Offer a basic product

Offer product extensions, service, warranty

Diversify brand and models

Phase out weak items


Use cost-plus

Price to penetrate market

Price to match or beat competitors

Cut price


Build selective distribution

Build intensive distribution

Build more intensive distribution

Go selective: phase out unprofitable outlets


Build product awareness among early adopters and dealers

Build awareness and interest in the mass market

Stress brand differences and benefits

Reduce to level needed to retain hard-core loyals

Sales Promotion

Use heavy sales promotion to entice trial

Reduce to take advantage of heavy consumer demand

Increase to encourage brand switching

Reduce to minimal level

Source: Philip Kotier and Kevin Lane Keller, Marketing Management, 13th ed. (Upper Saddle River, NJ: Prentice Hall, 2009), p. 288.

Source: Philip Kotier and Kevin Lane Keller, Marketing Management, 13th ed. (Upper Saddle River, NJ: Prentice Hall, 2009), p. 288.

Additional Product and Service Considerations <PP 304-306)

Here, we'll wrap up our discussion of products and services with two additional considerations: social responsibility in product decisions and issues of international product and service marketing.

Product Decisions and Social Responsibility

Product decisions have attracted much public attention. Marketers should carefully consider public policy issues and regulations regarding acquiring or dropping products, patent protection, product quality and safety, and product warranties.

Regarding new products, the government may prevent companies from adding products through acquisitions if the effect threatens to lessen competition. Companies dropping products must be aware that they have legal obligations, written or implied, to their suppliers, dealers, and customers who have a stake in the dropped product. Companies must also obey patent laws when developing new products. A company cannot make its product illegally similar to another company's established product.

Manufacturers must comply with specific laws regarding product quality and safety. Different countries around the world have different laws to protect consumers from unsafe and adulterated food, drugs, and cosmetics. Various acts provide for the inspection of sanitary conditions in the meat- and poultry-processing industries. Safety legislation has been passed to regulate fabrics, chemical substances, automobiles, toys, and drugs and poisons. Numerous countries ban or seize potentially harmful products and set severe penalties for violation of their laws.

If consumers have been injured by a product that has a defective design, they can sue manufacturers or dealers. A recent survey of manufacturing companies found that product liability was the second-largest litigation concern, behind only labor and employment matters. Although only a small percentage of manufacturers are found at fault in product liability cases, when they are found guilty, jury awards can run into the tens or even hundreds of millions of dollars. For example, in 2005 a jury ordered Merck to pay $253 million to the widow of a man who died from a heart attack after using the painkiller Vioxx for his arthritis. The judge later reduced the award to a "mere" $26.1 million. However, this was only the first of more than 60,000 Vioxx claims against the company and an eventual proposed settlement of nearly $5 billion that deeply crippled the company.36

This litigation phenomenon has resulted in huge increases in product liability insurance premiums, causing big problems in some industries. Some companies pass these higher rates along to consumers by raising prices. Others are forced to discontinue high-risk product lines. Some companies are now appointing "product stewards," whose job is to protect consumers from harm and the company from liability by proactively ferreting out potential product problems.

Many manufacturers offer written product warranties to convince customers of their products' quality. To protect consumers, the United States passed the Magnuson-Moss Warranty Act in 1975. The act requires that full warranties meet certain minimum standards, including repair "within a reasonable time and without charge" or a replacement or full refund if the product does not work "after a reasonable number of attempts" at repair. Otherwise, the company must make it clear that it is offering only a limited warranty. The law has led several manufacturers to switch from full to limited warranties and others to drop warranties altogether.

International Product and Services Marketing

International product and service marketers face special challenges. First, they must figure out what products and services to introduce and in which countries. Then, they must decide how much to standardize or adapt their products and services for world markets.

Author I Let's look at just a few Comment | more product topics, including regulatory and social responsibility issues and the special challenges of marketing products internationally. .

