p. 196

INTRODUCTION

At least one Procter and Gamble product can be found in almost every American household.  In many product categories, P&G competes with itself as well as with other companies.

P&G knows that not all its customers want the same benefits from its products.  To appeal to the most consumers, it offers a variety of brands in most categories, and it offers variations of most of its brands, simply to attract the largest possible market share.

It requires careful market segmentation and positioning to succeed with this strategy and to offer something valuable to consumers in each important preference group.

P&G succeeds so spectacularly in some product areas that major competitors such as Unilever and Colgate have abandoned the U.S. market.

p. 197

Ad: P&G

Ø Opening Vignette Questions

1. Odds are very high that you regularly purchase at least one, and likely multiple, P&G products.  Did you realize that the several brands you chose among were all P&G brands? Would it have affected your choice?

2. Is it possible to succeed by offering so many brands that compete against each other?  Why would P&G do it so insistently in so many categories? Is it really possible to successfully identify so many sub-segments in a market?

3. P&G has even taken some of its most successful brands and expanded them into new products, such as the Tide To Go stain removal pens and Tide Washing Machine Cleaner.  What are the benefits and risks of broadening the use of the brand name?

PPT 7-5

p. 198

PPT 7-6

PPT 7-7

Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning.

Most companies have moved away from mass marketing and toward target marketing—identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each.

Figure 7.1 shows the four major steps in designing a customer-driven marketing strategy.

Market segmentation involves dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes.

Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.

Differentiation involves actually differentiating the firm’s market offering to create superior customer value.

Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Review Learning Objective 1: Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning.

Learning Objective 1

p. 193

Key Terms: Market Segmentation, Market Targeting (Targeting), Differentiation

p. 199

Figure 7.1

Designing a Customer-Driven Marketing Strategy

p. 199

Key Term: Positioning

Ø Assignments, Resources

Use Discussion Question 7-1 here

Use Think-Pair-Share 1 here

PPT 7-8

p. 199

PPT 7-9

PPT 7-10

p. 193

PPT 7-11

PPT 7-12

p. 200

PPT 7-13

PPT 7-14

p. 201

PPT 7-15

p. 204

PPT 7-16

PPT 7-17

p. 205

p. 206

PPT 7-18

p. 206

PPT 7-19

p. 207

PPT 7-20

PPT 7-21

List and discuss the major bases for segmenting consumer and business markets.

MARKET SEGMENTATION

Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.

· Segmenting consumer markets

· Segmenting business markets

· Segmenting international markets

· Requirements for effective segmentation

Segmenting Consumer Markets using Geographic segmentation, Demographic segmentation, Psychographic segmentation, and Behavioral segmentation

Table 7.1 outlines the major variables that might be used in segmenting consumer markets.

Geographic Segmentation

Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods.

Demographic Segmentation

Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality.

Demographic factors are the most popular bases for segmenting customer groups.

Age and LifeCycle Stage means offering different products or using different marketing approaches for different age and lifecycle groups.

Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines.

Income segmentation has long been used by the marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel.

Psychographic Segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics.

Marketers also use personality variables to segment markets.

Behavioral Segmentation

Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.

Occasion segmentation means grouping buyers according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item.

Benefit segmentation means grouping buyers according to the different benefits that they seek from the product.

User Status means segmenting markets into nonusers, ex-users, potential users, first-time users, and regular users of a product.

Usage Rate means grouping markets into light, medium, and heavy product users.

Loyalty Status means dividing buyers into groups according to their degree of loyalty.

Using Multiple Segmentation Bases

Marketers rarely limit their segmentation analysis to only one or a few variables.

Experian’s Mosaic USA is a leading segmentation systems that classifies every American household based on a host of demographic factors.

Segmenting Business Markets

Consumer and business marketers use many of the same variables to segment their markets.

Business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics.

Segmenting International Markets

Companies can segment international markets using one or a combination of several variables.

· Geographic location: Nations close to one another will have many common traits and behaviors.

· Economic factors: Countries may be grouped by population income levels, or by their overall level of economic development.

· Political and legal factors: Type and stability of government, receptivity to foreign firms, monetary regulations, and the amount of bureaucracy.

· Cultural factors: Grouping markets according to common languages, religions, values and attitudes, customs, and behavioral patterns.

Intermarket segmentation is segmenting of consumers who have similar needs and buying behavior even though they are located in different countries.

