Product Levels, Product Hierarchy, Product Mix

Product Levels:

Theodore Levitt proposes that in planning its market offering, the marketer needs to think
through 5 levels of the product. Each level adds more customer value and taken together forms
Customer Value Hierarchy.

i. Core Benefit or Product:

This is the most fundamental level. This includes the fundamental service or benefit that the
customer is really buying. For example, a hotel customer is actually buying the concept of “rest
and sleep”

ii. Basic or Generic Product:

The marketer at this level has to turn the core benefit to a basic product. The basic product for
hotel may include bed, toilet, and towels.

iii. Expected Product:

At this level, the marketer prepares an expected product by incorporating a set of attributes and
conditions, which buyers normally expect they purchase this product. For instance, hotel
customers expect clean bed, fresh towel and a degree of quietness.

iv. Augmented product:

At this level, the marketer prepares an augmented product that exceeds customer expectations.
For example, the hotel can include remote-control TV, fresh, flower room service and prompt
check-in and checkout. Today’s competition essentially takes place at the product-augmentation
level. Product augmentation leads the marketer to look at the user’s total consumption system i.e.
the way the user performs the tasks of getting, using fixing and disposing of the product.

Theodore Levitt pointed out that the real competition is not what the companies have
manufactured in the factories, but between what they add to their factory output in the form of
packaging, services, advertising, customer advice, financing, delivery arrangements,
warehousing and other things that people value.

Some things should be considered in case of product-augmentation strategy.

i Each augmentation adds cost. The extra benefits available in hotels add cost

ii. Augmented benefits soon become expected benefits. The unexpected additions like flower,
remote-controlled TV soon become very much expected by the customers from the hotel.
iii. As companies raise the price of their augmented product, some companies may offer a
stripped- down” i.e. no-augmented product version at much lower price. There are always a set
of low- cost hotel are available among the 5-star hotels.

v. Potential Product:

This level takes into care of all the possible augmentations and transformations the product might
undergo in the future. This level prompts the companies to search for new ways to satisfy the
customers and distinguish their offer. Successful companies add benefits to their offering that not
only satisfy customers, but also surprise and delight them. Delighting is a matter of exceeding
expectations.

Product Hierarchy:

Each product is related to certain other products. The product hierarchy stretches from basic
needs to particular items that satisfy those needs. There are 7 levels of the product hierarchy:

1. Need family:

The core need that underlines the existence of a product family. Let us consider computation as
one of needs.

2. Product family:

All the product classes that can satisfy a core need with reasonable effectiveness. For example,
all of the products like computer, calculator or abacus can do computation.

3. Product class:

A group of products within the product family recognised as having a certain functional
coherence. For instance, personal computer (PC) is one product class.

4. Product line:

A group of products within a product class that are closely related because they perform a similar
function, are sold to the same customer groups, are marketed through the same channels or fall
within given price range. For instance, portable wire-less PC is one product line.

5. Product type:

A group of items within a product line that share one of several possible forms of the product.
For instance, palm top is one product type.
6. Brand:

The name associated with one or more items in the product line that is used to identity the source
or character of the items. For example, Palm Pilot is one brand of palmtop.

7. Item/stock-keeping unit/product variant:

A distinct unit within a brand or product line distinguishable by size, price, appearance or some
other attributes. For instance, LCD, CD- ROM drive and joystick are various items under palm
top product type.

Product Mix:

An organisations product line is a group of closely related products that are considered a unit
because of marketing, technical or end-use considerations. In order to analyse each product line,
product- line managers need to know two factors. These are.

i. Sales and profits

ii. Market profile

A product mix or assortment is the set of all products and items that a particular seller offers for
sale. A company’s product-mix has some attributes such as.

1. Width:

This refers to how many different product lines the company carries.

2. Depth:

This refers to how many variants, shades, models, pack sizes etc. are offered of each product in
the line

3. Length:

This refers to the total number of items in the mix.

4. Consistency:

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

Let us take example of partial product assortment of HLL in its Home and Personal Care (HPC)
division:
So you see that there are three product lines of detergent, bathing soaps and shampoos in our
example. The list is illustrative and not exhaustive as HLL has many more product lines. Hence,
in the example the product width is 3. If Sunsilk has 3 different formulations (oily, dry and
normal hair) and 3 variations (sachet, 50 ml and 100 ml), then the depth of Sunsilk is 3 X 3 = 9.

