number of product lines.
 Broad Product Mix

= Many different product lines carried.

A description of the width of a
business's product mix offering many
product lines.
 Shallow Product Mix

= Limited variety within a product

line. A description of the depth of a
business's product mix offering few
items in the product line.
 Deep Product Mix

= Extensive variety within a product

line. A description of the depth of a
business's product mix offering a
great many items in the product
line.
 Identify reasons that a
business would offer a
narrow product mix.
 Product Width – number of different product lines
 CONTRACTING - Pruning weak brands can strengthen the
remaining brands in the line.
 Ease on management
 Cost effective
 Simplicity
 Consistency
 Identify reasons that a
business would offer a
broad product mix.
 Product Width – number of different product lines

 EXPANDING
 Reach all markets
 Competitive advantage
 Ex: Red Lobster specializes in seafood, but offers
chicken and steak to broaden their product mix.
 Identify reasons that a
business would offer a
deep product mix.
 Product Depth – number of items
offered within each product line

 EXPANDING
 Variety
 Quantity
Ex: Kohl’s carries various quantities of
sizes, colors, & styles of Levi Jeans.
 Identify reasons that a
business would offer a
shallow product mix.
 Product Depth – number of items offered within each
product line

 CONTRACTING
 Cost effective
 Satisfy small markets

 Ex: Only 2 chicken items on Red Lobster’s menu.

 REVIEW:

What are some key

product mix

strategies?
Product-Mix Strategies

Expansion
Expansion Contraction
Contraction

Alteration
Alteration of
of
Trading
Trading Up
Up and
and
existing
existing products
products
Trading
Trading Down
Down
 Explain the importance of
a business’s product mix.

 Businesses must plan their product mix

carefully because they cannot offer all the
products that customers may want.

 They should be a profitable market for

product offered by a company
 How do businesses
determine which products to
produce and sell?
 Businesses will use different product mix
strategies to determine what to produce or
sell.
 Product mix strategies depend on:
 Resources
 Objectives
 Past and current sales
 Consumer trends
Product Mix Strategies
 The plan for how the business determines
which products it will make or stock

 May develop completely new products

 May expand or modify their current

product lines

 May drop existing products

EXPANSION
Developing New Products

 Generating Ideas
 Come from a variety of sources
 Creativity is essential

 Screening Ideas
 Ideas are evaluated and matched against the
company’s overall objectives.
 Developing New Products (cont.)

 Developing a Business Proposal

 Consider a product’s potential sales, costs,
and production requirements.

 Developing the Product

 The new idea takes physical shape
 Marketers develop a marketing strategy.

 Testing the Product with consumers

Developing New Products (cont.)

 Introducing the Product

 The product has been researched
successfully
 This stage also is called
commercialization.

 Evaluating Customer Acceptance

 Marketers track new product
performance.
 EXPANSION

ADVANTAGES DISADVANTAGES
 Extend product  Adding items to a
lifecycle product line or
introducing an entire
product line can be
 Adding items to a expensive, be difficult to
product line or manage, and not always
introducing an entire be successful.
product line can
capture market
share and meet
customer’s needs
and wants.
Deleting a Product or Product Line

 Obsolescence
 Loss of appeal
 Conflict with current company objectives
 Replacement with new products
 Lack of profit
 Conflict with other products in the line
 CONTRACTION

ADVANTAGES DISADVANTAGES
 Cut losses  Deleting products from a
 Reallocate resources to product line or the entire
more profitable product line is conceding
products market share to your
competitors.
 Deleting products from
a product line or the  It may be wiser to improve
entire product line can the existing product or line
be cost effective and to recapture market share.
easier to manage while
creating simplicity and
consistency
 Describe alteration
product-mix strategies.

Alteration of Existing Products:

Making changes to meet customer
needs & wants
Improve an established product with
new design, new package, new uses.
 Ex: Jeep offering 4 doors
Developing Existing Products
(ALTERATION)

 Companies constantly review their

product mix to see if they can further
expand their product lines or modify
existing products.

 Two ways to do this:

Developing Existing Products (cont.)

Line Extensions – new product lines,

items, or services
Original Product

Newer Products
Developing Existing Products (cont.)