Learning Objective 2

p. 199

Table 7.1: Major Segmentation Variables for Consumer Markets

p. 199

Key Term: Geographic Segmentation

p. 200: Renaissance Hotels

p. 200

Key Term: Demographic Segmentation, Age and Life-Cycle Segmentation

p. 201

Key Term: Gender Segmentation

p. 201

Photo: GoldieBlox

p. 201

Key Term: Income Segmentation

p. 202

Ad: VF Corporation

p. 202

Key Term: Psychographic Segmentation

p. 204

Key Terms: Behavioral Segmentation, Occasion Segmentation, Benefit Segmentation

p. 205

Photo: Hardee’s and Carl’s Jr.

p. 206

Photo: Experian’s mosaic USA

p. 202

Ad: Coca-Cola

p. 207

Key Term: Intermarket (Cross-Market) Segmentation

Ø Assignments, Resources

Use Real Marketing 7.1 here

Use Discussion Questions 7-2 and 7-3 here

Use Critical Thinking Exercise 7-6 here

Use Additional Projects 1, 2 and 3 here

Use Small Group Assignment 1 here

Use Outside Example 2 here

Troubleshooting Tip

· Understanding the concept of a market segment can be difficult for students. Breaking down a market, such as their own university, into separate groups can help tremendously, as can drawing a big box on the board, and then breaking the box down into separate sections to represent pieces of a larger market.

p. 208

PPT 7-22

PPT 7-23

Requirements for Effective Segmentation

To be useful, market segments must be:

· Measurable: The size, purchasing power, and profiles of the segments can be measured.

· Accessible: The market segments can be effectively reached and served.

· Substantial: The market segments are large or profitable enough to serve.

· Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs.

· Actionable: Effective programs can be designed for attracting and serving the segments.

Review Learning Objective 2: List and discuss the major bases for segmenting consumer and business markets

Ø Assignments, Resources

Use Critical Thinking Exercise 7-8 here

Use Individual Assignment 1 here

Use Think-Pair-Share 2, 3, and 4 here

Use Outside Example 1 here

PPT 7-24

p. 208

PPT 7-25

p. 208

p. 209

PPT 7-26

PPT 7-27

PPT 7-28

PPT 7-29

p. 210

PPT 7-30

p. 211

PPT 7-31

PPT 7-32

PPT 7-33

p. 213

PPT 7-34

Explain how companies identify attractive market segments and choose a market-targeting strategy.

MARKET TARGETING

Evaluating Market Segments

In evaluating different market segments, a firm must look at three factors:

1. Segment size and growth

2. Segment structural attractiveness

3. Company objectives and resources

The largest, fastest-growing segments are not always the most attractive ones for every company.

The company also needs to examine major structural factors that affect long-run segment attractiveness.

· A segment is less attractive if it already contains many strong and aggressive competitors.

· The existence of many actual or potential substitute products may limit prices and the profits.

· The relative power of buyers also affects segment attractiveness.

A segment may be less attractive if it contains powerful suppliers who can control prices.

Selecting Target Market Segments

A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. .  

Undifferentiated Marketing

Using an undifferentiated marketing (or mass-marketing) strategy, a firm might decide to ignore market segment differences and target the whole market with one offer.

This mass-marketing strategy focuses on what is common in the needs of consumers rather than on what is different.

Differentiated Marketing

Using a differentiated marketing (or segmented marketing) strategy, a firm decides to target several market segments and designs separate offers for each.

Concentrated Marketing

Using a concentrated marketing (or niche marketing) strategy, instead of going after a small share of a large market, the firm goes after a large share of one or a few smaller segments or niches.

It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments.

It can market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.

Micromarketing

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.

Micromarketing includes local marketing and individual marketing.

Local marketing involves tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, and even specific stores.

Local marketing has drawbacks.

· It can drive up manufacturing and marketing costs by reducing economies of scale.

· It can create logistics problems.

Individual marketing is the tailoring of products and marketing programs to the needs and preferences of individual customers.

Individual marketing has also been labeled one-to-one marketing, mass customization, and markets-of-one marketing.