The average depth of HLL’s product mix can be calculated by averaging the depths of all brands,
which signifies the average depth of each product. For example if Surf, Lifebuoy, Surf Excel,
Lux, Clinic Plus, Sunsilk, Wheel, Liril, Rexona, Dove and Hamam have depths of 3, 2, 1, 3, 6, 9,
2, 3, 2, 1 and 2 respectively (all are hypothetical figures), then the average depth of HLL’s HPC
division is (3+2+l+3+6+9+2+3+2+l+2)/11i. e. 34/11 i.e. 3.1. The length of HPC division is 11.
The average length of line is determined by dividing the total length by the width (i.e. the
number of lines), which signifies the average number of products in a product line. In this case,
the average length is 11/3 i.e. 3.67.

Product-Line Length:

Product-line managers are concerned with length of product line. If adding items to the product
line can increase profits, then we can say that the product line is too short. On the contrary, the
line is too long if dropping items can increase profits. They have to consider these two extremes
of the product line and have to strike a balance between them.

Company objectives influence product-line length. Companies seeking high market share and
market growth will carry longer lines. Companies that emphasise high profitability will carry
shorter lines consisting of carefully chosen items.

A company can lengthen its product line in 2 ways viz. a) line stretching and b) line filling.
Line Stretching:

This occurs when a company lengthens its product line beyond its current range. This is a
frequent measure taken by companies to enter new price slots and to cater to new market
segments. The product may be stretched by the addition of new models, sizes, variants etc. The
company can stretch in 3 ways:

1. Down-market stretch:

A company positioned in the upper market may want to introduce a lower price line. They offer
the product in the same product line for the lower end markets. A company can take this strategy
for 3 reasons:

i. Strong growth opportunities in the down-market

ii. Tie-up lower-end competitors who might try to move up-market

iii. Stagnating or declining middle market

The company has 3 choices in naming its down-market products.

i. Same name Eg: Sony

ii. Sub-brand name: Eg: Maruti 800

iii. Different name: Eg: Panasonic and JVG from Matshushita

ii. Up-market stretch:

Companies may wish to enter the high end of the market for more growth, higher margins or
simply to position themselves as full-line manufacturers. So they offer the products in the same
product line and cover the upper end market. For example, most of the car companies in India
have cars in premium segments like GM (Chevrolet Forester), Ford (Endeavour), Hyundai
(Terracan), Mitusubishi (Pajero), Maruti (Grand Vitara XL-7), Honda (CR-V) and Mercedes
Benz (M-Class)

iii. Two-way stretch:

Companies serving the middle market may decide to stretch their line in both directions. Tata
Motors had Multi-purpose Utility Vehicles (MU V) like Sumo and Safari targeted for middle
segment of the market. It had launched Indica for lower segment of the market as well as Indigo
Marina and Indigo Estate for up-market consumers.
a) Line filling:

As the name applies, filling means adding a product to fill a gap in the existing line. The
company wants to portray itself as full line company and that customers do not go to competitors
for offers or models in particular price slots. There are several motives of line filling as follows:

i) Reaching for incremental profits

ii) Trying to satisfy dealers who complain about lost sales because of missing items in the line

iii) Trying to utilise the excess capacity

iv) Trying to be the leading full-line company

v) Trying to plug holes in the product-line to keep out the competitors

Line Modernisation:

Product lines need to be modernised continuously. Companies plan improvements to encourage

customer migration to higher-valued, higher-priced items. For instance, Intel upgraded its
Celeron microprocessor chips to Pentium 1, 2, 3 and now 4.

Line Featuring:

The product-line manager selects one or few items in the line to feature. Sometimes, a company
finds one end of its line selling well and the other end selling poorly. Then the company may try
to boost demand for the short sellers especially if they are produced in a factory that is idled by
lack of demand.

Line Pruning:

At times a company finds that over the years it has introduced many variants of a product in the
product line. This was required may be because of the changing market situations. In this process
the product lines become unduly complicated and long with too many variants, shapes or sizes.
In the present situation it mind find out that efforts behind all these variants is leading to non-
optimal utilisation of resources. In other words it might be profitable for the company to leave
behind some of the variants.

