Final Paper due Midnight Tuesday 8 pages/Send handshakes and will review profiles
Learning Objectives
After studying this chapter, you should be able to:
• Recall three ways of describing a product, each of which can affect customer value.
• Describe the implications of the product life cycle for marketers.
• Explain how the proliferation of product choice has affected marketers’ product strategies.
• Discuss four aspects of service as a “product” that demand a strategic marketing response.
• Identify the three stages of change required in social marketing.
Tom Sibley/Corbis3
The Marketing Mix: Products
whi80045_03_c03_063-094.indd 63 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
Introduction
The subject of what marketers sell—the goods and services on offer and the packag-ing, customer service, brand reputation, and more that surround them—is covered by the term Product as one of the four p’s of marketing management. Under the umbrella term marketing mix, the four p’s of product, place, price, and promotion rep- resent the elements of a strategy that marketers control. This chapter, and the three that follow it, will take up the topic of each “P” in turn.
This chapter focuses on concepts necessary to understand strategic decisions about prod- ucts, but we are not talking merely about the tangible goods that come home from stores in boxes. Product strategy encompasses all the elements that enable a product to serve its owner. The size and shape of a potato peeler’s handle, the location of menus in a software application, the brightness of a car’s headlights—these are all elements of form that ren- der service. As you learn about offerings ranging from pure goods to pure services, about where new products come from and the life cycles they experience, keep in mind that every purchase transaction has its roots in service-dominant logic. Seen in this light, the Product “P” is really an “S” for service.
3.1 Designing Products for Customer Value
When we say “products,” what exactly are we talking about? The American Mar-keting Association (AMA) defines the term as a “bundle of attributes (features, functions, benefits, and uses) capable of exchange or use; usually a mix of tangi- ble and intangible forms” (Marketingpower.com, 2011). Thus a product may be a physical entity, a service, an idea, or any combination of the three. An organization, person, place, or idea can be a product.
Consider Oprah Winfrey. Her company, Harpo Productions, is an organization that cre- ates content for motion pictures, television, and radio. That content is a tangible output— a product. For her fans, being in the audience during taping of the “The Oprah Winfrey Show” was thrilling; seats in the television studio were a product for sale as well. And finally, Oprah’s core idea of “Live your best life” was a product that anchored the place, person, and organization together as a brand experience.
Table 3.1 demonstrates that all product offerings can be positioned somewhere on a con- tinuum from pure good (composed of tangible attributes) to pure service (composed entirely of intangible attributes). To identify a product’s position on this continuum, con- sider if anything is taking up space after you make the purchase. With a bar of soap, the answer is definitely yes. With completion of a medical exam, the answer is no.
whi80045_03_c03_063-094.indd 64 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
Table 3.1: Continuum of products
Pure Good Combination Pure Service
Character- istics
Tangible Blend of tangible and intangible
Intangible
Examples Soap, salt Tailored suit Starbucks coffee Cell phone
Restaurant meal
Auto tune-up
Medical exam Haircut
Bank transaction Hotel stay
All products for sale occupy a position somewhere on the continuum from pure good to pure service.
The tangibility of pure goods can create the illusion that people purchase them solely to take possession of physical objects. Not true—behind every purchase is the desire for a benefit that derives from possession. This reflects the current marketing thought regard- ing service-dominant logic—the understanding that customers buy offerings that render services (Lusch & Vargo, 2007). Over the past decades, the view that products could be classified on a continuum has been augmented with this understanding that even pure goods have value only to the extent they render service (utility) to their owners. Tangibles like soap and salt serve their owners, for example, by loosening dirt or enhancing the flavor of a dish.
All products on the continuum shown in Table 3.1 fall into two broad classifications—those bought by consumers and those bought by businesses to make products for consumers. Consider the humble paper clip. Individuals and families—especially those including stu- dents—buy a box from time to time. But do they buy a shrink-wrapped cube of 12 boxes? Rarely. The big-volume purchasers of paper clips are businesses. Until the modern office goes completely paperless, the simple bent wire will be consumed by the case to organize the paperwork in the offices that manage the making of products for consumers.
Where can we begin to study the marketers’ perspective on all these “somethings” for sale, as diverse as Oprah and a paper clip? The answer lies in a fundamental concept intro- duced in Chapter 1. All products, whether tangible or intangible, are designed to deliver customer value.
“Designing products for customer value” means putting into the product enough fea- tures that deliver the benefits customers are looking for, but not so many that the product costs more than they’re willing to pay. As consumers, all of us expect the things we buy to deliver a certain degree of reliability and fitness for use at a reasonable price. The more reliable the offering is, the better its functionality, the higher the price we are likely to consider reasonable. When a company gets the balance between value and price right, customers say, “Now, that is a good deal.”
whi80045_03_c03_063-094.indd 65 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
Product Strategy: Three Perspectives Imagine that you have been invited to sit in on a strategy session of the Acme Paper Clip Company’s new product development committee. In the room are Eugene from engineer- ing, Sally from sales, and Alvin from accounting.
As an engineer, Eugene’s perspective on paper clips is purely focused on what paper clips are and do—the form they take, the functionality they deliver. As a salesperson, Sally’s perspective is more expansive. She thinks about the paper clip’s value as customers per- ceive it—not just how the paper clip attaches paper, but the price and the packaging that go into the product, that make it easier for her to sell. Alvin from accounting sees the paper clip purely in terms of what it does for the company. He’s counting costs against income to calculate profit, worrying about liability issues, and wondering what will hap- pen to Acme Paper Clip if paper clips become obsolete in the future.
These three points of view add up to a product strategy for Acme Paper Clip. A product strategy describes the product offering from three perspectives: core, expanded, and con- cept, as shown in Figure 3.1.
Figure 3.1: Product strategy perspectives
The three perspectives of the product strategy are increasingly comprehensive.
The core product describes the product in terms of its solution for sale—the form/func- tion utility that creates the set of benefits that allow it to fill a need.
The expanded product description includes the mix of tangible attributes and intangible product support that come with the product. This includes how the product is packaged, plus all the factors categorized as part of “ease of possession,” one of the four utilities
Expanded product
Core product
Product concept
whi80045_03_c03_063-094.indd 66 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
of customer value discussed in Chapter 1. The expanded product (referred to by some marketers as the augmented product) includes the price, payment plan, and any warran- ties or guarantees that go with a purchase. What differentiates one offering from others on the market? The expanded product, which establishes the customer’s perception of its value equation.
Finally, the product concept is the company’s long-range perspective on the product. It describes the market niche to be served by this product, the life cycle it will experience in the marketplace, and the impact of manufacturing and selling it on the company itself. Consumers’ perception of the brand, the company’s social responsibility in producing it, and customers’ experience with the company after they make the purchase all contribute to the product concept.
These three perspectives form the product strategy—the “Product” P in the four p’s of the marketing mix.
Consider how Trader Joe’s Candy Cane Joe Joe’s (an Oreo-like cookie product) would be described in terms of the three perspectives of core product, expanded product, and product concept. The core product is a tasty, generously stuffed chocolate-peppermint cookie. The expanded product is the affiliation of one cookie with all products sold under the Trader Joe’s private label, a widely trusted seal of approval. The product concept, the “big idea” behind this tasty treat, is Trader Joe’s corporate strategy of creating exclusive private-label products that compete with national brands on price to gain a long-term competitive advantage (Private Label Magazine, 2009).
Product Strategy Captures Value The product strategy is made up of dozens of decisions. Marketing strategists choose which market the product will serve and what the product will do for the people in that market. Other departments make decisions about manufacturing processes and materials sourcing, which affect the cost to produce the product and thus how it can be priced. All these decisions come together in a product strat- egy that allows an offering to stand out from similar items for sale, due to specific promises of service utility designed to appeal to specific market segments.
The product strategy defines the limits of what the product will do, to avoid promising to be all things to all people. When consumers know exactly what a product will do, they can put a value on it. Only then can they differentiate between sev- eral offerings and decide which option best suits their needs.
Decisions about branding, packaging, support, and quality give products points of competitive differentiation by which consumers can compare options and assess value.