Choosing a Targeting Strategy

Which strategy is best depends on:

· Company resources

· Product variability

· Product’s life-cycle stage

· Market variability

· Competitors’ marketing strategies

Learning Objective 3

p. 209

Figure 7.2: Market-Targeting Strategies

p. 209

Key Terms: Target Market, Undifferentiated (Mass) Marketing, Differentiated (Segmented) Marketing

p. 209

Photo: Hallmark

p. 210

Key Term: Concentrated (Niche) Marketing

p. 210

Web Site: ModCloth.com

p. 211

Key Terms: Micromarketing, Local Marketing

p. 212

Photo: Local Marketing

p. 212

Key Term: Individual Marketing

p. 212

Photos: PUMA

Ø Assignments, Resources

Use Discussion Questions 7-4 here

Use Online, Mobile, and Social Media Marketing here

Use Small Group Assignment 2 here

Use Individual Assignment 2 here

Troubleshooting Tip

· It may also be difficult for students to understand the concept that there is no one, single way to segment a market. Students will often point out that companies segment on a single variable frequently, not understanding that the concept is much broader than that. Using a simple pen as an example, you can point out the various segmentation variables, such as income, occasion (such as graduations), and lifestyle that a pen manufacturer could study to determine effective segments. Although Mont Blanc might segment based on income and occasion factors, Bic could very well look at lifestyle or even age.

p. 213

PPT 7-35

Socially Responsible Target Marketing

Target marketing sometimes generates controversy and concern. Issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products.

Marketers of a wide range of industries have been criticized for their marketing efforts directed toward children.

Problems arise when marketing adult products to kids, whether intentionally or unintentionally.

The growth of the Internet and other carefully targeted direct media has raised new concerns about potential targeting abuses.

The issue is not so much who is targeted, but how and for what. Controversies arise when marketers attempt to profit by unfairly targeting vulnerable segments or target them with questionable products or tactics.

Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company, but also the interests of those targeted.

Review Learning Objective 3: Explain how companies identify attractive market segments and choose a market-targeting strategy.

p. 213

Photo: McDonald’s

Ø Assignments, Resources

Use Real Marketing 7.1 here

Use Marketing Ethics here

PPT 7-37

p. 214

PPT 7-38

p. 216

PPT 7-39

p. 217

PPT 7-40

PPT 7-41

p. 218

PPT 7-42

p. 219

PPT 7-43

PPT 7-44

p. 220

p. 221

p. 222

PPT 7-45

PPT 7-46

PPT 7-47

PPT 7-48

Discuss how companies differentiate and position their products for maximum competitive advantage.

DIFFERENTIATION AND POSITIONING

Value proposition: How a company will create differentiated value for targeted segments and what positions it wants to occupy in those segments.

A product position is the way the product is defined by consumers on important attributes.

Positioning Maps

Perceptual positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions.

Choosing a Differentiation and Positioning Strategy

The differentiation and positioning task consists of three steps:

1. Identifying a set of possible competitive advantages upon which to build a position

2. Choosing the right competitive advantages

3. Selecting an overall positioning strategy

4. Communicating and delivering the chosen position to the market

Identifying Possible Value Differences and Competitive Advantages

To the extent that a company can differentiate and position itself as providing superior customer value, it gains competitive advantage.

It can differentiate along the lines of product, service, channel, people, or image.

Choosing the Right Competitive Advantages

How Many Differences to Promote

Ad man Rosser Reeves believes a company should develop a unique selling proposition (USP) for each brand and stick to it.

Other marketers think that companies should position themselves on more than one differentiator.

Which Differences to Promote 

A difference is worth establishing to the extent that it satisfies the following criteria:

Important: The difference delivers a highly valued benefit to target buyers.

Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way.

Superior: The difference is superior to other ways that customers might obtain the same benefit.

Communicable: The difference is communicable and visible to buyers.

Preemptive: Competitors cannot easily copy the difference.

Affordable: Buyers can afford to pay for the difference.

Profitable: The company can introduce the difference profitably.

Selecting an Overall Positioning Strategy

The full positioning of a brand is called the brand’s value proposition. (see Figure 7.4)

More for More positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs.

More for the Same positioning involves introducing a brand offering comparable quality but at a lower price.

The Same for Less positioning can be a powerful value proposition—everyone likes a good deal.

Less for Much Less positioning is offering products that offer less and therefore cost less. This involves meeting consumers’ lower performance or quality requirements at a much lower price.

More for Less positioning is the winning value proposition.

In the long run, companies will find it very difficult to sustain such best-of-both positioning.

Developing a Positioning Statement

Company and brand positioning should be summed up in a positioning statement.

The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference).

Communicating and Delivering the Chosen Position

Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target consumers. All the company’s marketing mix efforts must support the positioning strategy.

Review Learning Objective 4: Discuss how companies differentiate and position their products for maximum competitive advantage.