So when the products are not satisfactorily performing, the product managers need to drop them
form the product line. This may lead to increase in profitability. Thus line pruning is consciously
taken decision by the product manager to drop some product variants from the line. For example
Heads and Shoulders is a well-known brand of shampoo from P&G, which had 31 versions.
They went for line pruning and now they have around 15 versions.
Definition of Branding

According to American Marketing Association - Brand is “A name, term, design, symbol, or

any other feature that identifies one seller’s good or service as distinct from those of other
sellers. The legal term for brand is trademark. A brand may identify one item, a family of items,
or all items of that seller. If used for the firm as a whole, the preferred term is trade name.”

According to Philip Kotler - “Brand is a name, term, sign, symbol, design, or a combination of
them, intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors”

Branding is “a seller’s promise to deliver a specific set of features, benefits and services
consistent to the buyers.”

Packaging Decisions

Another set of questions to consider involves the packaging on which a brand’s marks and name
will be prominently displayed. Sometimes the package itself is part of the brand. For example,
the curvaceous shape of Coca-Cola’s Coke bottle is a registered trademark. If you decide to
market your beverage in a similar-shaped bottle, Coca-Cola’s attorneys will have grounds to sue
you.

Packaging has to fulfill a number of important functions, including

 communicating the brand and its benefits;

 protecting the product from damage and contamination during shipment, as well as
damage and tampering once it’s in retail outlets;

 preventing leakage of the contents;

 presenting government-required warning and information labels.

Sometimes packaging can fulfill other functions, such as serving as part of an in-store display
designed to promote the offering.
Primary packaging holds a single retail unit of a product. For example, a bottle of Coke,

a bag of M&Ms, or a ream of printer paper (five hundred sheets) are all examples of

primary packages. Primary packaging can be used to protect and promote products

and get the attention of consumers. Primary packaging can also be used to

demonstrate the proper use of an offering, provide instructions on how to assemble the

product, or any other needed information. If warning or nutrition labels are required,

they must be on the primary packaging. Primary packaging can be bundled together as

well. Consumers can buy bottles of Coke sold in six-packs or cans of Coke in twelve-

packs, for example.

Secondary packaging holds a single wholesale unit of a product. A case of M&M bags

is an example, as are cartons of reams of paper. Secondary packaging is designed

more for retailers than consumers. It does not have to carry warning or nutrition labels

but is still likely to have brand marks and labels. Secondary packaging further protects

the individual products during shipping.

Tertiary packaging is packaging designed specifically for shipping and efficiently

handling large quantities. When a Coca-Cola bottler ships cases of Cokes to a grocery

store, they are stacked on pallets (wooden platforms) and then wrapped in plastic.

Pallets can be easily moved by a forklift truck and can even be moved within the

grocery store by a small forklift.

Labeling : A label is an information tag, wrapper, seal, or imprinted message attached to a

product.
The other definition which was proposed in 1963 by Regan suggested that “services represent
either intangible yielding satisfactions directly (transportation, housing etc.), or intangibles
yielding satisfactions jointly when purchased either with commodities or other services (credit,
delivery, etc.)”. For the first time services were considered as pure intangibles - capable of
providing satisfaction to the customer and can be marketed like tangible products.

NATURE OF SERVICES It is utmost important to explore the distinctive features of services,

because recognition of these special characteristics will provide insights for enlightened and
innovative management. One reason for the poor quality of service levels across different service
industries is that managers often tend to solve service marketing problems with tools and
techniques that are essentially meant for tangible products. It happens because of inadequate
understanding about the nature of services. As our knowledge of the characteristics of services
grows, so does our ability to deal with them from both an economic and marketing perspective.
Services have a number of unique characteristics that make them different from products. Some
of most commonly accepted characteristics are as follows: 3