Associated Press
whi80045_03_c03_063-094.indd 67 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
The goal of the product strategy is to achieve competitive differentiation. This takes dis- cipline. Decisions add up to a strategy that promises one product offering delivers value that no competing product does. When a product is truly designed for customer value, it can command a premium price. That is a company’s reward for taking a disciplined approach to competitive differentiation.
Marketers’ decisions that affect customer value can be grouped into four areas:
1. Branding—a company’s use of its name, reputation, and trademark to attract consumers’ attention;
2. Packaging—form attributes designed to attract the eye, prevent damage in ship- ping, and convey information to serve both the sellers’ and the buyers’ needs, like nutrition labels and UPC codes;
3. Support—post-sale services and policies that create customer satisfaction by affirming that a company stands behind its products; and
4. Quality—technical conformance to a standard set by experience, enabling the offering to render the service for which it is intended. More quality creates a bet- ter value for the consumer, delivering greater satisfaction with the purchase.
To summarize, here’s how prod- uct strategy creates the cus- tomer’s perception of an offer- ing’s value equation: From the manufacturing company’s point of view, product strategy begins with identifying a target market and a need to fill. Then, strategic decisions about the core product, expanded product, and prod- uct concept fill out the picture of what that product is and does. Decisions about branding, pack- aging, support, and quality give the product its positioning and points of competitive differentia- tion—the means by which a con- sumer can compare it to similar options and decide its value.
Product Classifications: The Marketing Orientation To those who manufacture and sell products, their output can be classified as items, which are part of product lines, which make up the assortments of goods on offer. These terms are defined as follows:
• Items: Individual products with specific characteristics; one item equals one SKU (stock-keeping unit).
• Lines: A set of closely related individual products. • Assortments: All the lines and products a company sells.
Packaging plays a large part in marketing. Customers want packaging that is attractive, safe, and opens easily.
PR Newswire/Associated Press
whi80045_03_c03_063-094.indd 68 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
That’s how a manufacturing company or retailer looks at products. But in any company, the marketing department plays the crucial role of representing the customer. Marketers are the ones who keep their buyers’ (and end users’) perspective in mind, bringing a mar- keting orientation into every discussion of business strategy. Holding this perspective can be difficult; it’s all too easy to slip into the habit of seeing the company’s products from an internal vantage point. That’s why it is important to understand the difference between manufacturers’ and marketers’ thinking about products.
Let’s start our examination of these different points of view by looking at how marketers classify products into distinct groups. Classification matters, because marketers sell dif- ferent products to different people in different ways. Marketing decisions about branding, product strategy, and benefit statements will all be based on the class in which a specific product fits.
Products can be categorized by the type of customer the company sells them to: consum- ers or businesses. The terms B2B and B2C—abbreviations for “business to business” (B2B) and “business to consumer” (B2C)—are frequently used in marketing to describe these two sales orientations, so it’s good to be familiar with them. B2B describes transactions between businesses, such as between a manufacturer and a wholesaler or between a wholesaler and a retailer. B2C describes transactions between businesses and consumers. A less frequently used term is B2G, for business-to-government transactions.
Products for consumers are classified based on the way people shop, while products for businesses are classified based on how the product will be used.
A B2C company sells products that fall into four categories, based on how consumers make buying decisions:
1. Convenience: These products are inexpensive, frequently needed, and easily sub- stituted by something else. Consumers buy with a minimum of comparison or effort. Example: soap.
2. Shopping: These products are less frequently needed and typically evaluated based on suitability of style or image. Consumers compare brands, price, and quality. Example: clothing.
3. Specialty: These products require a high investment and are infrequently needed. Consumers research and make careful comparisons. Example: cars.
4. Unsought: These products can be new innovations or simply not a high con- sumer priority. Consumers must be convinced to want them. Example: charitable donations.
To some extent, B2B products can be classified based on how business consumers shop for them. A purchasing manager will likely shop for printer paper like a convenience product, but a computer printer like a specialty product.
Products for businesses have one thing in common: derived demand. The need for them springs from the demand for something else. Business buyers don’t purchase a printer and paper because they want to own them—they buy them because they help their com- pany construct its end product.
whi80045_03_c03_063-094.indd 69 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
A B2B company sells products that other businesses buy, which fall into seven categories:
1. Raw materials: Basic substances in their natural, modified, or semi-processed state, used as an input to a production process.
2. Component parts: Pieces, assemblies, or subassemblies that are required to finish an activity, item, or production process.
3. Process materials: Substances purchased for incorporation into a product, which cannot be recognized in the finished activity or item.
4. Manufacturing installations: Assemblies or systems required to conduct manu- facturing processes, usually custom-designed and installed.
5. Accessory equipment: Assemblies purchased for use in production, administra- tive, clerical, or marketing activities, not directly used as an input to a production process.
6. Operating supplies: Items used in production, maintenance, or administrative activities.
7. Business support services: Activities required for successful completion of a process or to support administrative functions.
To understand these categories, consider a mustard company. It buys mustard seeds and spices (raw materials); plastic bottles (component parts); laundry soap for washing the workers’ uniforms (process materials); a bottling line (manufacturing installation); a pho- tocopier for the office (accessory equipment); copy paper (operating supplies); and finally, the services of an accountant, an advertising agency, and a food distributor (business sup- port services).
Most companies specialize in selling products, services, or a combination that fit one niche in either the consumer or business product classification, as shown in Table 3.2.
Table 3.2: Product classifications
Consumer Products Business Products
Convenience Shopping Specialty Unsought
Raw materials Component parts Process materials Installation Accessory equipment Operating supplies Business support services (distribution or consulting)
Companies sell products, services, or a combination thereof that fit one niche in either the consumer or business product classification.
Now let’s take product classification a step further. To a marketer, it makes more sense to look at how consumers shop and use items. Marketers gain insights into how to promote products when they think of them in the following classifications:
whi80045_03_c03_063-094.indd 70 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
• Usage groups: Items that go together to fill a need. • Complementary products: Items whose use is related to the use of the original
product to fill a need. • Substitute products: Offerings that have some characteristics in common with the
original item considered, and that could stand in for the original in filling a need.
For an example of a usage group, look no further than the grocery store. If you want to have a cookout, it’s not enough just to buy hot dogs. You’re also going to need buns, pick- les, ketchup, and mustard. Without those items (and sauerkraut and onions), you don’t have an all-American hot dog with the works.
Complementary products for your cookout might include disposable plates and uten- sils, grilling tools, charcoal, and a tablecloth. You can make a hot dog sandwich without them—but your cookout will go better if you bring these complementary products too.
Substitute products are the marketer’s bane—the items consumers settle for when they perceive the usage group or complementary products are not a good enough value. Many a cookout is downgraded to a mere meal outdoors by substitution of a bag of fast food replac- ing the usage group and complementary products required to cook and serve a picnic.
Marketers create more effective promotional strategies when they keep in mind these con- cepts. In spring 2011 Vlasic created a marketing campaign that focused on its pickles’ role as part of the “cookout” usage group. The company placed ads for Vlasic pickles in grocery stores, putting in-store ads on shelves near the meat section, hamburger buns, and cheese case, and on shopping carts as well (Newman, 2011). Without insight into classification of products, the marketers at Vlasic might have missed this opportunity to increase pickle sales.
Regardless of the niche(s) in which a company offers its products, the strategy around them will spring from marketers’ understanding of product classifications and their view of each product in terms of its core, expanded product, and product concept.
Field Trip 3.1: Minimus.Biz usage groups
Visit Minimus.Biz, a company specializing in individually sized products. How might these items be combined to create a usage group like a “convention survival package” or “campers’ kit”?
Which items, if purchased, might create complementary demand for another item in the line?