Product Modifications – an alteration in

a company’s existing product
 ALTERATION

ADVANTAGES DISADVANTAGES
 Improving an  Improving an
established established product is
product can expensive and not
capture new always a success.
customers and Example: New Coke
meet customer’s
unmet wants as
trends change.
Ex: McDonald’s
opening stores in
India
Product Mix Strategies

 Developing New Products

Follows seven steps:
Generate Ideas
Screen Ideas
Develop a Business Proposal
Test the product with consumers
Introduce the product
Evaluate customer acceptance
Product Mix Strategies (cont)
 Developing Existing Products
 Line Extensions: Adding new product lines, items or
services.
Ex: Tylonol

 Product Modifications: An alteration to an existing

product:
New and different varieties
Formulations
Colors
Styles
Features
Sizes
Product Mix Strategies (cont)

 Deleting a Product or Product Line

 Obsolescence
 Loss of Appeal
 Changes in Company Objectives
 Replacement with New Products
 Lack of Profit
 Conflict with other products in the line
Describe trading up / down
product-mix strategies.
 Trading up: Adding a higher-priced
product to a line to attract a higher-
income market and improve the sales of
existing lower-priced products.
 Trading down: Adding a lower-priced item
to a line of prestige products to encourage
purchases from people who cannot afford
the higher-priced product, but want the
status.
 TRADING UP
ADVANTAGES DISADVANTAGES
 Adding higher priced  While sales may be generated for the new
product or line, sales of established products
items to a product line may decline.
will attract the higher  If the business uses trading up to enhance
income market and its image, the business must be careful that
may help increase the present customers are not lost in the
process of gaining new ones.
image and sales of the
 Customers may become confused as to
lower priced items. what the company’s image is meant to be,
or they may refuse to believe that better
quality merchandise can be purchased from
a business that had formerly sold budget
goods.
 Adding higher priced items to a product line
is expensive and may not attract new
customers while hurting the image and sales
of the lower priced items.
 TRADING DOWN

ADVANTAGES DISADVANTAGES
 Adding lower priced  Adding lower priced items to a product
line of prestige products can hurt the
items to a product image and sales of the higher priced items
in the line
line of prestige
 Consumers may be confused about the
products can capture new product or line.
a lower income  Profits from the cheaper product may be
market who cannot eroded by reduced sales in the more
afford the higher expensive line.
 Dealers may not be willing to add the
priced items. lower priced product to their offering.
 Competition may become stronger at the
high end of the market.
 Gaining short-term sales at the expense
of long term sales
 How are

products/services

positioned in the

market place?
POSITIONING is about bringing
attention to products and
DIFFERENTIATING them from
similar ones.
Positioning the Product
Differential
Differential
COMPETITOR
COMPETITOR advantage
advantage

PRODUCT
PRODUCTCLASS
CLASS Associated
Associatedwith
with
OR
ORATTRIBUTE
ATTRIBUTE attractive
attractiveattribute
attribute

High
Highprice/high
price/highquality
quality
PRICE
PRICE or
or
AND
ANDQUALITY
QUALITY low
lowprice
price
Product Positioning = the IMAGE a
product projects

 The goal is to set the product apart from

the competition.

 “The way you get into your customer’s

mind.”

 The efforts a business makes to identify,

place, and sell its products.
 Describe positioning
product-mix strategies.
 Positioning – is all about perception; actions
marketers take to create a certain image of a
product in the minds of the customers
• In Relation to a Competitor
• In Relation to a Product Class or Attribute
• In Relation to a Target Market
• By Price and Quality
• Difficult to change
Product Positioning
 Product positioning: Efforts a business
makes to identify, place and sell its products
in the marketplace.
Positioning by price and quality:
Ex: Ford Motor Company positions its
Focus as an economical passenger car
while still emphasizing quality.
 Positioning by Price & Quality

 Offer economy, mid-priced, and luxury lines

Product Positioning (cont)

 Positioning by features and benefits:

Ex: Oil of Olay was positioned as a
premium facial moisturizer and cleanser
to keep skin soft and young.

 Positioning by unique characteristics:

Ex: Cell phones that can text message
or take pictures and send them.
 Positioned by Features & Benefits

 Unique characteristics
Product Positioning (cont)

 Positioning in relation to the competition:

Ex: Warner-Lambert Company introduced
Cool Mint Listerine by positioning against the
“theraputic” benefits of Original Listerine and
the “cosmetic” benefits of Scope.

 Positioning in relation to other products in

a line:
Ex: Binney & Smith introduced washable
crayons and positioned them as a specialty
item in the company’s Crayola crayon line.
Positioning in
Relation to the Competition
Positioning in Relation to
Other Products in a Line
 POSITIONING STRATEGIES

ADVANTAGES DISADVANTAGES
 Creating an identity  Images of a product are
of a product helps difficult to change once
find a place for the they are established and
product in the very expensive.
marketplace while
strongly identifying
with a specific target
market and possibly
creating brand
loyalty.
 6 Steps to Successful
Positioning

1. What position do you currently own?

2. What position do you want to own?
3. Whom you have to defeat to own the
position you want.
4. Do you have the resources to do it?
5. Can you persist until you get there?
6. Are your tactics supporting the positioning
objective you set?