(i) Intangibility: The most basic and universally cited characteristic of services is
intangibility, because services are performances or actions rather than objects, they
cannot be seen, felt, tasted, or touched in the same manner that we can sense tangible
goods. For example, when we buy a cake of soap, we can see, feel, smell and use to
check its effectiveness in cleaning. But, when we pay fees for a semester in the
university, we are paying for the benefits of deriving knowledge, skills and education
which is delivered to us by teachers. Teaching is an intangible service. When we travel
by a plane, the benefit which we are deriving is a service (transportation) but, it has some
tangible aspects such as the particular plane in which we fly (Boeing, Avro, Concorde,
etc.) and the food and drink which are served. The broad definition of services implies
that intangibility is a key determinant of whether an offering is or is not a service. While
this is true, it is also true that very few products are purely tangible or purely intangible.
Instead, services tend to be more intangible than manufactured products, and
manufactured products tend to be more tangible than services. The tangibility spectrum
shown in Table 1.1 captures this idea. Intangibility presents several marketing
challenges. Services cannot be inventoried, and therefore fluctuations in demand are
often difficult to manage. It cannot be patented legally, and new service concepts can,
therefore, easily be copied by competitors. It cannot be readily displayed or easily
communicated to customers, so quality may be difficult for consumers to assess. The
actual costs of a ‘unit of service’ are hard to determine and the price/quality relationship
is complex.
(ii) (ii) Inseparability: In most cases a service cannot be separated from the person or firm
providing it. A service is provided by a person who possesses a particular skill (singer,
doctor, etc.), by using equipment to handle a tangible product (dry cleaning) or by
allowing access to or use of a physical infrastructure (hotel, train, etc.). Services are
 typically produced and consumed at the same time. The relationship between production
and 4 consumption, therefore, dictates that production and marketing are highly
integrated processes. The telephone company produces telephone service while the
telephone user consumes it. A plumber has to be physically present to provide the
service, the beauti cian has to be available to perform the massage. The service provider
and the client are often physically present when consumption takes place. Generally,
most goods are produced first, then sold and consumed. On the other hand, services are
usually sold first and produced and consumed simultaneously. Sasser observed that the
firm is unable to store or transport services, that only direct distribution is possible,
thereby potentially limiting the number of markets that firm can cover. Apart from the
stress laid on ‘right place’ and ‘right time’ in case of distributing goods, there is
additional importance given to the performance of service in the ‘right way’ as well.
Another outcome of simultaneous production and consumption is that service producers
find themselves playing a role as part of the product itself and as an essential ingredient
in the service experience for the consumer. Since services often are produced and
consumed at the same time, mass production is difficult if not impossible. The quality of
service and customer satisfaction will be highly dependent on actions of employees and
the interactions between employees and customers. It is not usually possible to gain
significant economies of scale through centralization. Usually operations need to be
relatively decentralised so that the service can be delivered directly to the consumer at
convenient locations. Since the customer is involved in and observes the production
process, and thus may affect (positively or negatively) the outcome of the service
transaction.
(iii) Heterogeneity: Since services are performances, frequently produced by human beings,
no two services will be precisely alike. The human element is very much involved in
providing and rendering services and this makes standardization a very difficult task to
achieve. The doctor who gives us complete attention in one visit may behave a little
differently in next visit. The new bank clerk who encashes our cheques may not be as 5
efficient as the previous one and we may have to spend more time for the same activity.
This is despite the fact that rules and procedures have been laid down to reduce the role
of the human element and ensure maximum efficiency. Airlines, banks, hotels, etc. have
a large number of standardized procedures. Human contact is minimal in the
computerised reservation systems, but when we go to the hotel there will be a person at
the reception to hand over the key of the reserved room. The way that person interacts
with us will be an important factor in our overall assessment of the service provided by
the hotel. The rooms, the food, the facilities may be all perfect, but it is the people
interacting with us who make all the difference between a favourable and unfavourable
perception of the hotel. Heterogeneity also results because no two customers are
precisely alike; each will have unique demands or experience the service in a unique
way. Thus, the heterogeneity connected with services is largely the result of human
interaction (between and among employees and customers) and all of the vagaries that
accompany it. Levitt argues that owing to the industrialisation of services, their
production can no longer be viewed as being heterogeneous. Attempts have been made
to improve productivity in the service sector by introduction of technology. Uniformity
can be achieved by substituting equipment and machinery for labour. Hostage suggested
that service firms could also reduce variability by training the service providers in
appropriate responses to each customer situation. They can also monitor customer
satisfaction through suggestion and complaint system so that poor service can be
detected and corrected. Services are heterogeneous across time, organisations, and
people and as a result, it is very difficult to ensure consistent service quality. Quality
actually depends on many factors that cannot be fully controlled by the service supplier,
such as the ability of the consumer to articulate his or her needs, the ability and
willingness of personnel to satisfy those needs, the presence (or absence) of other
customers, and the level of demand for the service. Because of these complicating
factors, the service manager cannot always know for sure that the service is being
delivered in a manner consistent with what was originally planned and promoted.