On the one hand, companies would like to standardize their offerings. Standardization helps a company to develop a consistent worldwide image. It also lowers the product design, manufacturing, and marketing costs of offering a large variety of products. On the other hand, markets and consumers around the world differ widely. Companies must usually respond to these differences by adapting their product offerings. A For example, Nestlé sells a variety of very popular Kit Kat flavors in Japan that might make the average Western chocolate-lover's stomach turn, such as green tea, red bean, and red wine. Beyond taste, Kit Kat's strong following in Japan may also be the result of some unintended cultural factors:

In recent years, Kit Kat—the world's number two chocolate bar behind Snickers—has become very popular in Japan. Some of this popularity, no doubt, derives from the fact that the notoriously sweet-toothed Japanese love the bar's taste. But part of the bar's appeal may also be attributed to the coincidental similarity between its name and the Japanese phrase kitto katsu, which roughly translates in Japanese as "You will surely win!" Spotting this opportunity, marketers for Nestlé Japan developed an innovative Juken (college entrance exam) Kit Kat campaign. The multimedia campaign positions the Kit Kat bar and logo as good luck charms during the highly stressful university entrance exam season. Nestlé even developed a cherry flavored Kit Kat bar in packaging containing the message "May cherries blossom," wishing students luck in achieving their dreams. The campaign has been such a hit in Japan that it has led to a nationwide social movement to cheer up students for Juken. Kit Kat has also become an even broader national good luck charm. For example, a large flag featuring the Kit Kat logo and the phrase "Kitto Katsu!" has been used by fans of professional football team Jubilo IWATA, which is sponsored by Nestlé Japan. Since the Juken campaign began six years ago, Kit Kat sales in Japan have increased more than 250 percent.37

Packaging also presents new challenges for international marketers. Packaging issues can be subtle. For example, names, labels, and colors may not translate easily from one country to another. A firm using yellow flowers in its logo might fare well in Canada but meet with disaster in Mexico, where a yellow flower symbolizes death or disrespect. Similarly, although Nature's Gift might be an appealing name for gourmet mushrooms in America, it would be deadly in Germany, where gift means poison. Packaging may also need to be tailored to meet the physical characteristics of consumers in various parts of the world. For instance, soft drinks are sold in smaller cans in Japan to fit the smaller Japanese hand better. Thus, although product and package standardization can produce benefits, companies must usually adapt their offerings to the unique needs of specific international markets.

Service marketers also face special challenges when going global. Some service industries have a long history of international operations. For example, the commercial banking industry was one of the first to grow internationally. Banks had to provide global services in order to meet the foreign exchange and credit needs of their home country clients wanting to sell overseas. In recent years, many banks have become truly global. Germany's Deutsche Bank, for example, serves more than 13 million customers through 1,868 branches in 73 countries. For its clients around the world who wish to grow globally, Deutsche Bank can raise money not only in Frankfurt but also in Zurich, London, Paris, Tokyo, and Moscow.38

Kitto Katsu

Nestlé Kit Kat chocolate bar in Japan benefits from the coincidental similarity between the bar's name and the Japanese phrase kitto katsu, which roughly translates to "You will surely win!" The brand's innovative "May cherries blossom" campaign has turned the Kit Kat bar and logo into national good luck charms.

Nestlé Kit Kat chocolate bar in Japan benefits from the coincidental similarity between the bar's name and the Japanese phrase kitto katsu, which roughly translates to "You will surely win!" The brand's innovative "May cherries blossom" campaign has turned the Kit Kat bar and logo into national good luck charms.

Professional and business services industries such as accounting, management consulting, and advertising have also globalized. The international growth of these firms followed the globalization of the client companies they serve. For example, as more clients employ worldwide marketing and advertising strategies, advertising agencies have responded by globalizing their own operations. McCann Worldgroup, a large advertising and marketing services agency, operates in more than 130 countries. It serves international clients such as Coca-Cola, General Motors, ExxonMobil, Microsoft, MasterCard, Johnson & Johnson, and Unilever in markets in countries around the world. Moreover, McCann Worldgroup is one company in the Interpublic Group of Companies, an immense, worldwide network of advertising and marketing services companies.39

Retailers are among the latest service businesses to go global. As their home markets become saturated, retailers such as Wal-Mart, Office Depot, and Saks Fifth Avenue are expanding into faster-growing markets abroad. For example, since 1995, Wal-Mart has entered 13 countries; its international division's sales grew nearly 18 percent last year, skyrocketing to more than $90.6 billion. Foreign retailers are making similar moves. Asian shoppers can now buy products in French-owned Carrefour stores. Carrefour, the world's second-largest retailer behind Wal-Mart, now operates more than 12,500 stores in more than 30 countries. It is the leading retailer in Europe, Brazil, and Argentina and the largest foreign retailer in China.40

The trend toward growth of global service companies will continue, especially in banking, airlines, telecommunications, and professional services. Today, service firms are no longer simply following their manufacturing customers. Instead, they are taking the lead in international expansion.


