Can someone do my Week 1 & Week 2 Discussion in Principles of Marketing?

3 The Marketing Mix: Product Supermarket aisle. Fascinadora/iStock/Getty Images Plus Learning Outcomes After reading this chapter, you should be able to List 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. Describe four aspects of service as a "product" that demand a strategic marketing response. Identify the three stages of change required in social marketing. Introduction The subject of what marketers sell—the goods and services on offer and the packaging, customer service, brand reputation, and more that surround them—is covered by the term product as one of the four Ps of marketing management. Under the umbrella term marketing mix, the four Ps of product, place, price, and promotion represent 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 products, 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, the quality of manufacture that makes a Yeti cooler more desirable than a Styrofoam ice chest—these are all elements of form that render service. As you learn about offerings ranging from pure goods to pure services and 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-product = good or service. 3.1 Designing Products for Customer Value When we say "products," what exactly are we talking about? The AMA defines the term as a "bundle of attributes (features, functions, benefits, and uses) capable of exchange or use; usually a mix of tangible and intangible forms" (Marketingpower.com, 2001). Thus, a product may be a physical entity, a service, an idea, an experience, or any combination thereof. An organization, person, place, experience, or idea can be a product. Consider Ellen DeGeneres: The comedian creates entertainment content through her production company (A Very Good Production) and markets a lifestyle brand (ED by Ellen), among other business ventures. The apparel and home goods sold by ED by Ellen are physical products. The content on The Ellen DeGeneres Show is technically a digital output—and as an experience, it too is a product. For her fans, being in the audience during a taping of the show is thrilling; seats in the television studio are a product for sale as well. And finally, Ellen’s core idea of charitable behavior, captured in the catchphrase with which she closes each program ("Be kind to one another"), is an idea as product that anchors the entire Ellen DeGeneres brand experience in the humanity-centric world of Marketing 3.0. Table 3.1 demonstrates that all product offerings can be positioned somewhere on a continuum from pure good (composed of tangible attributes) to pure service (composed entirely of intangible attributes). To identify a product’s position on this continuum, consider 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. Table 3.1: Continuum of products Pure ← Good combination → Pure service Characteristics 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 Note. 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, as was discussed in Chapter 1. This reflects the current marketing thought regarding 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 that 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 students—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 Ellen DeGeneres and a paper clip? The answer lies in a fundamental concept introduced 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 features that deliver the benefits customers are looking for but not so many that the product costs more than customers are willing to pay. As you learned in Chapter 1, customers are increasingly being invited into cocreation of value, which removes some of the guesswork from the question "What do customers want and what are they willing to pay for it?" 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 and 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." Consumer Product "Marketing Fails" Unsuccessful examples are likewise educational. Google Glass was unceremoniously withdrawn from Google’s new product lineup in 2016. Tech industry observers generally agree that the failure resulted from inadequate research on consumer behavior and attitudes. While the idea of a ubiquitous computer housed in a hands-free device worn like a pair of eyeglasses seemed promising, the fact that it housed a camera caused privacy concerns to top the list of reasons it failed. Poor design, lack of a clear functional purpose, high purchase price, and a marketing strategy that backfired helped push it into its grave. The design was considered "geeky" at best, and possibly dangerous. "Please tell me if I’m being paranoid here but isn’t the small, sharp-edged cube of glass placed directly in front of my very delicate eye an accident waiting to happen?" wrote Karsten Strauss (2013, para. 3) in a Forbes product review). Functionality would appear to be a given with any device that promises to be a "ubiquitous computer"—but almost everyone already carries a mobile device that delivers the functions Google Glass offered. Even the engineers who designed it couldn’t agree on what its unique functional advantage was (Doyle, 2016). Now let’s look closer at the failed marketing strategy—which includes its high purchase price, one of marketing’s four Ps. At $1,500 for a product that was barely out of beta testing, the product failed to resemble "a good deal" for most potential buyers. Recognizing that, Google Glass was promoted exclusively to early adopters. "Unfortunately, this group was comprised mainly of tech geeks and journalists who wouldn’t really benefit from the key features that Google Glass had to offer," wrote Bob Doyle (2016, para. 14) on Business2community.com. (He named as primary features the ability to have a feed of information available at a glance and to quickly capture images.) "The worst part was the fact that some tech geeks and journalists are very opinionated people, and they do have the habit of sharing their experiences. . . . Consequently, the underwhelming experience . . . damaged its reputation prematurely" added Doyle (2016, para. 17). But don’t be surprised if Google Glass makes a comeback: In the summer of 2017, Alphabet (Google’s parent company) announced a Google Glass product for the workplace that allows wearers to shift between actual and virtual views. Google Glass Enterprise, as the redesigned product is known, solves a problem for workers who need two hands free while accessing or inputting digital information. In settings as disparate as airline factories and doctors’ offices, Google Glass Enterprise