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Summary - Product and services management
1.1 Historical overview of the product concept
- Basic idea that the product itself was a planned variable, rooted from the concept of differential (competitive advantage).
- From the 1930 price is the basis for competition in the economic system and the consumer has no choice preference for different products.
- Advent of the 20th century this changed and different bases for competition were brought up in production communication and transportation. Industries became oligopolistic (the supply of products was concentrated in the hands of relatively few sellers).
- Chamberlin and Robinson abandoned the assumption of homogeneous products and developed the theory of monopolistic competition under which sellers sales are limited and defined by two more variables n addition to price, namely the nature of the product and advertising outlays.
- Diferential advantage concept based on the view of Chamberlin is one of the most important concepts in marketing theory and argues that buyers have the freedom to differentiate, distinguish, or have specific prefenrences among the competing outputs of sellers.
- According to Aldersen, product differentiation can be based on product characteristics but also varied wants and needs in the market place
- Prior to the 20th century price was the main competition instruments and the primary weapon for the destruction of competing firms, today the product plays this role.
1.2.1 Product levels
What are the five distinct levels of the product?
- Core benefit
- Basic product
- Expected product
- Augmented product
- Potential product
Nowadays most companies compete at the augmented product level and try to differentiate their offerings by providing product characteristics that are beyond the expected functional features.
1.2.2 Product hierarchy
What are the five categories product hierarchy comprises?
- Need family (basic need, example security)
- Product familiy (all product classes that satisfy a basic need, example savings and income)
- Product class or category (group of products within a familiy, example investment products)
- Product line (group of closely related products within a product class, example investment accounts)
- Product type (group of items within a product line, example capital guaranted accounts)
- Brand (name of a product)
- Item (unit within a brand or product line)
1.2.3 Product life cycle
Most important product-related concept.
- Horizontal axis represents time
- Vertical axis portrays sales/profits
Useful mainly as a framework for developing effective marketing strategies in different stage of the life cycle of both physical goods and services.
What are the stages of the product life cycle?
- Importance of quality and quality control
Introductory marketing strategies when price and promotion are considered together.
- High profile strategy (high price and high promotion level)
- Low profile strategy (low price and low promotion level)
- Selective penetration strategy (high price and low promotion)
- Pre-emptive penetration (low price and high promotion)
Basic factors in selecting these four strategies are: market size, market awareness, degree of price sensitivit, the type and nature of competition and comapny´s cost structure.
- Improvement of products
- Price focus on broadening and promotional pricing opportunities
- Promotion should focus to nurturing product preference
- Long stage were management is facing formidable challenges
- Changes in tangible and intangible characteristics
- Search for incremental pricing opportunites including private branding contracts
- Market may be said to be saturated
Eliminate the product;
- Concentration strategy: concentrate resoures only in the strongest market while phasing out promotional and distributioin activities.
- Milking strategy: reduces market expenses to increase current profits.
1.2.4 Product positioning
Positioning refers to the development of destined image/position of the product in the mind of the customer.
Perceptual map; graphically representation of the perceived position of a product in the customers mind.
Perceptual mapping; the process initiates with the identification of the most important dimensions that differentiate products from one another.
- Identification of important attributes
- Identification of close substitutes-main competitors
- Identification of differentiated brands
- Market segmentation
- Identification of gaps in the market new product opportunities
Postitioning strategies (Aaker and Shansby, Wind)
- Positioning by attribute
- Positioning by benefits
- Positioning by price/quality
- Positioning by competitor
- Positioning by application
- Positioning by product user
- Positioning by product class
- Hybrid positioning (combination of more than one strategy
What are the mistakes made in positioning?
- Underpositioning (buyers dont understand any differences)
- Overpostioning (buyers have a narrow image of the brand)
- Confused positioning (buyers are confused as to what a brand stands for)
- Doubtful positioning (buyers may doubt about the claims in view of the products features, price of distribution)
- Repositioning in existing customers
- Repositioning in new customers
Directing a competitive brand in a worst position is depositioning.