Which items might substitute for another?
www.minimus.biz
For hints to the answer to these questions, read the company’s blog at http://blog.minimus.biz/,
specifically
http://blog.minimus.biz/2011/08/convention-survival-kit.html
and
http://blog.minimus.biz/2005/03/camping-season-think-small-think-light.html.
whi80045_03_c03_063-094.indd 71 6/27/12 11:17 AM
CHAPTER 3Section 3.1 Designing Products for Customer Value
Product Strategy in Action In summer 2011 a flawed strategy resulted in misuse, injury, and a swift recall of a prod- uct. As the outdoor season approached, Napa Home & Garden Inc. marketed decorative firepots that burned a pourable fuel gel. But problems emerged when consumers used the fuel gel improperly to refill the firepots. Packaging for both the fuel gel and firepots car- ried warnings not to refill the pots when lighted or even hot, but the consumer typically discarded the packaging. When time to refill came around, the instructions were long gone. After users of the product reported several serious injuries, Napa Home & Garden pulled both the fuel gel and firepots from store shelves with the intention of redesign- ing the packaging. The product (which marketers would classify as a consumer product usage group because of its relatively low cost and similarity to other products such as candles and oil lamps), was recalled within weeks (Halbfinger, 2011).
In this case the product strategy failure was not with the core product, or the product concept, but specifically with part of the expanded product—the packaging. Because the product was a recent innovation, consumers weren’t familiar with its safe use. They needed instructions where it mattered—on the product itself.
You’ve now learned how product strategy supports the quest to design products for cus- tomer value through decisions about the core product, expanded product, and product concept. You’ve learned the importance of giving the product points of competitive differ- entiation through branding, packaging, support, and quality. You’ve explored classifica- tion schemes from the seller’s point of view (B2C or B2B) and the shopper’s point of view (usage groups, complementary products, and substitute products).
Field Trip 3.2 offers an opportunity to practice using these concepts.
Keeping in mind the concept of service-dominant logic, we must not lose sight of the service rendered by products, even those that are pure goods. All offerings for sale—at any point on the continuum from pure goods to pure service—derive their value from their usefulness. Later in this chapter we’ll delve into marketing approaches for services as distinct from tangible goods. But first, a fundamental concept needs discussion: the Product Life Cycle.
Field Trip 3.2: Product Assortments for B2C and B2B
Visit Benjamin Plumbing Supply to view product assortments in both B2C and B2B niches. Identify which parts of the website are designed for each buying niche. Look for examples of the concepts we’ve covered.
http://www.benjaminsupply.com/
Questions to Consider
How can a product strategy make one product stand out in a crowd of similar offerings? Call to mind some item you recently purchased. How did branding, packaging, support, and quality considerations influence your choice? Where did the item fit in the classification scheme shown in Table 3.2?
whi80045_03_c03_063-094.indd 72 6/27/12 11:17 AM
CHAPTER 3Section 3.2 Managing Product Life Cycles
3.2 Managing Product Life Cycles
Every product on the market has a lifespan. A product begins with an original idea. If all goes well and the company gets the idea to market while the timing is favorable, the product enters the growth phase. Other companies take notice and introduce competing products. The rivalry either stimulates new product strategies that keep the product thriving, or the product moves on to decline.
Marketers describe the Product Life Cycle in four phases. Figure 3.2 depicts a product’s contribution to the manufacturer’s bottom line during each of the four stages:
1. Market Introduction, 2. Growth, 3. Market Maturity, and 4. Decline.
Figure 3.2: Product life cycle
The Product Life Cycle consists of four stages during which it contributes sales and profits to the seller’s bottom line.
During the Introduction phase, investment costs accrue, but are not yet recouped. Costs are high but sales and profits are low. During Growth, sales rise as costs fall, due to effi- ciencies as the scale of production increases. The expenses of product introduction are recouped. In Maturity, both costs and sales (and profits) are stable. Once Decline begins,
S a le
s a
n d
p ro
fi ts
( $ )
Time
Introduction
0
Growth Maturity Decline
Sales and profits ($)
Investment+
–
whi80045_03_c03_063-094.indd 73 6/27/12 11:17 AM
CHAPTER 3Section 3.2 Managing Product Life Cycles
both costs and sales decrease. Therefore, it’s important for a company to have products in the Growth and/or Maturity phases and to predict decline before its onset; otherwise, it is difficult to remain profitable.
The buyers for a product typically differ somewhat at each stage in the Product Life Cycle. The Diffusion of Innovations Theory describes a pattern of adoption and explains the mecha- nism by which subsequent waves of buyers generate sales throughout a product’s lifes- pan. Products in the Introduction stage attract buyers who are innovators, who like to think independently and take risks. Early adopters soon follow, moving the product into its Growth stage. Products in the Maturity stage are bought by those who are generally more traditional in their preferences and less willing to take risks—the largest segment of buyers. Latecomers are the last to try anything new and typically adopt a product only as it is about to reach Decline—or already has. Diffusion of Innovations Theory is best seen as a descriptive tool, with limited utility in predicting outcomes (Clarke, 2009).
Two trends—increasing price competition at retail and increasing speed in manufacturing time-to-market—are shortening the Product Life Cycle. Thus, competitive differentiation is growing in importance.
Product Life Cycle: Examples Market Introduction: In the early 1980s, two Minnesota brothers brought to market Roller Blades, an improved in-line skate designed to fill a need for off-season hockey training. That introduction led to a whole new category of sports equipment for recreational and professional team use. Marketing action focused on reaching innovators who would try the new training tool.
Growth: Darlene Tenes started CasaQ in 2007 to produce a line of Christmas ornaments for people who embrace Latino culture. By focus- ing her marketing energy on a defined niche, Tenes’s product launch went well. Before long, competitors took notice. Three years later, bigger companies are starting to copy her designs, but Tenes’s marketing savvy and roots in Hispanic culture have helped her maintain the growth of her company. View the product line at www.casaqornaments .com (Tenes, 2011).
Maturity: Mattel’s Hot Wheels toy cars have been popular since their introduction in 1968. To sustain the product in its maturity and stave off decline, Mattel began targeting adult buyers by extending the line with Hot Wheels clothes, video and online games, a TV show, and experiential marketing at events like the Indianapolis 500 race (Elliott, 2011).
CasaQ introduced a line of Christmas ornaments in 2007 for people who embrace the Latino culture.
CasaQ
whi80045_03_c03_063-094.indd 74 6/27/12 11:17 AM
CHAPTER 3Section 3.2 Managing Product Life Cycles
Decline: Harry and David, the Oregon-based company founded in 1910 that practically invented the mail order fruit business, began experiencing unexpected sales decline as the “farm to table” ethos arose in the 21st century. The profusion of new choices, more locally sourced, took the shine off Harry and David’s products. The company installed an “orchard cam” to create a more tangible connection between consumers and growers, part of a concerted marketing effort to counteract declining sales (Gordinier, 2011).
As these examples show, those who plan for their products’ life cycles will avoid harsh surprises when one phase gives way to the next. The best defense against declining sales due to product life cycle issues is a good offense—the development of new products.
New Product Development The new product development process takes a brand new idea, proves its potential, and brings it to market, as shown in Table 3.3. During Idea Generation, ideas enter the pro- cess from sources such as customers, retailers, the sales force, and independent inventors. In Screening, ideas are judged against company objectives; some organizations maintain detailed checklists of standards new product ideas must meet. The Evaluation stage brings detailed analysis to assess the idea’s potential market, competitive strengths, and market potential. This step will determine the product’s target market, service utility, competi- tive differentiation, and the financial and technical requirements it must meet to support company objectives. Product ideas that pass this stage proceed to development, includ- ing engineering for form and function. Finally the Rollout stage arrives—typically in test markets first, followed by full-scale marketing.
Table 3.3: New product development process
Idea Generation Screening Evaluation Development Rollout
• Customers’ suggestions
• Research • Competitors • Other markets
• Fit to company strategy
• Market trends • Costs/profitability
forecasts
• Potential customers’ reactions
• Cost/sales estimates
• Develop prototype • Test • Develop marketing
plan (marketing mix decisions)
• Execute marketing plan
• Start production • Deliver to point
of sale
The new product development process generates an idea and brings it to market.
Many companies’ ideas for new products come from an internal department responsible for generating new ideas. Other companies actively solicit ideas from their customers or the public at large—a method that has grown rapidly with the onset of Marketing 3.0 and greater appreciation of consumers’ role in co-creation of value through products and experiences that satisfy their needs or wants (Prahad & Krishnan, 2008). A few companies operate as “idea labs” that match inventors with companies seeking new product ideas.