is increasing productivity and accuracy. By shifting from targeting consumers to targeting business buyers (a shift in marketing strategy), Google has been able to recover from its "marketing fail" and breathe new life into its innovation (Levy, 2017). Follow the link in Field Trip 3.1 to read about a museum started by an innovation researcher who began collecting failed products. Field Trip 3.1: Museum of Failure Organizational psychologist Dr. Samuel West opened the Museum of Failure in Helsingborg, Sweden, in 2017 to provide a learning experience about the "risky business of innovation," according to the museum’s website. Among its notable fails: Bic for Her (pens in pastel colors) and Harley Davidson eau de toilette. The museum traveled to Los Angeles for an exhibition in late 2017. http://www.museumoffailure.se Research in Food Product Development Loblaw's brand sets out to create a Mexican-inspired food product that will appeal to a broad range of tastes. Where would this product fall on the continuum of products shown in Table 3.1? Even pure goods render service (utility), as food products do by providing nutrition. What services might a new Mexican food product offer, in addition to nutrition? 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 engineering, 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 and the functionality they deliver. As a salesperson, Sally’s perspective is more expansive. She thinks about the paper clip’s value as customers perceive 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 happen 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 concept, as shown in Figure 3.1. Figure 3.1: Product strategy perspectives The three perspectives of the product strategy are increasingly comprehensive. Illustration showing the three perspectives of the product strategy: core product, expanded product, and product concept. The core product describes the product in terms of its solution for sale—the form/function utility that creates the set of benefits that allow it to fill a need. Acme offers paper clips with features like a nonskid surface, colored coating, and heavier gauge of metal, giving its paper clips a range of advantages in form/function utility. 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 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 warranties or guarantees that go with a purchase. What differentiates one offering from others on the market, beyond form/function utilities? The expanded product, which establishes the customer’s perception of its value equation. Acme uses packaging to augment its product’s value by selling assorted colors of vinyl-coated paper clips in plastic tubs with internal dividers to keep the different colors separate. It offers a money-back guarantee and discounts for bulk orders. These features of the expanded product are designed to increase their paper clip offerings’ value in consumers’ eyes. 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. Acme Paper Clips is carefully monitoring the office paper industry and other indicators of trends in business consumption of its humble product and conducting innovation research in search of products that offer value in paperless office environments. These three perspectives form the product strategy—the product P in the four Ps 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). Now let’s take a trickier example: the business networking service LinkedIn. Can you define this company’s three product strategy perspectives? Its core product is its customers—specifically, the ability of members to connect with other members. The more members LinkedIn has, the more valuable its core product becomes to those same customers. LinkedIn’s expanded product includes the free and premium membership levels it offers, with "perks" at each level designed to meet the needs of different types of users. The majority of LinkedIn’s members never pay for membership, but it’s the existence of this large pool of professionals that gives the platform value for marketing, sales, and recruiting (Baxter, 2015). LinkedIn’s product concept comprises its strategy to focus on the needs of people in the niches that value the premium features enough to pay for them. Walmart’s Great Value products. Associated Press Decisions about branding, packaging, support, and quality give products points of competitive differentiation by which consumers can compare options and assess value. 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 strategy 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 several offerings and decide which option best suits their needs. The goal of the product strategy is to achieve competitive differentiation. This takes discipline. Decisions add up to a strategy that promises that 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. branding—a company’s use of its name, reputation, and trademark to attract consumers’ attention packaging—form attributes designed to attract the eye, prevent damage in shipping, and convey information to serve both the sellers’ and the buyers’ needs, like nutrition labels and UPC codes support—postsale services and policies that create customer satisfaction by affirming that a company stands behind its products 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 better value for the consumer, delivering greater satisfaction with the purchase Think about the product strategy for Yeti coolers, the popular but pricey ice chests first designed for hunting and fishing enthusiasts that began showing up at beaches, football tailgate parties, and even as permanent car accessories for ferrying groceries. Yeti’s brand has the cachet of a luxury good (Kurutz, 2017). Its attention to packaging is similarly high end. For example, Yeti vacuum-insulated tumblers are packaged with a combined label and information sheet that, rather than sticking to the mug where adhesive residue could linger, wraps around to adhere to itself and thus can be cleanly removed (Gintzler International, 2014). Yeti offers product support unheard of with the typical coolers and tumblers retailed through mass discounters—Yeti gear comes with a 3- to 5-year warranty, depending on the item. Yeti makes quality the differentiating feature of its product strategy. By using a rotational molding process, it delivers far greater insulating properties and rugged durability; the same process is used to mold kayaks (Kurutz, 2017). A well-manufactured product, wrapped in supportive policies and thoughtful packaging, marketed like a luxury