Learning Objective 4

p. 215

Key Term: Product Position

p. 216

Ad: IKEA

p. 217

Figure 7.3: Positioning Map

p. 218

Key Term: Competitive Advantage

p. 212

Photo: Bose

p. 219

Ad: Gatorade

p. 220

Key Term: Value Proposition

p. 220

Figure 7.4: Possible Value Propositions

p. 221

Ad: Hearts On Fire

p. 222

Ad: Evernote

p. 222

Key Term: Positioning Statement

Ø Assignments, Resources

Use Real Marketing 7.2 here

Use Discussion Questions 7-4 and 7-5 here

Use Company Case here

Use Critical Thinking Exercise 7-7 and 7-8 here

Use Marketing by the Numbers here

Use Additional Project 4 here

Use Video Case here

p. 230

INTRODUCTION

During the past several decades, ESPN has built its logo/name into one of the world’s best-known brand symbols.

Since its founding in 1979, ESPN has revolutionized televised sports programming. It aggressively added products and now reaches far beyond its original single U.S. sports network.  

Its portfolio includes: television with seven additional networks; radio programming available in 11 countries; online with the leading sports Web site; mobile with its singular focus on optimizing performance of all its Web sites around mobile; publishing of ESPN The Magazine.

ESPN also manages many events including the X Games and football bowl games; it offers ESPN-branded products including CDs, DVDs, video games, apparel, and restaurants.

To consumers everywhere, ESPN means sports.  Its ever-extending brand ensures the continuing growth of that relationship by providing customers with experiences and information.

p. 231

Photo: ESPN

Ø Opening Vignette Questions

1. What “product” is ESPN really selling?

2. How does ESPN successfully promote bonding between customers and its products?

3. How would you compare the ESPN “brand” to that of other entertainment companies?

p. 232

PPT 8-5

p. 232

PPT 8-6

p. 233

PPT 8-7

Define product and describe the major classifications of products and services.

WHAT IS A PRODUCT?

A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.

Broadly defined, “products” also include services, events, persons, places, organizations, ideas, or mixes of these.

Services are a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

Products, Services, and Experiences

A company’s market offering often includes both tangible goods and services.

At one extreme, the offer may consist of a pure tangible good, such as soap or toothpaste.

At the other extreme are pure services, for which the offer consists primarily of a service.

As products and services are becoming more commoditized, to differentiate their offers, marketers are creating and managing customer experiences with their brands or company.

Learning Objective 1

p. 232

Key Term: Product

p. 233

Key Term: Service

p. 233

Photo: Verizon

Ø Assignments, Resources

Use Discussion Question 8-1 here

Ø Troubleshooting Tip

Students will most likely have difficulty understanding the levels of products exhibited in Figure 8.1; no one in class is likely to have thought of a product in that level of detail before. This is a critical piece of information the students will need; however, it is worth going through several products and services to get at the core benefit, actual product, and augmented product in each so that they can see how to apply this concept.

p. 233

PPT 8-8

p. 234

p. 234

PPT 8-9

p. 235

PPT 8-10

PPT 8-11

PPT 8-12

PPT 8-13

PPT 8-14

p. 236

PPT 8-15

PPT 8-16

p. 236

PPT 8-17

PPT 8-18

PPT 8-19

PPT 8-20

p. 237

PPT 8-21

Levels of Product and Services

Product planners need to think about products and services on three levels.

1. Core customer value, which addresses the question: What is the buyer really buying?

2. Actual product.

3. Augmented product, which is created around the core benefit and actual product by offering additional consumer services and benefits.

When developing products, marketers first must identify the core customer value that consumers seek from the product. They must then design the actual product and find ways to augment it in order to create this customer value and the most satisfying customer experience.

Product and Service Classifications

There are two main classifications of products: consumer products and industrial products.

Consumer Products

Consumer products are products and services bought by final consumers for personal consumption.

Consumer products include (see Table 8.1):

· Convenience products are consumer products and services that customers usually buy frequently, immediately, and with a minimum of comparison and buying effort.

· Shopping products are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price, and style.

· Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.

· Unsought products are consumer products that the consumer either does not know about or knows about but does not normally think of buying.

Industrial Products

Industrial products are those purchased for further processing or for use in conducting a business.

The three groups of industrial products and services are:

· Materials and parts include raw materials and manufactured materials and parts.

· Capital items are industrial products that aid in the buyer’s production or operations, including installations and accessory equipment.

· Supplies and services include operating supplies and maintenance and repair services.

Organizations, Persons, Places, and Ideas

Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization.

Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people.

Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places.

Social marketing is the use of commercial marketing concepts and tools in programs designed to bring about social change.