Companies find and develop new-product ideas from a variety of sources. Many new-product ideas stem from internal sources. Companies conduct formal research and development, pick the brains of their employees, and brainstorm at executive meetings. Other ideas come from external sources. By conducting surveys and focus groups and analyzing customer questions and complaints, companies can generate new-product ideas that will meet specific consumer needs. Companies track competitors' offerings and inspect new products, dismantling them, analyzing their performance, and deciding whether to introduce a similar or improved product. Distributors and suppliers are close to the market and can pass along information about consumer problems and new-product possibilities.

A company's current products face limited lifespans and must be replaced by newer products But new products can fail—the risks of innovation are as great as the rewards The key to successful innovation lies in a total-company effort, strong planning, and a systematic new-product development process

Explain how companies find and develop new-product ideas, (pp 282-283)

comes idea screening, which reduces the number of ideas based on the company's own criteria. Ideas that pass the screening stage continue through product concept development, in which a detailed version of the new-product idea is stated in meaningful consumer terms. In the next stage, concept testing, new-product concepts are tested with a group of target consumers to determine whether the concepts have strong consumer appeal. Strong concepts proceed to marketing strategy development, in which an initial marketing strategy for the new product is developed from the product concept. In the business-analysis stage, a review of the sales, costs, and profit projections for a new product is conducted to determine whether the new product is likely to satisfy the company's objectives. With positive results here, the ideas become more concrete through product development and test marketing and finally are launched during commercialization.

New-product development Involves more than just going through a set of steps. Companies must take a systematic, holistic approach to managing this process. Successful new-product development requires a customer-centered, team-based, systematic effort.

Describe the stages of the product life cycle and how marketing strategies change during the product life cycle, (op 296-303)

List and define the steps in the new-

List and define the steps in the new-

product development process and the major considerations in managing this process, (pp 283-296)

The new-product development process consists of eight sequential stages. The process starts with idea generation. Next

Each product has a life cycle marked by a changing set of problems and opportunities. The sales of the typical product follow an S-shaped curve made up of five stages. The cycle begins with the product development stage in which the company finds and develops a new-product idea. The introduction stage is marked by slow growth and low profits as the product is distributed to the market. If successful, the product enters a growth stage, which offers rapid sales growth and increasing profits. Next comes a maturity stage in which sales growth slows down and profits stabilize. Finally, the product enters a decline stage in which sales and profits dwindle. The company's task during this stage is to recognize the decline and to decide whether it should maintain, harvest, or drop the product.

In the introduction stage, the company must choose a launch strategy consistent with its intended product positioning. Much money is needed to attract distributors and build their inventories and to inform consumers of the new product and achieve trial. In the growth stage, companies continue to educate potential consumers and distributors. In addition, the company works to stay ahead of the competition and sustain rapid market growth by improving product quality, adding new product features and models, entering new market segments and distribution channels, shifting advertising from building product awareness to building product conviction and purchase, and lowering prices at the right time to attract new buyers.

In the maturity stage, companies continue to invest in maturing products and consider modifying the market, the product, and the marketing mix. When modifying the market, the company attempts to increase the consumption of the current product. When modifying the product, the company changes some of the product's characteristics—such as quality, features, or style—to attract new users or inspire more usage. When modifying the marketing mix, the company works to improve sales by changing one or more of the marketing-mix elements. Once the company recognizes that a product has entered the decline stage, management must decide whether to maintain the brand without change, hoping that competitors will drop out of the market; harvest the product, reducing costs and trying to maintain sales; or drop the product, selling it to another firm or liquidating it at salvage value.

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