good, appears to be a highly successful strategy for Yeti. To summarize, here’s how product strategy creates the customer’s perception of an offering’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 product concept fill out the picture of what that product is and does. Decisions about branding, packaging, support, and quality give the product its positioning and points of competitive differentiation—how a consumer 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, also called its product mix. Note that this terminology differs slightly from that used in the discussion of designing a business portfolio in Chapter 2. That concerned 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 marketing orientation (introduced in Chapter 2) 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 different products to different people in different ways. Marketing decisions about branding, product strategy, and positioning 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: consumers 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. Convenience: These products are inexpensive, frequently needed, and easily substituted by something else. Consumers buy with a minimum of comparison or effort. Example: soap. 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. Specialty: These products require a high investment and are infrequently needed. Consumers research and make careful comparisons. Example: cars. Unsought: These products can be new innovations or simply not a high consumer priority. Consumers must be convinced to want them; their purchase can easily be deferred. Example: funeral services, reference books. To some extent, B2B products can also be classified based on how business consumers shop for them. A purchasing manager will likely shop for printer paper like a convenience product but for a computer printer like a specialty product. A B2B company sells products that other businesses buy, which fall into seven categories. Raw materials: Basic substances in their natural, modified, or semiprocessed state, used as an input to a production process. Component parts: Pieces, assemblies, or subassemblies that are required to finish an activity, item, or production process. Process materials: Substances purchased for incorporation into a product, which cannot be recognized in the finished activity or item. Manufacturing installations: Assemblies or systems required to conduct manufacturing processes, usually custom-designed and installed. Accessory equipment: Assemblies purchased for use in production, administrative, clerical, or marketing activities, not directly used as an input to a production process. Operating supplies: Items used in production, maintenance, or administrative activities. 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 photocopier for the office (accessory equipment); copy paper (operating supplies); and finally, the services of an accountant, an advertising agency, and a food distributor (business support 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) Note. Companies sell products, services, or a combination thereof that fit one niche in either the consumer or business product classification. The marketing orientation leads us to keep customers’ needs and desires in mind. Frequently, filling those needs and desires creates demand for other goods and services. If consumer demand for Gatorade sports drinks increases, PepsiCo (which owns of Gatorade) will need to increase production, leading to demand for plastic bottles, caps, and labels, not to mention for labor at the bottling plant and distribution capacity to get all that Gatorade to retailers. This is termed derived demand because need 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 company construct its end product. 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. 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 to buy just hot dogs. You’re also going to need buns, pickles, 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 utensils, 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 replacing 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 concepts. In the spring of 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, 2011c). Without insight into classification of products, the marketers at Vlasic might have missed this opportunity to increase pickle sales. Field Trip 3.2: 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? http://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. 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. Product Strategy in Action In the summer of 2011, a flawed strategy resulted in misuse, injury, and a swift recall of a product. As the outdoor season approached, Napa Home & Garden 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 carried 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 redesigning 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, 2011a, 2011b). 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 customer value through decisions about the core product, expanded product, and product concept. You’ve learned the importance of giving the product points of competitive differentiation through branding, packaging, support, and quality. You’ve explored classification 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 3.3 offers an opportunity to practice using these concepts. Field Trip 3.3: 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 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. 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? 3.2 Managing Product Life Cycles Every product on the market has a life span. 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. Either 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, listed below. market introduction growth market maturity 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. Graph showing the four stages of a product life cycle (introduction, growth, maturity, and decline) and the sales and profits as time progresses. During the introduction phase, investment costs accrue but are not yet recouped (that is, costs are high, but sales and profits are low). During growth, sales rise as costs fall, due to efficiencies 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, 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. Two trends—increasing price competition at retail and decreasing 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 Rollerblades, 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 focusing 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 (Tenes, 2018). 