Review Learning Objective 1: Define product and describe the major classifications of products and services.

p. 234

Figure 8.1: Three Levels of Product

p. 234

Photo: Shopping

p. 235

Key Terms: Consumer Product, Convenience Product, Shopping Product, Specialty Product, Unsought Product

p. 235

Table 8.1: Marketing Considerations for Consumer Products

p. 236

Key Term: Industrial Product

p. 236

Ad: Kaiser Permanente

p. 237

Key Term: Social Marketing

Ø Assignments, Resources

Use Discussion Question 8-2 here

Use Online, Mobile, and Social Media Marketing here

Use Small Group Assignment 2 here

Use Think-Pair-Share 1, 2, 3, and 4 here

Use Outside Example 1 here

p. 237

PPT 8-22

PPT 8-23

PPT 8-24

p. 237

PPT 8-25

p. 238

PPT 8-26

PPT 8-27

p. 239

PPT 8-28

p. 241

PPT 8-29

p. 242

PPT 8-30

Describe the decisions companies make regarding their individual products, and services, product lines, and product mixes.

PRODUCT AND SERVICE DECISIONS

Individual Product and Service Decisions

Product and Service Attributes

Developing a product or service involves defining the benefits that it will offer. These benefits are communicated and delivered by product attributes such as quality, features, and style and design.

Product Quality is creating customer value and satisfaction.

Total quality management (TQM) is an approach in which all the company’s people are involved in constantly improving the quality of products, services, and business processes.

Product quality has two dimensions: level and consistency.

The quality level means performance quality or the ability of a product to perform its functions. Quality conformance means quality consistency, freedom from defects, and consistency in delivering a targeted level of performance.

Product Features are a competitive tool for differentiating the company’s product from competitors’ products.

The company should periodically survey buyers who have used the product and ask these questions: How do you like the product? Which specific features of the product do you like most? Which features could we add to improve the product?

Product Style and Design is another way to add customer value.

Style describes the appearance of a product. Design contributes to a product’s usefulness as well as to its looks.

Branding

A brand is a name, term, sign, symbol, or design, or a combination of these, that identifies the maker or seller of a product or service.

Branding helps buyers in many ways.

· Brand names help consumers identify products that might benefit them.

· Brands say something about product quality and consistency.

Branding gives the seller several advantages.

· The brand name becomes the basis on which a whole story can be built about a product.

· The brand name and trademark provide legal protection for unique product features.

· The brand name helps the seller to segment markets.

Packaging

Packaging involves designing and producing the container or wrapper for a product.

Labeling

Labels perform several functions.

· The label identifies the product or brand.

· The label describes several things about the product.

· The label promotes the brand.

Labeling also raises concerns. As a result, several federal and state laws regulate labeling.

The most prominent is the Fair Packaging and Labeling Act of 1966.

Labeling has been affected in recent times by:

· Unit pricing (stating the price per unit of standard measure)

· Open dating (stating the expected shelf life of the product)

· Nutritional labeling (stating the nutritional values in the product)

Product Support Services

The first step is to survey customers periodically to assess the value of current services and to obtain ideas for new ones.

Next, the company can take steps to fix problems and add new services that will both delight customers and yield profits to the company.

Learning Objective 2

p. 237

Figure 8.2: Individual Product Decisions

p. 237

Key Term: Product Quality

p. 238

Ad: Nest Labs

p. 239

Key Term: Brand

p. 239

Photo: Branding with Joshua Bell

p. 240

Key Term: Packaging

p. 241

Ad: PUMA

p. 241

Photo: American Airlines

p. 242

Photo: L.L.Bean

Ø Assignments, Resources

Use Discussion Question 8-3 here

Use Critical Thinking Exercise 8-6 and 8-7 here

Use Individual Assignment 1 here

p. 243

PPT 8-31

PPT 8-32

p. 243

PPT 8-33

PPT 8-34

Product Line Decisions

A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.

Product line length is the number of items in the product line.

Product line filling involves adding more items within the present range of the line.

Product line stretching occurs when a company lengthens its product line beyond its current range.

Companies located at the upper end of the market can stretch their lines downward.

Companies located at the lower end of the market can stretch their product lines upward.

Companies located in the middle range of the market can stretch their lines in both directions.

Product Mix Decisions

Product mix (or product portfolio) consists of all the product lines and items that a particular seller offers for sale.

A company’s product mix has four dimensions: width, length, depth, and consistency.