(iv) Perishability: Perishability refers to the fact that services cannot be saved, stored,
resold, or returned. Since services are deeds, performances or acts whose production and
consumption takes place simultaneously, they tend to perish in the absence of
consumption. Goods can be stored and sold at a later date in the absence of a customer.
Services, on the other hand, go waste if they are not consumed. A seat on an airplane or
in a restaurant, an hour of a professor’s time, or telephone line capacity not used cannot
be reclaimed and used or resold at a later time. A primary issue that marketers face in
relation to service perishability is the inability to hold inventory. Demand forecasting and
creative planning for capacity utilisation are, therefore, important and challenging
decision areas. The fact that services cannot typically be returned or resold also implies a
need for strong recovery strategies when things do go wrong. Kurtz and Boone observed
that the utility of most services is short lived; therefore, they cannot be produced ahead of
time and stored for periods of peak demand. The perishability of services is not a problem
when demand is steady because it is easy to staff for the service in advance. When there
are wide fluctuations in demand there should be a highly flexible production system or
idle productive capacity. Sasser has described several strategies for producing a better
match between demand and supply in a service business. On the demand side, the firm
can make use of differential pricing, cultivating non-peak demand and developing
complementary services. On the supply side, for effective matching with demand, the
firm may hire part time employees to serve peak demand; peak-time efficiency routines
can be introduced, facilities for future expansion can be developed, and increased
consumer participation can be encouraged. (v) No Transfer of Ownership: When we buy
a product, we become its owner-be it a pen, book, shirt, TV or Car. In the case of a
service, we may pay for its use, but we never own it. By buying a ticket one can see the
evening film show in local cinema theatre; by paying wages one can hire the services of a
 chauffeur who will drive his car; by paying the required charges we can have a marketing
research firm survey into the reasons for our product’s poor sales performance, etc. In
case of a service, the payment is not for purchase, 7 but only for the use or access to or
for hire of items or facilities; and transfer of ownership does not take place.

PEOPLE

In services, ‘People’ refers to all human actors who play a part in service delivery and thus
influence the buyer’s perceptions; namely, the firm’s personnel, the customer, and other
customers in the service environment. All of human actors participating in the delivery of a
service provide cues to the customer regarding the nature of the service itself. How these people
are dressed, their personal appearance, and their attitudes and behaviours all influence the
customer’s perception of the service. If the service personnel are cold and rude, they can
undermine all the marketing work done to attract the customers. If they are friendly and warm,
they increase customer satisfaction and loyalty. Employee behaviour is often an integral part of
the service product. This is not true in a manufacturing operation, where employee behaviour
may affect product quality, but is not a part of the product. People constitute an important
dimension in the management of services in their role both as performers of services and as
customers. People as performers of service are important because, a customer sees a company
through its employees. The employees represent the first line of contact with the customer. They
must, therefore, be well informed and provide the kind of service that wins customer approval.
The firm must recognise that each em-ployee is a salesman for the company’s service. If these
employees are not given training in how to go about face-to-face customer contact, the entire
marketing effort may not prove to be effective. The importance of customers in services stems
from the fact that most services imply active and involved customer-organisation interface. In
many service situations, customers themselves can also influence service delivery, thus affecting
service quality and their own satisfaction. Customers not only influence their own service
outcomes, but they can influence other customers as well. People can be subdivided into:

(i) Service personnel: Service personnel are important in all organisations but more so in an
organisation involved in providing services. The behaviour and attitude of the personnel
providing the service is an important influence on the customer’s overall perception of the
service and he can rarely distinguish between the actual service rendered and the human element
involved in it. Customer contact is very important concept in services, which refers to the
physical presence of the customer in the system. The extent of contact refers to the percentage of
time a customer ought to be in the system out of the total time it takes to serve him. The low
contact services include bank, post offices or retailing and the high contact services include
hotels, educational institutions, restaurants and hospitals. Services with high contact are more
difficult to control and manage because a longer customer contact is more likely to affect the
time of demand, and nature of service and its quality; whereas, in low contact services such
contact has much less impact on the service. Therefore, the high contact personnel must be
dexterous in public relations and inter-personal skills, and the low contact personnel must have
high technical and analytical attributes. The quality and performance of service personnel can be
improved through:

• Careful selection and training of personnel;

• laying down norms, rules and procedures to ensure consistent behaviour;

• ensuring consistent appearance; and

• reducing the importance of personal contact by introducing automation and computerization

wherever possible.