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, 2011a). Decline: Harry & 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 & 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. Recall what you learned about the BCG Matrix in Chapter 2: the question marks, defined as high-growth but low-share SBUs, typically consist of products/services that are in the introduction and growth phase of the product life cycle. Companies avoid having too much of their business portfolio invested in products that are vulnerable to decline by investing in innovation of and marketing for question marks. Product life cycles can be months or years. It is important for the company to recognize the stage in which the product is in. Pricing strategies and development strategies are based on this information. Diffusion of Innovations Theory The product life cycle focuses attention on a product’s contribution to a company’s profitability. The marketing orientation encourages us to look at that same life cycle—but this time with customers in mind. How are the buyers for a product different at each stage in the product life cycle? Their consumer psychology—and thus their patterns of adoption—varies in predictable ways. The diffusion of innovations theory explains the mechanism by which subsequent waves of buyers generate sales throughout a product’s life span. The differentiator is innovativeness—the degree to which an individual adopts a new idea (Rogers, 2003). 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. This large segment of buyers can be divided into early majority and late majority. Laggards 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, 2011). But more than psychology determines diffusion of innovations. Other factors affecting the speed at which an innovation is adopted include price, risk, and effort (known as switching costs, discussed in Chapter 5). A higher price can slow adoption if the consumer doesn’t see sufficient value. Early adopters were quick to buy iPhones and even Google Glasses, but only in the former case was that momentum sufficient to sustain a product life cycle (Levy, 2017). Risk can become a factor in several ways—reputational, as when people wearing Google Glasses were perceived to be "creepy" because the product allowed them to take photos surreptitiously, or financial, as when a product requires an "ecosystem" that may or may not develop around it, like Blu-ray players requiring entertainment companies to distribute media on Blu-ray disks. Sometimes the switch requires the consumer to learn new skills, such as switching from a bicycle to a Segway. Segways attracted early adopters, but all three factors—price, risk, and effort—probably contributed to their poor adoption by the subsequent categories of customers. Figure 3.3 depicts the diffusion of innovations theory. Figure 3.3: Diffusion of innovations The diffusion of innovations theory categorizes individuals’ psychological orientation toward innovation. Graph. Y-axis is market share, and x-axis is adopters. Blue line shows trend of consumers adopting new technology. Yellow line shows trend of new technology gaining market share. New Product Development The best defense against declining sales due to product life cycle issues is a good offense: the development of new products. 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 process 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, competitive differentiation, and the financial and technical requirements it must meet to support company objectives. Product ideas that pass this stage proceed to development, including 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 Note. 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 cocreation 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 in which the sales of new items eat into the sales of other products already in the market. When Apple introduced 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 planning for existing products’ life cycles and strategically timed new product introductions. Adaptive Innovation Businesses are increasingly shifting to an adaptive innovation approach (introduced in Chapter 1) to get new products to market faster, without sacrificing confidence in a successful rollout. The adaptive innovation approach invites customers into cocreation at the idea generation stage and keeps them involved throughout the rest of the process. The Nike+ website is one example: On the platform, customers post data, access maps, and share with their friends about their recent running activity. Customers get increased engagement and interaction around their running, while Nike receives valuable data about its customers and their product usage. That information drives innovation efforts. And because the data collection and analysis is ongoing, Nike can rapidly respond should its customers’ behavior begin to change. Can of diet Mountain Dew. Darios44/iStock Editorial/Getty Images Plus PepsiCo created different versions of its Mountain Dew. How did the company market to a particular niche group? The adaptive innovation approach focuses on releasing pilots and prototypes before full-scale rollouts take place. During prototyping, companies frequently experiment with multiple variations simultaneously, to see which ones experience the most success with consumers (Gupta, 2016). This leads to new cycles of pilots and prototypes. Rather than treating the rollout as the end of the process, adaptive innovation is iterative. The product development team continues to add, modify, or delete features based on the ongoing customer conversation. In this way a company keeps new products in its business portfolio, balancing the need to adapt to consumers’ rapidly changing purchasing behavior with the need to control investment in innovation. 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. Mountain 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 including 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, a manufacturer of plastic 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 in which 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 drinkware product line, choosing a glowing shade of green for its emotional connection to the environment. Palm Products uses trade shows to reach distributors and retailers. Lara Blamey, marketing manager, exhibited the line as part of a larger product assortment at a hospitality 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. Blamey (2011) said: When we got back to the office in Melbourne, we started calling the suppliers to the hospitality industry and letting them know about the 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. 