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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 Theproduct is thereto servean underlying need
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A product can de divided into threeparts: (a) Search part (b) Experience part (c) Credencepart To what extent consumers can evaluatetheproduct (figure out whether theproduct meets their needs), before, or after, theconsumption
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Example: Cars (Mostly search) Thesearch part: What is the price of the car? How does Consumer Reports “rate” thecar on safety, and reliability? How does thecar “handle” as you take it for a test drive? Theexperiencepart As you drive thecar, how do you feel? Does the car “handle” the way you expected it to? Do you think you made the right choice? Thecredence part How long will the car last? Will thecar 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. Experiencepart: How did you like the food? How was the service (theatmosphere, or ambience? Credencepart: 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: Thequality is unobservable– you cannot figure it out through search, so how do you know? For example: Used cars – the seller knows the truequality, you (the buyer) do not: This is the information asymmetry problem and can lead to theadverse 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 thecost of warranty redemptions would beprohibitive Certifications I havea PhD from Pitt Therepair shop is AAA certified
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Product Line Decisions One important task for marketing mangers is to managetheproduct line (a line is a collection of similar products) (a) LineExtension Decisions
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Jumping to a higher price-quality tier: Upward stretching
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Upward stretching:
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