Lecture 7 Product and Services Management March 31, April 5, 7

Lecture 7 Product and Services Management March 31, April 5, 7

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Product (and Services) Management March 31, April 5, and April 7
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Products (and Services) Almost anything can be a product (a) people (b) places (c) organizations (d) ideas The product is there to serve an underlying need
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A product can de divided into three parts: (a) Search part (b) Experience part (c) Credence part To what extent consumers can evaluate the product (figure out whether the product meets their needs), before, or after, the consumption
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Example: Cars (Mostly search) The search part: What is the price of the car? How does Consumer Reports “rate” the car on safety, and reliability? How does the car “handle” as you take it for a test drive? The experience part As you drive the car, how do you feel? Does the car “handle” the way you expected it to? Do you think you made the right choice? The credence part How long will the car last? Will the car be problem-free, an year from now? Five years from now?
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Example: Dinner at a restaurant (Mostly experience) Search part: Consumers can find out a lot of information about the restaurant (Zagat ratings and reviews), talk to your friends, etc. Experience part: How did you like the food? How was the service (the atmosphere, or ambience? Credence part: What is the likelihood that something you ate will not make you violently ill a week from now?
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For products that are mostly experience: The quality is unobservable – you cannot figure it out through search, so how do you know? For example: Used cars – the seller knows the true quality, you (the buyer) do not: This is the information asymmetry problem and can lead to the adverse selection problem
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“Good” marketers can send signals of quality Warranty - As a marketer, you can offer a warranty only when you are confident about your quality – otherwise the cost of warranty redemptions would be prohibitive Certifications I have a PhD from Pitt The repair shop is AAA certified
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Product Line Decisions One important task for marketing mangers is to manage the product line (a line is a collection of similar products) (a) Line Extension Decisions
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Upward stretching
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Lecture 7 Product and Services Management March 31, April 5, 7

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