(ii) Customers: Customers are important because they are a source of influencing themselves,
being actively involved in service delivery, and other customers as well. In case of doctors,
lawyers, consultants one satisfied customer will lead to a chain reaction, bringing in his wake a
number of other customers. So, its an important task of service marketers to ensure complete
satisfaction of the existing customers. The kind of customers that a firm attracts exerts an
important influence on prospective customers. The prospective customer may feel attracted
towards the organisation e.g., club, restaurant, school, because it has his type of customers or the
customer may turn away if he perceives the existing customers to be a kind with whom he would
not like to associate.
PHYSICAL EVIDENCE

It refers to the environment in which service is delivered and where the firm and customer
interact, and any tangible components that facilitate performance or communication of the
service. The physical evidence of service includes all of the tangible representations of the
service such as, brochures, letterhead, business cards, report format, signage, equipment, etc.

Packaging importance stems from the fact that it is what comes in between the product and the
customer’s eye. The product package is a visual representation of the whole marketing effort.
The customer judgement and evaluation are often based on the product packaging.

Physical evidence is to a service, what the packaging is to a product. In services, the product
itself being intangible, the need is to tangibles it as far as possible. Thus, physical entities can be
successfully employed to describe the service product and its distinguishing qualities. Since the
potential customers form impressions about the service organisations on the basis of physical
evidence, like building, furniture, equipments, stationery and brochures, it becomes imperative
that the marketers manage the physical evidence in a manner that reinforces the proposed
position and image of the organisation.

Cleanliness in a doctor’s clinic, the exterior appearance and interior decor of a restaurant, the
comfort of the seating arrangement in a cinema hall, adequate facility for personal needs at the
airport, all contribute towards the image of the service as perceived by the customer. The
common element in these is that they are all physical, tangible and controllable aspects of a
service organisation. There may be two kinds of physical evidence:

(i) Peripheral evidence: It is actually possessed as a part of the purchase of service but by itself
is of no value. An airline ticket, cheque book, or receipt for a confirmed reservation in a hotel are
examples of peripheral evidence. A cheque book is of value only if customer has money in the
bank, without that it is of no significance. Peripheral evidence adds on to the value of essential
evidence, such as writing pad, pen, match box, complimentary flowers and drinks, etc. in a hotel,
which customer may take away. Such evidence must be designed keeping in mind the overall
image which the organisation wishes to project and the reminder value of the evidence in its
ability to remind the customer about the organisation.

(ii) Essential evidence: Whereas the peripheral evidence is possessed and taken away by the
customer, the essential evidence cannot be possessed by the customer; the building, its size and
design, interior layout and decor, logo, etc. of the organisations are constituents of essential
evidence. The essential evidence is a very critical input in determining the atmosphere and
environment of the service organisation.

43
Physical evidence can be used to build strong association in the customers’ minds and service
can be differentiated from the competitor’s similar offering. By making the service more tangible
and making it easier for the customer to grasp the concept of the service, marketers can create the
ideal environment for the service offering.

PROCESS

Process in services refers to the actual procedures, mechanisms, and flow of activities by which
the service is delivered- the service delivery and operating systems. In a service organisation, the
system by which customer receives delivery of the service constitutes the process. In fast food
outlets the process comprises buying the coupons at one counter and picking up the food against
that at another counter. The process of a delivery function which can be compared with that of
operations management implies the conversion of input into the finished product. But, in a
service organisation, there is no clear cut input or output. Rather, it is the process of adding value
or utility to system inputs to create outputs which are useful for the customers.

