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Product/Service Management A marketing function that involves obtaining, developing, maintaining, and improving a product or service mix in response to market opportunities. 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 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 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 MGMT: 1. Developing New Products 2. Monitoring Existing Products - Sales, Profit, Market Share 3. Eliminate Weak Products Staple Goods ◦ Items that are constantly in demand by customers ◦ Items are used consistently replaced regularly by consumers ◦ Easy to predict sales because of consistency in demand ◦ Examples: Toothpaste, milk, bread, butter, etc.. Convenience Goods ◦ Small, inexpensive items that customers purchase frequently ◦ Commonly sold at convenience stores, grocery stores, or gas stations. ◦ Examples: Snack foods, pain relievers, beverages Shopping Goods: ◦ Goods that are more expensive & require more research prior to buying ◦ Consumers usually want to be able to compare & contrast this item with others ◦ Limited to extensive decision-making is required ◦ Examples: Automobile, appliances, furniture, & homes Fashion Goods ◦ Items that constantly change. ◦ Items that are only popular for a certain amount of time ◦ NOT just clothing items. ANY item that goes in and out of style is an example ◦ Examples: Toms, Class of 2013 Shirts, Chubbies, etc… What is an example of something not clothing related? Seasonal Goods ◦ Items that are only popular at a certain time of year ◦ May focus on seasons or holidays ◦ Examples: Heavy coats in the winter & swimsuits in the summer Boxed chocolate around Valentine’s Day Specialty Goods ◦ Goods that are considered unique by buyers ◦ Customers will go to great lengths to buy them ◦ Price is almost never an issue ◦ Purchase is based off of: Quality, style, scarcity, &/or personal preference ◦ A specialty good can be a shopping good for one person and a specialty for someone else ◦ Examples: Louis Vuiton Bag from flagship store in Paris, France Men’s Suits Expensive Watches Unsought Goods ◦ Goods that are not actively sought out by customers, but is instead purchased due to fear, precaution or need ◦ Marketers tend to actively and aggressively market such goods in order to arouse interest in them ◦ Examples: Fire Extinguishers Encyclopedias Industrial Goods ◦ Industrial goods usually produce consumer goods ◦ Goods purchased by an individual or organization in order to modify them or simply distribute them to the ultimate consumer in order to make a profit or meet some other objective ◦ Tends to be items directed at organizations, businesses, and other institutions, rather than at the individual end user of a product ◦ Examples: Lumber Fixed Equipment Product Life Cycles • • 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 is launched. ◦ Can be risky ◦ 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. Higher investment, lesser profits ◦ Least profitable stage Minimal Competition Efforts are focused on promotion & production http://nrn.com/casual-dining/olive-garden-tests-smallplates-family-style-dinner http://www.reuters.com/article/2013/10/22/us-apple-ipadidUSBRE99L0ZK20131022 • What are the goals of the Introduction Stage? – To increase product awareness – Get the customer’s attention thru promotion – Lots of special promotion –Example: –Smartv’s –http://www.techradar.com/us/news/world-of-tech/10-best-new-products-from-ces-2013-1124170 • During Growth Stage: – Customers are aware of product, sales increase Product starts showing better returns on investment. – Companies focus on customer satisfaction – Competition starts from other companies 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. Product is successfully launched Demand increases Distribution increases Competition intensifies Company might introduce secondary products or support services. Better revenue generation and Return On Investment 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. Competition is high Product is established and promotion expenditures are less Little growth potential for the product The major focus is towards extending the life cycle and maintaining market share • What happens during Maturity Stage? – The product’s sales level off. – More money is spent on competition during this stage. In this stage the expenditures begin to equal the profits or worse, expenses are more than profits. A typical scenario which a product might face in its last stage. ◦ 1 product, 10 competitors, minimum profits, huge amount of manpower and resources in use 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. Market is saturated Sales and profits decline Company becomes cost conscious A lot of resources are blocked in rejuvenating the dead product. ◦ Repositioning 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. Setup a PowerPoint according to what is listed ◦ Individual assignment ◦ Identify & Provide 2 Examples of each goods Staple: Convenience: Fashion: Specialty: Shopping: Seasonal: Must Have’s Routine D.M. Trendy Rare Limited / Extensive D.M. Time Sensitive Not Unsought & Industrial The iPad Air is in the introduction phase Launched November 1, 2013 ◦ $499.99 Focus will be on production & promotion Customers are aware of iPhone 5S ◦ Focus is on making them happy Sales and production/distribution are increasing ◦ Released in35 additional countries last Friday ◦ 16 more countries on 11/1/13 Competition is strong ◦ Similar models in stores ◦ Product is mass produced Product is not as popular but is still popular ◦ WOW factor is gone Sales have slowed Price Drop Money is spent combating competition Product starts to lose money ◦ Price drops to point it costs more to product ◦ Product may be liquidated Virtually no competition because no one wants product 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. 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-flavored 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. Consider how these products have had their life cycle extended: ◦ Coca-Cola ◦ Kit Kat ◦ Playstation console Product Mix Product Line Product Width Product Depth Product: Anything a person receives in an exchange ◦ ◦ ◦ ◦ Tangible items (Stapler) A service (Haircut) Idea (Marketing Strategy) An abstract good (Education) Product Planning: Decisions about features that are needed to sell a business’s products, services or ideas Examples: Packaging, labeling, Branding, Services, Warranties, etc.. Product MIX: All the different products that a company makes or sells. KRAFT Company Example: ….Kraft ….Maxwell House ….Kool-Aid ….Oscar Mayer ….Post Cereal products Product Line ◦ Group of closely related products manufactured &/or sold by a business ◦ Example: Kellogg’s makes all the cereals listed All product lines are apart of the product mix A product line can be determined by the following: ◦ They function similarly All of Chevrolets Cars are a Product Line ◦ They are sold to the same groups of people All of Staples Supplies sold to schools ◦ Are marketed the same way ◦ Are priced similarly Product Item ◦ A specific model, brand, or size of a product within a product line. Product Mix Example ◦ All classes AK offers Product Line ◦ All marketing courses offered Product Item ◦ Marketing ◦ Sports Marketing ◦ International Marketing Product Mix: ◦ The width and depth of a company’s product offerings. Width: number of different product lines a business manufactures or sells Small businesses have fewer product lines; less width Depth: number of product items within a product line Company sells three different sizes & three different flavors they would have a product depth of 9. Example: Chocolate = small, medium, large Working in groups of 1-3; you will be assigned a Company ◦ Define Product Mix At least 5 brands they sell ◦ 2 Examples of Product Lines ◦ 3 Product Items Specific items sold by company ◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦ General Motors Mars Nestle Sony Proctor & Gamble Kraft General Mills Johnson & Johnson Unilever Kellogg’s Coca-Cola Pepsico Dr. Pepper/Snapple Nike owns ◦ ◦ ◦ ◦ ◦ ◦ ◦ Nike Golf Nike Pro Nike+ Nike Skateboarding Air Jordan Converse Hurley International ◦ NikeTown Retail Stores 4 Product Lines Examples ◦ ◦ ◦ ◦ Converse Basketball Soccer Clothing Could’ve broken it down by: ◦ Others Sports ◦ Hurley, Golf, Jordan Converse All Star Ox ◦ $49.99 Nike Club Swoosh Full Zip Hoodie ◦ $39.99 Nike Air Max 2013 ◦ $179.99