Introducing new products is a necessary activity for businesses that wish to avoid the shrinking profits associated with products in decline. Some companies resist new product development, fearing the adverse effects of cannibalization—a situation where the sales
whi80045_03_c03_063-094.indd 75 6/27/12 11:17 AM
CHAPTER 3Section 3.2 Managing Product Life Cycles
of new items eat into the sales of other products already in the market. When Apple intro- duced iPhones with the capacity to play music files, it surely expected that move would cannibalize sales of its iPod music player line. Some companies take an opposite tack—a strategy of planned obsolescence. In this approach, product strategists deliberately retire an item before the end of its useful life by cutting off supply or service. In its place will be introduced a newer model, with the objective of prodding consumers to trade the old for the new. Both strategies, valid in certain circumstances, point to the importance of plan- ning for existing products’ life cycles and strategically timed new product introductions.
Line Extension Lessens Cost Launching new products is not the only way to generate new sales. Companies can give new life to existing products by developing a line extension. The high cost associated with developing and introducing a new product can be avoided when a marketer spots an opportunity to adapt an existing product to suit new niches in the same market, or finds an entirely new market that can be served by the existing product.
Examples of adapting an existing product to suit new niches abound in the soft drink aisle. Moun- tain Dew (a Pepsi product) exists in versions including regular, diet, caffeine-free, and caffeine- free diet to suit those who appreciate its citrus flavor. Additional variants in fruit flavors includ- ing Code Red and Diet Code Red (fruit punch), LiveWire (orange), and Baja Blast (tropical lime) bring Mountain Dew products to a new niche uninterested in its original citrus flavor profile.
Palm Products of Melbourne, Australia (www .palmproducts.com.au), a manufacturer of plas- tic drinkware, discovered an opportunity for line extension at a trade show.
Managing director and designer Robert Wilson was working on a stable, nonslip, unbreakable drinking glass for boaters. He looked at other outdoor situations where these attributes would be beneficial and realized campers have similar needs to boaters but deal with an added obstacle of low or no light. He came up with a glow-in- the-dark drink-ware product line, choosing a glowing shade of green for its emotional connec- tion to the environment.
Palm Products uses trade shows to reach distributors and retailers. Lara Blamey, mar- keting manager, exhibited the line as part of a larger product assortment at a hospital- ity industry trade show. The camping line brought two orders on the first day from senior-care facilities, which saw the advantage of a glow-in-the-dark glass to residents who wake up thirsty in the night. “When we got back to the office in Melbourne, we started calling the suppliers to the hospitality industry and letting them know about the
Pepsi Co. created different versions of its Mountain Dew. How did the company market to a particular niche group?
PR Newswire/Associated Press
whi80045_03_c03_063-094.indd 76 6/27/12 11:17 AM
CHAPTER 3Section 3.3 The Paradox of Choice
glow-in-the-dark drinkware and its suitability to senior care. The suppliers identified another market: nightclubs! They saw a novelty as well as a practical safety,” Blamey said. “In just a few months our camping range went from a high-concept introduction to being stocked at 70-plus sporting goods stores, used at senior-care facilities in three states in Australia, and increasingly sold to nightclubs” (Blamey, 2011).
The Product Life Cycle, an immutable fact of life for companies (regardless of product or service orientation), has three specific implications for marketers. These spring from advances in technology that increase both the speed and reach of business. First, prod- uct life cycles are becoming increasingly brief. Companies that quickly get their product to market first make the most profit. Second, companies must invite collaboration with consumers, who are eager to experience the engagement in co-creation. Third, marketers must now take a global perspective. New product ideas can come from outside markets; likewise, products in a mature or declining phase in the home country can achieve new life when introduced into an outside market.
To summarize: Every product experiences a four-stage life cycle in which sales begin, climb, mature, and decline, each requiring investment and to varying degrees contributing profit to the company. Buyers at different stages are characterized by somewhat different person- alities and motivations. Because almost all products eventually decline, every company needs to make new product development an institutionalized, ongoing process. Line exten- sion is a strategy that generates additional sales of an existing product by adapting it to suit new niches in the same market or finding a new market the existing product can serve.
3.3 The Paradox of Choice
You’ve been there—standing in the toothpaste aisle at the drugstore, facing down an over-abundant array of product options. Do you need extra whitening power, more tartar control, or both? What flavor do you prefer—spearmint, cinnamon, or original? Can you even find the same package that you bought last time? Too much choice can make consumers feel anxious.
Barry Schwartz described the problem in his 2005 book, The Paradox of Choice: Why More Is Less. He argues that too much choice creates anxiety and depression, brought on by the daunting task of evaluating every alternative.
A study on choice, conducted by Columbia Professor Sheena Iyengar and reported in Schwartz’s book, revealed that customers given too many choices were 10 times less likely to make a purchase. Her research team set up a free tasting of jams in a grocery store. Some- times they offered 6 jams and other times they offered 24. When choosing from 6 jams, 30 percent of tasters made purchases; when offered 24 options, only 3 percent of tasters pur- chased a jam. Iyengar’s research concluded that having too many options can leave buyers less inclined to buy and more dissatisfied with their choices when they do (Schwartz, 2005).
Questions to Consider
Consider two staples of schools and offices—Post-it™ notes and highlighting markers. Where are these products in their product life cycle? What advice would you give their manufacturers?
whi80045_03_c03_063-094.indd 77 6/27/12 11:17 AM
CHAPTER 3Section 3.3 The Paradox of Choice
What’s a Marketer to Do? Where did all these choices come from? Why do manufacturers of consumer goods keep placing their bets on developing more offerings? To some extent they are simply manag- ing the Product aspect of their marketing mix.
Many companies have responded to their products’ life cycles with the safe choice of line extension, rather than innovation. When purchases of Crest’s original mint flavor start to fall, it’s easier for Crest to extend the line with a new flavor than to discover and persuade consumers to accept an innovation in tooth care.
When market research reveals that customers would value a toothpaste that pampers sensitive teeth while it whitens enamel and freshens breath, that product goes into devel- opment, and soon a new box squeezes onto that toothpaste display in the grocery aisle. As con- sumers we asked for it—but once it’s there, the proliferation of choices can make us anxious.
Stand Out Among “Good Enough” A fundamental problem facing marketers today is that most offerings are essentially “good enough.” Products and services that are seriously flawed quickly wash out in a marketplace already crowded with reasonably good alternatives, as shown by the example of the firepot and pourable fuel.
The effect of product parity, as this situation of many “good enough” offerings is termed, is to chal- lenge marketers to create differentiation in other ways than through product features and benefits. In a world of product parity, marketers must lever- age consumer emotions through branding, which creates a link between positive emotions and the identity of a company and its products. Branding lifts a simple offering into the realm of feeling and self-expression. For consumers, it connects “I buy this” with “I am this.” By wearing running shoes emblazoned with the Nike “swoosh,” an athlete can display that he or she, like Nike, believes in the “Just do it” philosophy. The concept of brand- ing is discussed in depth in Chapter 6.
Field Trip 3.3: The Paradox of Choice: Why More Is Less
Follow this link to view a 20-minute video of Barry Schwarz talking about the Paradox of Choice at a TED conference in July 2005.
http://www.ted.com/index.php/talks/barry_schwartz_on_the_paradox_of_choice.html
Product parity challenges marketers to create a link between positive emotions and the company’s identity. An athlete who wears Nike displays that he or she has a “Just do it” philosophy too.
iStockphoto/Thinkstock
whi80045_03_c03_063-094.indd 78 6/27/12 11:17 AM
CHAPTER 3Section 3.4 When the Product Is a Pure Service
In the Marketing 3.0 world where consumers reach for fulfillment of their higher needs through their buying decisions, marketers are discovering a new way to differentiate their products and help consumers overcome the anxiety created by the paradox of choice. Cause-related marketing, introduced in Chapter 1, is one such method.