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. 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, product 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 cocreation. 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 personalities and motivations, as identified by the diffusion of innovations theory. That theory also delineates factors affecting the speed at which a new innovation is adopted, including price, risk, and effort. Because almost all products eventually decline, every company needs to make new product development an institutionalized, ongoing process. Cocreation and adaptive innovation keeps that new product development function attuned to consumers’ changing needs and desires. Line extension 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. 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? 3.3 The Paradox of Choice You’ve been there—standing in the toothpaste aisle at the drugstore, facing down an overabundant 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. Sometimes they offered 6 jams and other times they offered 24. When choosing from 6 jams, 30% of tasters made purchases; when offered 24 options, only 3% of tasters purchased 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). Field Trip 3.4: The Paradox of Choice: Why More Is Less More choice opens the door to regret. Follow this link to view a brief explanation of the neurology behind The Paradox of Choice. https://youtu.be/qosYJvMZJFA 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 managing 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 an innovation in tooth care and persuade consumers to accept it. 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 development, and soon a new box squeezes onto that toothpaste display in the grocery aisle. As consumers, 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." Goods 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. Street full of runners in running gear. GAPS/iStock/Getty Images Plus 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. The effect of product parity, as this situation of many "good enough" offerings is termed, is to challenge marketers to create differentiation in other ways than through product features and benefits. In a world of product parity, marketers must leverage 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 branding is discussed in depth in Chapter 6. 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. 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. Corporate social responsibility takes cause-related marketing a step further, integrating concern for social and environmental well-being into the fundamental mission of the company. Companies like Ben & Jerry’s, which has been committed to a three-part mission from its start, is a prominent example. Founders Ben Cohen and Jerry Greenfield wanted to (a) make the world’s best ice cream, (b) pursue progressive social change, and (c) provide fair compensation to employees and shareholders. They fought to maintain that commitment after purchase by Unilever in 2000—and largely succeeded (Edmondson, 2014). Unlike cause-related marketing, which is primarily a brand positioning strategy used in consumer-facing marketing, corporate social responsibility like that of Ben & Jerry’s is effective regardless of whether a company is B2C or B2B—or both. Ben & Jerry’s owns and operates consumer-facing scoop shops but primarily markets to grocery stores. 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 Product 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. Marketers 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." Questions to Consider Identify a product or service advertised in your community that is using a cause-related tie-in to differentiate itself from similar offerings. Describe how the marketing campaign you identified addresses the paradox of choice. 3.4 When the Product Is a Pure Service At the beginning of this chapter, Table 3.1 depicted product offerings on a continuum 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 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 must deliver customer value. As consumers 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. Zipcar parked in Sacramento, California. Andipantz/iStock/Getty 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. How Services Differ From Goods Services don’t come in a box—there’s nothing new to take home after purchasing a service. That fact raises several issues from a marketing perspective. Four characteristics of services set them apart from products. Services are intangible, inseparable, variable, and perishable. Because services are intangible, it’s hard for buyers to "kick the tires" before they buy. Services are sold on a promise of satisfaction that requires more faith on the buyers’ part than purchase of a good. Therefore, service marketers must make an offering tangible through clues to its reliability and fitness for use, such as testimonials from satisfied customers, visual representations of processes, and so on. Services are inseparable from the individual and the organization that provides them. Unlike a good that is manufactured, sold, and taken home in a box, most services are "manufactured" by a seller and consumed 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 assembly line essentially identical, services vary with the person providing them. Uniformity in services is a factor that each service owner tries for. For example, food chains like Subway, Chipotle, Pizza Hut and Domino’s have major challenges of providing same quality for every order (Bhasin, 2017). 