Product Decisions
Product Levels: The Customer-Value
Hierarchy Core Product: The benefit the customer is really
buying. A hotel guest is buying rest and sleep.
Basic Product. A hotel room includes a bed,
bathroom, towels, desk, dresser etc.
Expected Product: Attributes and conditions
normally expected on purchasing a product. Hotel
guests minimally expect a clean bed, fresh towels,
working lamps etc.
Augmented Product: Product exceeds customer
expectations. Here, competition between sellers
generally happen.
Potential Product: Encompasses all the possible
augmentations and transformations the product or
offering might undergo in the future. Companies
search for new ways to satisfy customers and
distinguish their offering.
Product Classification
Product Mix analysis
Decision making by Product
Managers
1. Understand each product line’s market profile and
performance
o Spread the total market mix
o Pull out sales and profitability reports
o Analyze the reports
2. Review how the line is positioned against competitors’
lines
3. Drop the items that are not doing well
4. Put more resources into items that are doing better
5. Introduce new items if there are gaps in the market
Product Line decisions
• Line Stretching:
o Down Market Stretching: Introducing a lower priced brand
at the lower end of the market
o Up Market Stretching: Enter high end of the market for
higher margins, more prestige and higher growth potential
o Two-way Stretching
• Line Filling: Filling gap in the market - gain incremental profits,
utilize excess capacity or becoming a full-line company
• Line Modernization: Modernize the offering and supersede the
existing lines - Due to technology changes, better market
potential or better margins
• Line Pruning: Reducing depth of product line
Product Lifecycle
Packaging
Design and production of containers, materials and wrappers used to
protect, store, transport and present products.
Services
An act or performance one party can offer to another party that is essentially
intangible and it doesn't result in ownership.
Characteristics of Services
Determinants of service quality
Reliability Ability to perform the promised A courier service guarantees delivery
service dependably and within 48 hours and they consistently
accurately deliver packages on time
Responsivenes Willingness to help customers A tech support hotline that answers
s and provide prompt service customer calls within the first minute
and provides immediate assistance
Assurance Knowledge and courtesy of A financial advisor who possesses the
employees and their ability to necessary certifications and is able to
convey trust and confidence explain complex investment
strategies in a clear and concise
manner
Empathy Provision of caring, A healthcare provider who takes the
individualized attention to time to listen to a patient's concerns,
customers offers emotional support and provides
personalized care
Tangibles Appearance of physical A luxury hotel with well-designed and
facilities, equipment, personnel, impeccably maintained rooms,
and communication materials elegant furnishings and polite, well-
groomed staff
SERVICE-QUALITY GAP MODEL
Examples:
GAP 1: A fast-food chain's management believes that customers
primarily value quick service, but customers actually place a higher
emphasis on the quality and freshness of ingredients.
GAP 2: Company management believes that customer expects polite
and friendly interactions with customer service representatives, but
the company's policies emphasize efficient call handling without
focusing on the tone of communication.
GAP 3: A hotel has a policy of responding to customer requests within
15 minutes, but due to understaffing, a customer's request for extra
towels takes over 45 minutes to fulfill.
GAP 4: An airline advertises luxurious and spacious seating in their
economy class, but the actual seating is cramped and uncomfortable.
GAP 5: A customer tries out a new dish at a restaurant. The dish is
exactly as it should be but not as per the taste palate and
expectations of the customer.
Thank You