Cause-related marketing involves strategically positioning a company to link its brand with a social cause or issue. A study conducted by Cone-Roper (referenced on the website of the Fred Hutchinson Cancer Research Center, 2011) revealed that:
• Three quarters of consumers say that, when price and quality are equal, they would be likely to switch to the offering associated with a good cause; and
• More than four-fifths of consumers say they hold a more positive opinion of com- panies that are linked to good causes.
These findings support marketers’ faith in cause-related marketing. The technique works for businesses of all sizes but is most frequently used by businesses that sell to consumers. Cause-related marketing is less common among businesses that sell to other businesses.
Another way to stand out among good enough is the use of experiential marketing— encounters that connect consumers with brands through experiences that create lasting impressions. Experiential marketing is discussed further in Section 3.5, “When the Prod- uct Is an Idea.”
The age of product parity, in which most offerings are able to render the desired service and line extensions have brought a confusing array of choices to store shelves, has made it imperative for marketers to achieve competitive differentiation. When all products are good enough, differentiating through product features and benefits is not enough. Mar- keters must also leverage consumer emotions through other techniques, like branding, experiential marketing, and cause-related marketing, that create a community around a product that connects “we buy this” with “we support this.”
3.4 When the Product Is a Pure Service
At the beginning of this chapter, Table 3.1 depicted product offerings on a contin-uum from pure goods, like soap or salt, to pure services, like haircuts or hotel stays. While some things offered for sale fall at the ends of this continuum, most consumer offerings are actually a mix of good and service. A restaurant meal, for instance, combines food (a good) and the work of a kitchen and wait staff (a service).
In many ways, a marketer’s product strategy for a service is no different from that for a tangible product. Just like goods, services have to deliver customer value. As consumers
Questions to Consider
Identify a product or service advertised in your community that is using a cause-related tie-in to dif- ferentiate itself from similar offerings. Describe how the marketing campaign you identified addresses the paradox of choice.
whi80045_03_c03_063-094.indd 79 6/27/12 11:17 AM
CHAPTER 3Section 3.4 When the Product Is a Pure Service
we expect the services we buy to deliver reliability and fitness for use at a reasonable price, just as we do with products.
The three perspectives that make up product strategy are essentially the same with pure services. Marketers describe service offerings from the same three perspectives of core, expanded, and concept. Marketers think about a service in terms of how it fills a need (core service), how it is differentiated from other competing options and establishes its value (expanded service), and the company’s long-range strategy surrounding it (service concept).
The fundamental marketing insight of service-dominant logic—that people buy what they buy because they want the benefits that derive from the purchase—holds true with services as well as products. Looked at this way, there is no difference; both are simply means of delivering a “solution for sale.”
But in some ways, a service is very different from a good.
How Services Differ from Goods Services don’t come in a box—there’s nothing new to take home after purchasing a ser- vice. That fact raises a number of issues from a marketing perspective. Four characteristics of services set them apart from products. Services are:
1. Intangible, 2. Inseparable, 3. Variable, and 4. Perishable.
Since services are intangible, it’s hard for buyers to “kick the tires” before they buy. Services are sold on a promise of satisfac- tion that requires more faith on the buyers’ part than purchase of a good. Therefore, service marketers must make an offer- ing tangible through clues to its reliability and fitness for use, such as testimonials from satis- fied customers, visual represen- tations of processes, and so on.
Services are inseparable from the individual and the organiza- tion that provides them. Unlike a product that is manufactured, sold, and taken home in a box, most services are “manufac- tured” by a seller and consumed
The inherent perishability of services creates issues for businesses facing fluctuating demand. Zipcar (“Wheels when you want them”) leverages perishability to differentiate itself from conventional car rental companies.
ZUMA Press/Corbis
whi80045_03_c03_063-094.indd 80 6/27/12 11:17 AM
CHAPTER 3Section 3.4 When the Product Is a Pure Service
or received by the buyer at the point of sale. The quality of the interaction between service provider and customer is an essential part of the customer value equation.
Related to inseparability is variability. Unlike goods, where items come off the assem- bly line essentially identical, services vary with the person providing them. If every day you order a Starbucks latte tall, dry, and skinny, you’re likely to come to believe that some baristas make your drink better than others. To counter the variability that arises from inseparability, companies invest in extensive staff training to increase consistency of service.
Services are perishable because they typically can’t be stored until a buyer comes along. Suppose you are a photographer with an appointment for a family portrait at 3 p.m. If the family fails to show up for the sitting, you can’t sell 3 p.m. to another client. With every elapsing minute your inventory of time is perishing. Businesses throughout the hospital- ity industry deal with the perishability of services through peak and off-peak pricing. Per- ishability is a significant problem for businesses facing fluctuating demand. For example, restaurants must hire extra staff members to keep service quality up to expectations dur- ing peak dining hours.
A company that leveraged perishability to create a new service is Zipcar, the by-the-hour car rental company whose motto is “Wheels when you want them” (Zipcar, 2011). Mem- bership-based Zipcar, founded in 2000, provides automobile reservations to its members, billable by the hour or day. The solution for sale by Zipcar is the ability for an individual or family to possess fewer cars through renting an extra vehicle when needed. “Wheels when you want them” gives Zipcar a clear point of differentiation from conventional car rental companies, with their focus on multiple-day rentals.
These four characteristics that set services apart from goods require specific responses in marketers’ product strategy:
• Counter intangibility with differentiation; for example, a brand image that sets your offering apart.
• Transform inseparability into an opportunity to build loyalty by empowering frontline employees to throw in “extras” or otherwise customize the service.
• Minimize variability with training for consistent service quality, especially across multiple locations.
• Offset perishability by managing for productivity; for example, using technology to forecast demand.
Services for Consumers and for Businesses As with classes of goods, the class in which a specific service fits affects marketing deci- sions about it. Like goods, service offerings can be divided into those sold to consumers (B2C) and those sold to businesses (B2B), which can be distribution or consulting services.
Everything sold is accompanied by a service encounter. Even retailers of products must focus on service, because service is part of what causes a consumer to choose one retailer over another.
In 2011, the appliance retailer hhgregg launched a marketing initiative to attract buyers by focusing on product training of its sales staff. While hhgregg recognized that competitive
whi80045_03_c03_063-094.indd 81 6/27/12 11:17 AM
CHAPTER 3Section 3.4 When the Product Is a Pure Service
pricing and product selections were important, it realized customer service was a factor on which it could base its competitive differentiation. That strategy grew from the insight that customers were looking for knowledge about product features to help them make their choices (Olson, 2011).
Like the B2C companies that sell goods, consumer services can be classified into the four categories of convenience, shopping, specialty, and unsought, based on how consumers make buying decisions.
B2B companies’ service offerings can be categorized as distribution or consulting, as shown in Table 3.4.
Table 3.4: Service classifications
Consumer Services
Convenience Shopping Specialty Unsought
Business Services
Distribution Consulting
Breaking bulk Assembling lots Creating assortments
Finance Operations Marketing Personnel
Most service providers sell offerings that fit one niche in either the consumer or business classification of services.
Distribution services involve the function of breaking bulk, assembling lots, and creat- ing assortments, which are discussed in Chapter 4 on Place. Consulting services involve offering expertise that a client company needs occasionally, but not on a continual basis. Consultants provide solutions in four broad areas: finance, operations, marketing, and personnel, as the following examples illustrate. Accountants serve the financial area; plumbers fit under operations; an advertising agency assists the company’s marketing department; a provider of temporary employees fills a need in the personnel category. It may be a stretch to think of janitors, plumbers, groundskeepers, and the like as “consul- tants”—keep in mind our definition. Consulting services are any that a company needs occasionally, but not on a continual basis.
Most service providers specialize in selling an offering that fits one niche in either the consumer or business classification. Like services sold to consumers, B2B services must be understood in terms of their intangibility, inseparability, variability, and perishability if they are to be marketed successfully.