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 3:00 p.m. If the family fails to show up for the sitting, you can’t sell 3:00 p.m. to another client. With every elapsing minute your inventory of time is perishing. Businesses throughout the hospitality industry deal with the perishability of services through peak and off-peak pricing. Perishability is a significant problem for businesses facing fluctuating demand. For example, restaurants must hire extra staff members to keep service quality up to expectations during 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, 2018). Membership-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. But let’s take a moment to view these characteristics through the macro marketing lens. One in particular—perishability—has led to human resource practices that have drawn concerns about unfair labor practices. The use of on-call staffing with retail service employees had unintended consequences that led to pushback and in some cases changes in management policy. To reduce labor costs from overstaffing, many retail and restaurant chains began using data-driven software to match the number of workers scheduled during a work shift with predicted customer demand. These companies required employees to be prepared to come in for a shift but canceled that shift on short notice when the software predicted lower customer demand than anticipated. The practice did indeed reduce labor costs but led to fierce criticism from employees and labor activists. For workers who had to juggle child care and other personal commitments—even other jobs—the burden was great. When in 2014 the New York Times profiled a Starbucks employee whose life was adversely affected, broad concern grew. Inquiries from states’ attorneys have led to many companies backing away from the on-call staffing approach (Halzack, 2016). Deploying technology that replaces human labor for customer service, such as self-checkout stations, appears to be a better solution to perishability, one that satisfies both consumers’ desire for speed and convenience and retailers’ need to control labor costs (Karolefski, 2015). While intangibility can be countered with branding, inseparability with customization, and variability with training, perishability remains a challenge. It is difficult to design a marketing response that benefits both customers and employees. Services for Consumers and for Businesses As with classes of goods, the class in which a specific service fits affects marketing decisions about it. Like goods, service offerings can be divided into those sold to consumers (B2C) and those sold to businesses (B2B). 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 H. H. Gregg launched a marketing initiative to attract buyers by focusing on product training of its sales staff. While H. H. Gregg recognized that competitive 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 Note. 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 creating assortments, which are discussed in Chapter 4. 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 "consultants"—but 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. 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 multihotel 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 TaskRabbit, a company created to address the needs of two groups of people: those who need help with occasional tasks and those who want to earn extra money without the commitment of a regular job. TaskRabbit’s service consists of listing tasks (in categories like personal assistant, delivery, cleaning, handyman, and assembly) that freelance workers accept. The business strategy for TaskRabbit is to attract and serve two target customer groups that 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. Similar "task-matching" companies include Thumbtack, Porch, Pro.com, and Amazon Home Services. Field Trip 3.5: TaskRabbit Visit the website of TaskRabbit (http://taskrabbit.com). What concerns do you see for the marketing strategists of TaskRabbit in terms of their service’s intangibility, inseparability, variability, and perishability? TaskRabbit, like LinkedIn, is an example of a service company operating in the platform business model. Companies like these create value for multiple interdependent groups (TaskRabbit terms its two groups "Clients" and "Taskers"), using a digital platform (typically a mobile app and website) to automate the interface between users from the two groups. The success of this business strategy depends on being able to generate enough customers to take advantage of the network effect, in which the value of the service increases with every member added. Without a balance of supply and demand between taskers and clients, TaskRabbit cannot grow. TaskRabbit, which launched in 2008 as RunMyErrand, had attracted over 60,000 Taskers by 2017 when it was purchased by IKEA. The Swedish furniture company is beloved for its affordable, well-designed products but infamous for its inscrutable product assembly instructions—a customer problem TaskRabbit is ideally positioned to solve. IKEA operates in 29 countries, a growth opportunity for TaskRabbit that could "eventually be extended globally" (as cited in Hsu, 2017a), the company said in a statement. As has been shown, many offerings bought by businesses and consumers are 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 perception 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. Regardless of whether services are sold individually or bundled into solutions; regardless of whether they are offered to consumers, businesses, or a blend of both; regardless of whether they market to one group or more in a platform business model; pure services must deliver customer value. 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 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 differentiation in a marketing campaign? 3.5 When the Product Is an Idea Consider a box of soap: It is clearly a good. 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 as spreading the word about 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 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 an 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 benefits 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 Note. Idea marketing tries to effect a change in thought, belief, or behavior. 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 interest wanes. This has created more opportunity for commercial offerings marketed as ideas rather than goods or services. Travel marketing is an example of the product as an idea. Journey Beyond Travel plans customized trips to Morocco with a promise of "unique experiences in hidden corners of the country" featuring "authentic encounters that will heighten your experience" ( Journey Beyond Travel, 2018). based on the founders’ deep relationships with locals. Journey Beyond Travel justifies its premium pricing with the promise that it specializes in customized, private "dream trips" that include accommodations, transportation, local guides, driver and in-country host, and some meals. Every aspect of its travel services have been personally vetted by company founders Fazia and Thomas Hollowell (Journey Beyond Travel, 2018). At the opposite end of the price spectrum from Journey Beyond Travel is the commercial marketing 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, a rare experience available in that city. That campaign was designed to work with a variety of demographic and economic groups (Katsilometes, 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 testimonial video pleas from unlikely supporters such 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 6 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 picture in consumers’ minds, is a type of idea marketing that will be touched on in Chapter 6. Commercial idea marketing typically evokes a scene that associates an intangible benefit with whatever the company is selling, whether it is global travel, Vegas freedom, or awareness of a brand, like the Onion. Social media workshop promoting the use of LinkedIn. Associated Press Marketers are responding to individuals’ desire for engagement by creating online communities that bring people together around shared interests. 