The process by which services are created and delivered to the customer is a major factor within
the services marketing mix, as services customers will often perceive the service delivery system
as part of the service itself. Thus, decisions on operations management are of great importance to
the success of the marketing of the service. In fact, continuous coordination between marketing
and operations is essential to success in most services businesses. Identification of process
management as a separate activity is a prerequisite of service quality improvement. The
importance of this element is especially highlighted in service businesses where inventories
cannot be stored. Through the introduction of automatic teller machines (ATMs) banks have
been able to free staff to handle more complex customer needs by diverting cash only customers
to the ATMs. If the processes supporting service delivery cannot, for example, quickly repair
equipment following a breakdown or provide a meal within a defined period, an unhappy
customer will be the result. This suggests that close cooperation is needed between the marketing
and operations staff who are involved in process management. By identifying processes as a
separate marketing mix element, its importance to service quality is duly recognized.
New Product Development

Step 1: Generating

Utilizing basic internal and external SWOT analyses, as well as current marketing trends, one
can distance themselves from the competition by generating ideologies which take affordability,
ROI, and widespread distribution costs into account.

Lean, mean and scalable are the key points to keep in mind. During the NPD process, keep the
system nimble and use flexible discretion over which activities are executed. You may want to
develop multiple versions of your road map scaled to suit different types and risk levels of
projects.

Step 2: Screening The Idea

Wichita, possessing more aviation industry than most other states, is seeing many new
innovations stop with Step 2 – screening. Do you go/no go? Set specific criteria for ideas that
should be continued or dropped. Stick to the agreed upon criteria so poor projects can be sent
back to the idea-hopper early on.

Because product development costs are being cut in areas like Wichita, “prescreening product
ideas,” means taking your Top 3 competitors’ new innovations into account, how much market
share they’re chomping up, what benefits end consumers could expect etc. An interesting
industry fact: Aviation industrialists will often compare growth with metals markets; therefore,
when Boeing is idle, never assume that all airplanes are grounded, per se.

Step 3: Testing the Concept

As Gaurav Akrani has said, “Concept testing is done after idea screening.” And it is important
to note, it is different from test marketing.

Aside from patent research, design due diligence, and other legalities involved with new product
development; knowing where the marketing messages will work best is often the biggest part of
testing the concept. Does the consumer understand, need, or want the product or service?

Step 4: Business Analytics

During the New Product Development process, build a system of metrics to monitor progress.
Include input metrics, such as average time in each stage, as well as output metrics that measure
the value of launched products, percentage of new product sales and other figures that provide
valuable feedback. It is important for an organization to be in agreement for these criteria and
metrics.

Even if an idea doesn’t turn into product, keep it in the hopper because it can prove to be a
valuable asset for future products and a basis for learning and growth.
Step 5: Beta / Marketability Tests

Arranging private tests groups, launching beta versions, and then forming test panels after the
product or products have been tested will provide you with valuable information allowing last
minute improvements and tweaks. Not to mention helping to generate a small amount of buzz.
WordPress is becoming synonymous with beta testing, and it’s effective; Thousands of
programmers contribute code, millions test it, and finally even more download the completed
end-product.

Step 6: Technicalities + Product Development

Provided the technical aspects can be perfected without alterations to post-beta products, heading
towards a smooth step 7 is imminent. According to Akrani, in this step, “The production
department will make plans to produce the product. The marketing department will make plans
to distribute the product. The finance department will provide the finance for introducing the
new product”.

As an example; In manufacturing, the process before sending technical specs to machinery

involves printing MSDS sheets, a requirement for retaining an ISO 9001 certification (the
organizational structure, procedures, processes and resources needed to implement quality
management.)

In internet jargon, honing the technicalities after beta testing involves final database preparations,
estimation of server resources, and planning automated logistics. Be sure to have your
technicalities in line when moving forward.

Step 7: Commercialize

At this stage, your new product developments have gone mainstream, consumers are purchasing
your good or service, and technical support is consistently monitoring progress. Keeping your
distribution pipelines loaded with products is an integral part of this process too, as one prefers
not to give physical (or perpetual) shelf space to competition. Refreshing advertisements during
this stage will keep your product’s name firmly supplanted into the minds of those in the
contemplation stages of purchase.

Step 8: Post Launch Review and Perfect Pricing

Review the NPD process efficiency and look for continues improvements. Most new products
are introduced with introductory pricing, in which final prices are nailed down after consumers
have ‘gotten in’. In this final stage, you’ll gauge overall value relevant to COGS (cost of goods
sold), making sure internal costs aren’t overshadowing new product profits. You continuously
differentiate consumer needs as your products age, forecast profits and improve delivery process
whether physical, or digital, products are being perpetuated.