A growing trend in the marketing of B2B offerings describes product/solution bundles as “solutions,” which renders the boundaries between product/service classifications less clean. This word choice conveys the service-dominant logic underlying the sales pitch, recognizing as it does that all prospective buyers are, on a fundamental level, seeking a solution to a defined problem.
whi80045_03_c03_063-094.indd 82 6/27/12 11:17 AM
CHAPTER 3Section 3.4 When the Product Is a Pure Service
Service Strategy in Action Consider the hospitality industry. For consumers of overnight stays, the “product” is a mix of amenities with nothing new to take home (except perhaps the complimentary toiletries). Every hotel guest expects a bed and a bathroom. The business strategy for any hotel or multi-hotel chain builds from a target customer—anywhere from bargain to luxury traveler—and a customer value proposition that dictates what amenities, at what price, will make up the service offering. Travelers who stay in Red Roof Inns choose a bed for the night based on the reliability, fitness for use, and price of the service they’ll receive, just as those who stay in a Kimpton boutique hotel do.
Both hoteliers deliver a “solution for sale,” investing resources to deliver a level of comfort and a quality of experience that meets consumers’ expectations. Kimpton may provide an assortment of amenities, such as wireless Internet access, complimentary breakfast, and pillow-top mattresses, while Red Roof Inn provides little more than free parking and a loyalty reward program. Both are the result of fundamental strategic decisions that help each company achieve competitive differentiation within its target market niche.
For another example, consider Agent Anything, a company created to address the needs of two groups of people: those who need help with occasional tasks, and college students who want to earn extra money without the commitment of a regular job. The company’s service consists of listing “missions” (tasks) that “agents” (college students) accept, for mutual benefit. The business strategy for Agent Anything is to attract and serve two tar- get customer groups who each become the supplier of what the other wants. Ideally, both benefit from the value proposition. And yet, the characteristics of services—intangibility, inseparability, variability, and perishability—could undermine this business model if not carefully managed.
As has been shown, many offerings bought by businesses and consumers are actually a mix of goods and services, while some exist purely at the service end of the continuum. For service offerings, intangibility, inseparability, variability, and perishability are issues that must be dealt with in addition to the product strategy decisions inherent in the core service, expanded service, and service concept perspectives.
These issues unique to service offerings can be leveraged to create a compelling percep- tion of value. Attention to differentiation counters the intangibility of a service, attention to empowering customer service staff can turn inseparability into loyalty, training can minimize variability, and attention to productivity (often through technology) can offset perishability.
Field Trip 3.4: Agent Anything
Visit the website of Agent Anything (www.agentanything.com).
What concerns do you see for the marketing strategists of Agent Anything in terms of their service’s intangibility, inseparability, variability, and perishability?
whi80045_03_c03_063-094.indd 83 6/27/12 11:17 AM
CHAPTER 3Section 3.5 When the Product Is an Idea
3.5 When the Product Is an Idea
Consider a box of soap: It is clearly a product. But what about a “soapbox”? In some situations, what one person is trying to get another to buy is not a product or a service, but an idea. When we think of marketing ideas, we generally think of nonprofits—groups like the Red Cross or the American Cancer Society that hope to “sell” the public on the idea of making a behavior change, like starting to donate blood or ceasing to smoke cigarettes. But this kind of marketing activity, known as social marketing, is actually a subset of the larger picture of selling ideas as if they were products to be consumed.
When the product is an idea, the solution for sale is usually a change in thought, belief, or behavior. The idea can be commercial, community, or cause-related, depending on who is “selling” and what market they’re selling to.
When the “sale” of a particular idea or belief benefits a company, delivering profits to the bottom line on the balance sheet, we think of that as a commercial idea. When the “sale” creates community among a group of people, we consider it a community idea; the ben- efits can accrue to both a commercial company and the public. When the solution for sale benefits the public good, we consider it a cause-related idea.
Table 3.5 depicts the relationships of the three types of ideas that can be marketed.
Table 3.5: Idea classifications
Idea Marketing
Type of Idea Commercial Community Cause-Related
Beneficiary Company Community Public
Examples Experiences Product awareness Company image
Politics Shared interests
Environmental Social Public health
Idea marketing tries to effect a change in thought, belief, or behavior.
Questions to Consider
It can be harder to sell an intangible service than a tangible product. Pick one of the cells in Table 3.4, Service Classifications and name a service offering in that class—for example, business remodeling service under Consulting (Operations). Describe a service in your chosen category in terms of the four ways a service is different from a product—its intangibility, inseparability, variability, and perishability. Does one of these aspects suggest a solution for sale that could be used as a point of competitive dif- ferentiation in a marketing campaign?
whi80045_03_c03_063-094.indd 84 6/27/12 11:17 AM
CHAPTER 3Section 3.5 When the Product Is an Idea
Commercial Ideas With the proliferation of so much “stuff,” consumers are becoming more willing to spend on experiences that don’t leave a product (or pile of packaging) gathering dust after inter- est wanes. This has created more opportunity for commercial offerings marketed as ideas rather than products or services.
Travel marketing is an example of the product as an idea. My Little Swans plans custom- ized family travel with price tags that can run to tens of thousands of dollars. The company sells the idea that family travel is part of good parenting because travel conveys invaluable life lessons about cultures and environments around the world. My Little Swans justi- fies its price points with promises that every aspect of its travel services, from tips on its website to its customized multi-week itineraries, has been personally vetted by company founder Katrina Garnett. She often travels with her three children to test the family friend- liness of the destinations and services she recommends (My Little Swans, 2011).
At the opposite end of the price spectrum from My Little Swans is the commercial market- ing of a destination like Las Vegas. The “What happens in Vegas stays in Vegas” campaign that launched in 2003 sold the idea of adult freedom from consequences. That campaign was designed to work with a variety of demographic and economic groups (Marketing News, 2011).
Commercial ideas are not restricted to destinations or travel experiences, of course. An example of a very different “idea for sale” is the Onion humor newspaper’s tongue-in- cheek campaign in 2011 to win a Pulitzer Prize. Editors of the satirical newspaper mounted a full-scale multimedia campaign on the occasion of its 1,000th issue, publishing testi- monial video pleas from such unlikely supporters as Gayle King (best friend of Oprah Winfrey) and the president of Georgia (Peters, 2011). The campaign for an Onion Pulitzer was likely intended to raise interest in the newspaper, which had six months’ previously begun to offer franchises of its print edition to local partners (Kirchner, 2010).
Another example of a commercial idea is the marketing strategy called image advertising. This category of promotions, in which companies attempt to create a favorable mental pic- ture in consumers’ minds, is a type of idea marketing that will be touched on in Chapter 6, Promotions.
Commercial idea marketing typically evokes a scene that associates an intangible ben- efit with whatever the company is selling, whether it is global travel, Vegas freedom, or awareness of a particular brand, like the Onion.
Community Ideas In the Marketing 3.0 world, marketers recognize individuals’ desire for engagement and the search for deeper meaning. This trend has given rise to selling the idea of community. Companies have formed around the specific service of helping people find individuals with shared interests or goals. This business model brings profits to the company that facilitates the growth of a community.
For example, consider marketplaces that match buyers and sellers, or social communities that bring people together around shared interests.
whi80045_03_c03_063-094.indd 85 6/27/12 11:17 AM
CHAPTER 3Section 3.5 When the Product Is an Idea
Angie’s List is a word-of-mouth network, created to help members find the best ser- vice companies and health care in their communities. The Angie’s List website provides detailed reviews from members, searchable by locale. The solution for sale on Angie’s List is trustworthy recommendations. Because of the geographical nature of the services reviewed, Angie’s List puts pressure on service providers to serve their communities well so that customers provide positive reviews.
With community ideas, it can be difficult to determine exactly who is profiting from trans- actions. Is there a company that stands to profit? Angie’s List charges a fee to join. Mem- ber fees help ensure reliability, provide staff support, and fund publication of a monthly magazine.
In the case of Angie’s List it’s clear who’s paying whom, and why. But what about social communities? Consider Meetup, the social networking portal that facilitates face-to- face meetings around common interests. While basic access is free, the subscription fees paid by some members and group sponsors flow toward the pri- vately held company’s bottom line. LinkedIn, the online com- munity geared toward business people, receives its revenues from advertising, subscriptions, and recruitment services.
The selling of community ideas can be profitable and produc- tive for both the company that markets it and the communi- ties served—a decent payoff for helping consumers find mean- ingful dialogue and engagement.