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. "Among the most desired of human needs is belonging. People are willing to pay a premium and give up their privacy in exchange for feeling accepted and loved," wrote Baxter (2015, p. 15). The membership economy business model is functionally a community idea. Its value proposition is essentially the same as the platform business model mentioned earlier—value creation through exchanges between two or more interdependent groups. For examples of membership economy businesses, consider marketplaces that match buyers and sellers, or social communities that bring people together around shared interests. Angie’s List is a word-of-mouth network, created to help members find the best service 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 transactions. Is there a company that stands to profit? Angie’s List charges a fee to join. Member 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 privately held company’s bottom line. LinkedIn, the online community geared toward business people, receives its revenues from advertising, subscriptions, and a premium membership level valuable to members in sales and talent recruitment. LinkedIn enables people to come together around shared interests using LinkedIn groups and so qualifies as a community idea. The selling of community ideas can be profitable and productive for both the company that markets it and the communities served—a decent payoff for helping consumers find meaningful dialogue and engagement. Cause Ideas When it comes to causes, the idea for sale is getting individuals to buy into a certain behavior, for their own betterment or on behalf of others—donating to a charitable cause, or voting for a particular political candidate, for example. 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 a mutually beneficial collaboration between a company and a cause, designed to promote the former’s sales and the latter’s mission. Social marketing generates 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 online media channels and their use. What do commercial, community, and cause ideas have in common? The marketing approach they require. How Do You Sell an Idea? Marketers’ product strategy for selling an idea reflects the three stages targeted individuals must go through before they arrive at a new attitude, behavior, or belief. As these three stages progress, individuals become aware of the marketers’ message, over time coming to understand what the message is saying to them; change their attitudes, accepting that the message is valid and realizing they could benefit from it; and 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 marketers 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 solution for sale that would persuade people to act. This example reflects the three stages marketers lead targeted individuals through to "sell" them an idea. Raise awareness: With the public relations agency’s help, the DCFS developed campaign messages and materials and produced print ads, brochures, and television and radio public service announcements. Change attitudes: The agency developed an information kit that highlighted the need for foster care and adoption through statistics and stories. Encourage action: The media campaign used the oldest advertising technique to encourage action: It asked for the order. Posters and brochures carried the call 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 encouraging action. From the point of view of the publicity firm, the campaign was a success because the client was very pleased with its result. Evidence suggests the desired behavior change was achieved: adoptions increased in Wisconsin by 38% in the 5 years following the campaign, according to the U.S. Department of Health and Human Services (Wulczyn & Brunner Hislop, 2002). Field Trip 3.6: Selling the Idea of the Men’s Health Movement Follow this link to explore how the Movember Foundation sells the idea of men living happier, healthier, longer lives. Look for messages designed to raise awareness, change attitudes, and encourage action. In November 2015 the foundation raised over $13 million to address four of the biggest health issues faced by men. https://us.movember.com Selling an idea, whether commercial, community, or cause-related, generally involves creating 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 marketing. The goal of this technique characterized by live encounters is to take individuals through the three stages described above, using memorable experiences. Questions to Consider Is it possible to assign intangible offerings to neat categories like services and commercial, community, 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. Case Study: Agritourism From 2013 to 2017 America’s farmers and ranchers weathered a 45% drop in net farm income, a trend seen as likely to continue (Harvie, 2017). Given the difficulty of making a living from traditional (smaller, family-owned) farming, some farmers are finding a way to sustain themselves financially without off-farm jobs, by adding hospitality and experiences (services) to their crop production (Neuman, 2011). Family picking strawberries in a field. Associated Press 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. 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. How should a farm business’s product strategy change to reflect its new emphasis on services? 