Marketing Innovative Products and Services

The term product has been already discussed in terms of a market offer, being able to satisfy a need of a certain group of customers (target market). However, there are several layers of the offer, which can be distinguished and are referred to as the levels of a product, or a service[1]. The core product is the concept, i.e. an idea, which delivers value to the customer, i.e. addressed his or her needs. It is the solution to the problem the customer is experiencing, as it relates to the kind of functionality, or features the customer wishes to obtain. The actual (tangible) product is the product delivered to the customer, along with its packaging, warranty and other accompanying features (see Figure 15).

Figure 15. The marketing concepts of a product/service

Downloaded from https://commons.wikimedia.org/wiki/File:Product_Level_graphic_final_ol-01.svg. Originally published in Waymaker Principles of Marketing course by Lumen Learning (http://lumenlearning.com/courseware-waymaker/). Used according to the terms, set by the Creative Commons Attribution 4.0 International license.

Beside a product (something one can actually see and hold), customers can be also offered a service, i.e. some kind of an action, provided by an entrepreneur, which helps the customer solve his or her problem(s). The services are, usually, intangible, as they involve a provider, who is doing some work for, or instead of a customer (e.g. cooking and serving a lunch, doing the haircut, walking the dog, doing babysitting, fixing the computer, teaching a person to do something, etc.). This is the source of the specific characteristics of service marketing (see Figure 16), which needs to take into account that services are very difficult to evaluate, since each person has different expectations and ideas how a certain service should be delivered. The quality of service depends mostly on the person providing it, how well he or she is trained and responsive to the customer’s requirements. It is also impossible to make an inventory of services and use it in case of a spike in demand: the service is always performed in “real time” and should be completed within a reasonable time frame. The services can be also made something more tangible by developing the brand name, providing a written warranty of customer satisfaction, or assigning to it some other features of the tangible products.

Figure 16. Differences between the product and services marketing

Downloaded from https://commons.wikimedia.org/wiki/File:Goods-Services_graphic.svg. Originally published in Waymaker Principles of Marketing course by Lumen Learning (http://lumenlearning.com/courseware-waymaker/). Used according to the terms, set by the Creative Commons Attribution 4.0 International license.

As already mentioned in the previous chapter, physical (tangible) products are often bundled with services, especially if they are complex and expensive. For instance, majority of high-ticket items, such as cars, home appliances, consumer electronics, etc., are coming with a warranty and service promises. Otherwise, only a small amount of customers would be willing to risk buying an expensive, but faulty product, which incurs a lot of additional costs. This is usually referred to as the augmented product[2]. Sometimes, the fourth level of product/service is added to the three classical levels, usually mentioned in marketing textbooks. It is the promised product – the (implied) promise from the marketer to customer, in terms of how the product is going to enhance the customer’s social status, how tradeable/valuable it will be in the future (in case the customer wishes to continue using it for a long time, or re-sell it), etc[3].

The product/service is also dynamic, in terms of acceptance by the targeted customers and the sales/financial performance. This concept is well-known and is referred to as the product life cycle (PLC). It acknowledges the fact that the initial investments into product development need some time to be recovered, as the product gains acceptance on the market[4]. With a product/service becoming more attractive to customers, it goes through the initial acceptance and growth stages, before settling as a mature and, finally, a declining product, which needs to be replaced by the innovative and more exciting products (see Figure 17).

Figure 17. The Product Life Cycle (PLC) concept

Downloaded from https://commons.wikimedia.org/wiki/File:Product_Lifecycle_graphic_v2.svg. Originally published in Waymaker Principles of Marketing course by Lumen Learning (http://lumenlearning.com/courseware-waymaker/). Used according to the terms, set by the Creative Commons Attribution 4.0 International license.

The marketing strategy and mix depend on the PLC stage, since the generic marketing objectives for products in different lifecycle stages are as follows[5]:

• Introduction stage – gaining interest of the “innovators” and “early adopters”, i.e. minority of customers, who are leading the pack in accepting innovation, as to position the product on the marketplace and communicate its value;
• Growth stage – securing strong growth and acceptance by the majority customer groups, in order to provide the return for the research & development costs, as well as to secure resources for a more aggressive promotion;
• Maturity stage – “milking out” the product, i.e. using the gained market share to secure the adequate cash flow, which should be used for modifications/improvement of the product, but, even being more important, for the development of new and attractive products for the future;
• Decline stage – managing the old product, which started losing market share and shows declining financial performance, due to the loss of new sales and customers switching to competitive products.

STUDENT ACTIVITY:

Take a look at the following You Tube video, demonstrating some of the well-known products and services and their lifecycle stages:

You can also consult a YouTube channel The Story of Solutions to find out more about the sustainability of consumer products and the approaches to their re-use, recycling, etc.:

Explain how to expose of the old products, offered by your venture, at the end of their lifecycle, as to ensure the environmental sustainability of your business.

[1] Source: Armstrong, G., Kotler, P.: Marketing: An Introduction, 12th Ed (Global Edition), Pearson Education, 2015, p. 231-232.

[2] Source: http://www.marketingteacher.com/three-levels-of-a-product/

[3] Source: Boundless Marketing: “Benefits and Solutions“,  https://www.boundless.com/marketing/textbooks/boundless-marketing-textbook/products-9/what-is-a-product-66/benefits-and-solutions-332-4050/.

[4] Refer to Figure 19 and the discussion of innovation diffusion/customer acceptance of innovative products in the following chapter.

[5] Source: http://productlifecyclestages.com/