Cause Ideas When it comes to causes, the idea for sale is getting individuals to buy into good behavior. Encouraging people to take care of themselves, or to make behavioral changes for the good of the environment or society, can be difficult. The practice of social marketing has emerged to apply the concepts and techniques of marketing to achieve specific behavioral changes.
Don’t confuse social marketing with cause-related marketing, a term that refers to compa- nies’ use of tie-ins with causes motivated by marketing strategy. Social marketing gener- ates results (which may or may not be monetary) for the actual cause or social concern itself. Likewise, don’t confuse social marketing with “social media” or a “social media marketing plan”—terms that refer to media channels and their use.
What do commercial, community, and cause ideas have in common? The marketing approach they require.
Marketers are responding to individuals’ desire for engagement by creating online communities that bring people together around shared interests.
Associated Press
whi80045_03_c03_063-094.indd 86 6/27/12 11:17 AM
CHAPTER 3Section 3.5 When the Product Is an Idea
How Do You Sell an Idea? Marketers’ product strategy for selling an idea reflects the three stages targeted individu- als must go through before they arrive at a new attitude, behavior, or belief. As these three stages progress, individuals:
1. Become aware of the marketers’ message, over time coming to understand what the message is saying to them;
2. Change their attitudes, accepting that the message is valid and realizing they could benefit from it; and
3. Take action, adopting the new idea in the message.
Marketers’ goal, with campaigns designed to sell ideas, is to help people in the target audience move through this change process.
If the idea is new to the target audience, then marketers must begin with raising awareness. If the audience knows about the issue, but doesn’t really connect it to its own behavior, then mar- keters must work on changing that attitude. And finally, once the audience is informed about the issue, marketers push for action.
Let’s walk through these steps with an example—the idea of giving a home to a child. In 1999 a public relations agency in Madison, Wisconsin, was hired by the state’s Division of Children and Family Services (DCFS) to develop a statewide campaign to increase adoptions (Olderman, 2011).
The agency first conducted quantitative and qualitative research to measure awareness, knowledge, and attitudes about foster care and special-needs adoption. Research helped reveal prevailing attitudes, so the agency could develop an appeal that would attract attention and a solu- tion for sale that would persuade people to take action. This example reflects the three stages marketers lead targeted individuals through to “sell” them an idea.
1. Raise awareness: With the public relations agency’s help, the DCFS developed campaign messages and materials and produced print ads, brochures, and televi- sion and radio public service announcements.
2. Change attitudes: The agency developed an information kit that highlighted the need for foster care and adoption through statistics and stories.
3. Encourage action: The media campaign used the oldest advertising technique to encourage action: It asked for the order. Posters and brochures carried the call
Poster designed to stimulate contact between potential adopters and the State of Wisconsin’s Division of Children and Family Services.
Wisconsin Department of Health Services
whi80045_03_c03_063-094.indd 87 6/27/12 11:17 AM
CHAPTER 3Product Strategy Case Study: Agritourism
to action “Children in Wisconsin need you. Call [number] or visit our website.” Ads on radio, television, and in movie theaters opened with, “Hey, I’m talking to you!” spoken by a little girl seeking a safe and loving home and closed with the same call to dial the phone or visit the website.
The campaign was strategically crafted to move a potential adopter through the three stages of change by first raising awareness, then changing attitudes, and finally encourag- ing action.
Selling an idea, whether commercial, community, or cause-related, generally involves cre- ating a connection between the brand and its consumers. When marketers use events, product sampling, in-store (or bar or nightclub) promotions, or street teams to bring the experience of the brand to the public, they are using a technique called experiential mar- keting. The goal of this technique characterized by live encounters is to take individuals through the three stages described above, using memorable experiences.
Product Strategy Case Study: Agritourism
It’s virtually impossible to make a living from traditional farming today. Small farms are finding a way to sustain themselves financially without off-farm jobs, by adding hospitality and experiences (services) to their crop production (Neuman, 2011). Some farms are switching to “you-pick” operations. Others run a seasonal corn maze or haunted house. Some are even adding bed-and-breakfast hospitality, known as farm stays, sharing with guests the experience of rural life. With income from crops augmented by fees paid by visitors and overnight guests, a small farm can become economically self- sustaining in a business model known as agritourism. The new model is attractive to farmers, but it is a shift that demands a new way of thinking about marketing.
Field Trip 3.5: Selling the Idea of Adoption
Follow this link to explore how AdoptUSKids, a website operated by a coalition of governmental agen- cies including the Children’s Bureau, Administration for Children and Families, and the Department of Health and Human Services, sells the idea of adoption. Look for messages designed to raise aware- ness, change attitudes, and encourage action.
http://www.adoptuskids.org/
Questions to Consider
Is it really possible to assign intangible offerings to neat categories like services and commercial, com- munity, and cause ideas? In what class would you put the Atkins diet? In what category would you put flood insurance?
Can ideas be described in terms of core product, expanded product, and product concept? Choose an idea and describe it in terms of each perspective.
whi80045_03_c03_063-094.indd 88 6/27/12 11:17 AM
CHAPTER 3Product Strategy Case Study: Agritourism
How should a farm business’s product strategy change to reflect its new emphasis on ser- vices? Consider a hypothetical farm we’ll call Green Hectares. Once exclusively a dairy farm, with a few acres rotating in corn and soybeans for animal feed, owners Oliver and Lisa have added seasonal fruit for you-pick sales and have turned an old farm laborer’s cottage into attractive lodging for rent. Where Oliver and Lisa once sold only a product—milk—they now sell additional services (entertainment) and an idea (the appeal of rural life).
Green Hectares’ milk output is purchased by a local dairy cooperative for packaging and processing. That classifies Oliver and Lisa’s original product as a raw material sold to a business (B2B). With the addition of several consumer offerings, they’ve added B2C to their business model. They must now learn how to market directly to consumers, as well as how to market services. Coming from a one-product, one-buyer business model, Oliver and Lisa have a lot to learn.
You-pick fruit is a blend of product and service offering. The consumer gets berries, but also the family-friendly fun of a day in the country. The core service is the experience of harvesting fruit, accompanied by a core product—bowls of berries. Renting the cottage is also part of the core service offering, similar to a stay at any hotel, with an added expe- riential aspect deriving from the working-farm surroundings.
In terms of the expanded prod- uct (service), the Green Hectares operation has little to distinguish it from other you-pick farms in the region. That is the challenge facing Oliver and Lisa, and their response depends on the mar- keting tactics of other you-pick farms, proximity to population centers, and more. Since other farms have not added on-farm overnight stays, lodging is a dis- tinguishing factor Green Hect- ares uses to stand out. An after- noon spent harvesting, overnight guests enjoying the fruit of their labors . . . these are features Oli- ver and Lisa have made part of the marketing strategy.
The cottage and you-pick operation combine to make up the product (service) concept of Green Hectares’ product strategy, the perspective describing the environment around the actual offering—market niche served, consumers’ perceptions and experiences, product life cycle, and the company’s long-range plans for sustainability.
Where are Green Hectares’ offerings in their product life cycle? The dairy production is a mature product, unlikely to experience decline given the relatively stable market demand for milk. You-pick operations have been around for decades; increasing interest in local foods,
There is little to distinguish one you-pick farm from others in the area. Competitive differentiation strategies depend on the marketing tactics of competitors, proximity to population centers, and more.
Associated Press
whi80045_03_c03_063-094.indd 89 6/27/12 11:17 AM
CHAPTER 3 Product Strategy Case Study: Agritourism
as well as the Marketing 3.0 desire of consumers to connect with producers, is giving this rel- atively mature product/service blend a fresh growth stage in the product life cycle. The hos- pitality service of Green Hectares’ new model is in its introductory stage. Consumer demand for farm stays is a more recent development in the United States, although many people who have traveled abroad are familiar with the concept and open to trying the domestic variety. The overall product strategy Green Hectares develops as part of its marketing plan will reflect these product life cycle factors. Green Hectares’ product concept agritourism is perceived by consumers as an authentic experience in harmony with Marketing 3.0 values of collaboration and co-creation of value, delivering plenty of opportunity for participation and engagement as well as social responsibility by supporting sustainable agriculture.