1. Product mix width refers to the number of different product lines the company carries.

2. Product mix length refers to the total number of items the company carries within its product lines.

3. Product mix depth refers to the number of versions offered of each product in the line.

4. Product mix consistency refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

The company can increase its business in four ways.

1. It can add new product lines, widening its product mix.

2. It can lengthen its existing product lines.

3. It can add more versions of each product, deepening its product mix.

4. It can pursue more product line consistency.

Review Learning Objective 2: Describe the decisions companies make regarding their individual products and services, product lines, and product mixes.

p. 243

Key Term: Product Line

p. 243

Ad: Samsung Galaxy

p. 243

Key Term: Product Mix (Product Portfolio)

Ø Assignments, Resources

Use Individual Assignment 2 here

Use Video Case here

p. 244

PPT 8-35

PPT 8-36

p. 245

PPT 8-37

p. 246

PPT 8-38

PPT 8-39

p. 248

PPT 8-40

PPT 8-41

PPT 8-42

p. 249

PPT 8-43

p. 250

PPT 8-44

PPT 8-45

Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require.

SERVICES MARKETING

Services account for close to 65 percent of U.S. gross domestic product.  

The types of service industries include: government, private not-for-profit organizations, and business services.  Services make up 64 percent of gross world product.

The Nature and Characteristics of a Service

A company must consider four service characteristics when designing marketing programs: intangibility, inseparability, variability, and perishability (see Figure 8.3).

1. Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before they are bought.

2. Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. Because the customer is also present as the service is produced, provider-customer interaction is a special feature of services marketing.

3. Service variability means that the quality of services depends on who provides them as well as when, where, and how they are provided.

4. Service perishability means that services cannot be stored for later sale or use.

Marketing Strategies for Service Firms

The Service-Profit Chain

In a service business, the customer and front-line service employee interact to create the service.

The service-profit chain consists of five links:

1. Internal service quality: superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which results in...

2. Satisfied and productive service employees: more satisfied, loyal, and hardworking employees, which results in...

3. Greater service value: more effective and efficient customer value creation and service delivery, which results in...

4. Satisfied and loyal customers: satisfied customers who remain loyal, repeat purchase, and refer other customers, which results in...

5. Healthy service profits and growth: superior service firm performance

Service marketing requires internal marketing and interactive marketing. (Figure 8.4)

Internal marketing means that the service firm must orient and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction.

Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter.

Service companies face three major marketing tasks: They want to increase their service differentiation, service quality, and service productivity.

Managing Service Differentiation

Service companies can differentiate their service delivery by having more able and reliable customer-contact people, by developing a superior physical environment in which the service product is delivered, or by designing a superior delivery process.

Service companies can work on differentiating their images through symbols and branding.

Managing Service Quality

Service quality is harder to define and judge than product quality.

Service quality will always vary, depending on the interactions between employees and customers.

Good service recovery can turn angry customers into loyal ones.

Managing Service Productivity

Service firms are under great pressure to increase service productivity.

· They can train current employees better or hire new ones who will work harder or more skillfully.

· They can increase the quantity of their service by giving up some quality.

· They can harness the power of technology.

Review Learning Objective 3: Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require.

Learning Objective 3

p. 245

Key Terms: Service Intangibility, Service Inseparability, Service Variability

p. 245

Figure 8.3: Four Service Characteristics

p. 245

Ad: Mayo Clinic

p. 246

Key Term: Service Perishability

p. 246

Key Term: Service-Profit Chain

p. 240

Photo: Zappos.com

p. 246

Figure 8.4

Three Types of Service Marketing

p. 248

Key Terms: Internal Marketing, Interactive Marketing

p. 249

Photo: Dick’s Sporting Goods

p. 250

Photo: United

Ø Assignments, Resources

Use Real Marketing 8.1 here

Use Discussion Question 8-5 here

Use Critical Thinking Exercise 8-8 here

Use Marketing Ethics here

Use Additional Project 4 here

Use Think-Pair-Share 5 here

Use Outside Example 2 here

Ø Troubleshooting Tip

· The service characteristics of intangibility, inseparability, variability, and perishability are usually picked up fairly easily, but again, various examples from day-to-day life may help. For instance, everyone has had to cancel at least one doctor’s appointment in his or her life—that beautifully illustrates the problem of perishability. Female students will understand inseparability by talking about the hair salons they use. Ask: If the hairdresser you used left, would you easily switch to another person at the salon? Many students today travel heavily, so talking about airline personnel can illustrate service variability. Intangibility is the easiest characteristic to appreciate, as most students will have suffered through having to choose between several universities from whom they had received acceptances.