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 good and service offerings. The consumer gets berries as well as 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 experiential aspect deriving from the working-farm surroundings. In terms of the expanded product (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 marketing tactics of other you-pick farms, proximity to population centers, and more. Because other farms have not added on-farm overnight stays, lodging is a distinguishing factor Green Hectares uses to stand out. An afternoon spent harvesting, overnight guests enjoying the fruit of their labors . . . these are features Oliver 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 its product life cycle? The dairy production is a mature product; it is 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, as well as the Marketing 3.0 desire of consumers to connect with producers, is giving this relatively mature product/service blend a fresh growth stage in the product life cycle. The hospitality 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 are 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 cocreation 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 challenges 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 business model, clearinghouses exist to market the idea of farm stays and activities to potential 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 achieving competitive differentiation In your product strategy, identify where pet adoption fits in the classification scheme of products, services, and ideas. Discuss marketing issues specific to that class of offerings. 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. The new product development process should balance needs for speed and controlled investment by adopting cocreation and adaptive innovation strategies. A crowded playing field has made it more important than ever that marketers achieve competitive differentiation. When all products are "good enough," differentiating 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 awareness, changing attitudes, and encouraging action. Critical-Thinking Questions You have created a diagnostic software product that can identify and resolve basic computer glitches. Describe its three levels of core product, expanded product, and product concept. 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. You are a marketer with a cell phone company. You are charged with developing ideas for a new cell phone that delivers value no other competitor can claim. Demonstrate four possibilities for achieving product differentiation. 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. 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. You work for a social marketing firm. The firm has a contract to mount a campaign that targets college students to stop binge drinking. How would you recommend the firm deal with the stages necessary to change behavior? Key Terms to Remember Click on each key term to see the definition. accessory equipment  Assemblies purchased for use in production, administrative, clerical, or marketing activities, not directly used as an input to a production process. assortments  All the lines and products a company sells. branding  The use of a company’s name, reputation, and trademark to attract consumers’ attention. Ideally, branding creates a link between positive emotions and the identity of a company and its products. B2B  Short for "business to business"; the business model in which a company sells its offerings to other businesses. B2C  Short for "business to consumer"; the business model in which a company sells its offerings to consumers. business support services  Activities required for successful completion of a process or to support administrative functions. cannibalization  A 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. decline  The fourth and final stage of the product life cycle, characterized by fast declining sales revenue and fewer customers. Both costs and profits decrease. derived demand  The demand for a basic good due to its use in the production of another good; the demand for an input to a production process, dependent on the output of a final or finished product. diffusion of innovations theory  A theory concerning how, why, and at what rates new ideas spread that categorizes consumers of those ideas as early adopters, early majority, late majority, and laggards. expanded product  The mix of attributes and intangibles that differentiate one offering from others; establishes the customer value equation. experiential marketing  The act of creating live encounters between individuals and brands that result in memorable experiences that generate awareness, change attitudes, and encourage action. growth  The second stage in the product life cycle, when sales revenue rises rapidly and profits climb. introduction  The first stage in the product life cycle, characterized by product launch, market entry, and user trial by early adopters. Investment costs accrue but are not yet recouped. items  Individual products with specific characteristics; one item equals one SKU (stock-keeping unit). line extension  The act of adapting an existing product to suit new niches in the same market or finding an entirely new market that can be served by the existing product. lines  Sets of closely related individual products. manufacturing installations  Assemblies or systems required to conduct manufacturing processes, usually custom designed and installed. maturity  The third and typically longest stage in the product life cycle, during which sales peak. Both costs and sales (and profits) are stable. network effect  A situation in which each additional customer increases the value of a service for all existing customers. operating supplies  Items used in production, maintenance, or administrative activities. planned obsolescence  The business practice of deliberately retiring an item (before the end of its useful life) by stopping its supply, customer service, or technical support and introducing a newer (often incompatible) model or version, to push consumers to abandon the currently owned item in favor of the new one. platform business model  A strategy to create value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. private label  Products or services manufactured 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 activity 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 perception, 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  The product offering described from three perspectives: core, expanded, and concept. raw materials  Basic substances in their natural, modified, or semiprocessed 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.