The characteristics of services that set them apart from products will present new chal- lenges to Oliver and Lisa. They must respond to the intangibility of the farm-stay and you-pick ideas, the inseparability and variability of the farm experience on any given day, and the perishability of their service—a major factor given the short productive season of their fruit crops and the limitations of their one-cottage hospitality operation.
Luckily for Oliver and Lisa, who bring very little marketing experience to their new busi- ness model, clearinghouses exist to market the idea of farm stays and activities to poten- tial consumers. Oliver and Lisa can list with one of these services—an example of the product as community idea—to raise awareness of agritourism, change attitudes about the desirability of simple work and relaxation in rural surroundings, and encourage the actions of you-pick harvesting and booking nights at the Green Hectares Cottage.
Challenge Question
Develop a product strategy for pet adoption. Bring in concepts you’ve learned in this chapter:
• Designing for customer value, in terms of core product, expanded product, and product concept; • Product life cycle; and • Achieving competitive differentiation.
In your product strategy, identify where pet adoption fits in the classification scheme of products, ser- vices, and ideas. Discuss marketing issues specific to that class of offerings.
whi80045_03_c03_063-094.indd 90 6/27/12 11:17 AM
CHAPTER 3Post-Assessment
Post-Assessment
1. What fundamental marketing mix concept is illustrated by the example of Oprah Winfrey and her company, Harpo Productions, which produces a TV show, magazine, and celebrity brand experience?
a. A product can be positioned somewhere on a continuum of attributes from intangible to tangible.
b. Product strategy encompasses all the elements that enable a product to serve its owner.
c. A product may be an organization, person, place, service, item, idea, or any combination of these.
d. A product consists of features, functions, benefits, and uses capable of being exchanged for value.
2. The three points of view of product strategy are increasingly comprehensive. Which has been described as the most comprehensive of the three?
a. Core product b. Product concept c. Augmented product d. Expanded product
3. Which of the following terms refers to a strategy related to new product development?
a. House brands b. Complementary products c. Planned obsolescence d. Substitute product
4. Which of the following lists includes the four broad areas into which services provided by consultants to businesses fall?
a. Operations, marketing, finance, and customer service b. Marketing, finance, operations, and maintenance c. Personnel, marketing, finance, and operations d. Marketing, sales, finance, and administration
5. Marketers must move individuals through three stages to “sell” them an idea. Which list contains the three stages, in the correct order?
a. Raise awareness, change attitudes, encourage action b. Raise awareness, create engagement, encourage action c. Change attitudes, encourage action, raise awareness d. Engage, believe, motivate
Answers 1. c. A product may be an organization, person, place, service, item, idea, or any combination of these. The
answer can be found in Section 3.1.
2. b. Product concept. The answer can be found in Section 3.1.
3. c. Planned obsolescence. The answer can be found in Section 3.2.
whi80045_03_c03_063-094.indd 91 6/27/12 11:17 AM
CHAPTER 3Critical Thinking Questions
4. c. Personnel, marketing, finance, and operations. The answer can be found in Section 3.4.
5. a. Raise awareness, change attitudes, encourage action. The answer can be found in Section 3.5.
Key Ideas to Remember
• Three ways of describing a product include the core product, expanded (where differentiation establishes value) product, and product concept; each can be structured to enhance customer value.
• Marketers design value into their offerings through decisions about branding, packaging, support, and quality.
• The inevitability of the product life cycle, especially the final stage of decline, makes it critical for marketers to have an institutionalized, ongoing new product development process.
• A crowded playing field has made it more important than ever that marketers achieve competitive differentiation. When all products are “good enough,” differ- entiating through product features and benefits is no longer enough. Marketers must also leverage consumer emotions through branding.
• Four aspects of service as a “product” demand a strategic marketing response: intangibility, inseparability, variability, and perishability.
• The three stages of change required in marketing an idea include raising aware- ness, changing attitudes, and encouraging action.
Critical Thinking Questions
1. You have created a diagnostic software product that can identify and resolve basic computer glitches. Describe its three levels of core product, expanded prod- uct, and product concept.
2. Many of the best new product ideas come from customers. Think of a product or usage group that’s important to you. Describe an idea for a new product or line extension based on your experience with this product.
3. You are a marketer with a cell phone company. You are charged with develop- ing ideas for a new cell phone that delivers value no other competitor can claim. Demonstrate four possibilities for achieving product differentiation.
4. Would you switch from your preferred brand to an alternate—say, from Coke to Pepsi—because of the one company’s support for a cause? Justify your position.
5. You are hired to evaluate a home cleaning service and recommend a strategy for differentiating the service from other home cleaners. The service must deal with the intangible, inseparable, variable, and perishable nature of its offering. Develop recommendations for ways the company can leverage one or more of these four characteristics to increase sales.
6. You work for a social marketing firm. The firm has a contract to mount a cam- paign that targets college students to stop binge drinking. How would you rec- ommend the firm deal with the stages necessary to change behavior?
whi80045_03_c03_063-094.indd 92 6/27/12 11:17 AM
CHAPTER 3Key Terms to Remember
accessory equipment Assemblies pur- chased for use in production, administra- tive, clerical, or marketing activities, not directly used as an input to a production process.
assortments All the lines and products a company sells.
augmented product Synonym, see expanded product.
B2B (business to business) The business model in which a company sells its offer- ings to other businesses.
B2C (business to consumer) The business model in which a company sells its offer- ings to consumers.
branding The use of a company’s name, reputation, and trademark to attract con- sumers’ attention. Ideally, branding creates a link between positive emotions and the identity of a company and its products.
business support services Activities required for successful completion of a process or to support administrative functions.
cannibalization Situation in which the sales of a new or differently branded product eat into the sales of other products already in the market.
complementary products Items whose use is related to the use of the original product under consideration to fill a need.
component parts Pieces, assemblies, or subassemblies that are required to finish an activity, item, or production process.
core product The core set of features that enable a product to fill a need.
derived demand Demand for a basic good due to its use in the production of another good; demand for an input to a production process, dependent on the output of a final or finished product.
expanded product The mix of attributes and intangibles that differentiate one offer- ing from others; establishes the customer value equation.
experiential marketing Creating live encounters between individuals and brands that result in memorable experi- ences that generate awareness, change attitudes, and encourage action.
items Individual products with specific characteristics; one item equals one SKU (stock-keeping unit).
lines Sets of closely related individual products.
line extension Adapting an existing prod- uct to suit new niches in the same market, or finding an entirely new market that can be served by the existing product.
manufacturing installations Assemblies or systems required to conduct manufac- turing processes, usually custom-designed and installed.
operating supplies Items used in pro- duction, maintenance, or administrative activities.
planned obsolescence Business practice of deliberately retiring an item (before the end of its useful life) by stopping its sup- ply, customer service, or technical support and introducing a newer (often incompat- ible) model or version, to push consumers to abandon the currently owned item in favor of the new one.
Key Terms to Remember
whi80045_03_c03_063-094.indd 93 6/27/12 11:17 AM
CHAPTER 3Key Terms to Remember
private label Products or services manu- factured by one company for sale under another company’s brand. Also called house brands.
process materials Substances purchased for incorporation into a product, which cannot be recognized in the finished activ- ity or item.
product A physical entity, a service, an idea, or any combination of the three designed to satisfy a customer’s wants or needs.
product concept A long-range plan describing aspects of the product strategy including target market niche, brand per- ception, and customer experience.
product parity An offering similar enough to other brands of the same type that it is considered functionally equivalent to products offered by competitors.
product strategy Describes the product offering from three perspectives: core, expanded, and concept.
raw materials Basic substances in their natural, modified, or semi-processed state, used as an input to a production process.
social marketing The application of concepts and techniques of marketing to achieve specific behavioral changes for the public good.
substitute products Offerings that have some characteristics in common with the product under consideration to fill a need.
usage groups Items that are required together to fill a need.
whi80045_03_c03_063-094.indd 94 6/27/12 11:17 AM