Marketing Chapter 8 audio

Chapter 8: Product Strategy:

Chapter 8: Product Strategy HSCA 4201: Health Care Marketing Dr. Alice Adams

Learning Objectives:

Learning Objectives Know the range of variation for products & services Understand the issues in product line formation Identify the strategic issues over the product life cycle Know the implications of alternative branding strategies 1 2 3 4 2 Understand factors that affect diffusion of innovation 5

Range of Variation for Goods:

Many health care services are actually a combination of services (primarily) and products (secondarily). Range of Variation for Goods Durable Goods Non-Durable Goods Products Services 3

Range of Variation for Goods:

Differences between products and services Range of Variation for Goods Intangibility Inconsistency Inseparability Inventory Interaction with Customers 4

Levels of a Product/Service:

5 Levels of a Product/Service Actual Product Core Benefits Features Design Quality Augmented Product Warranty Support Customer Service Financing Delivery/Installation Packaging

Types of Products:

Types of Products Consumer Goods Industrial Goods Convenience Goods Shopping Goods Production Goods Support Goods 6

Types of Health Care Services:

Types of Health Care Services How Services are Delivered Organizational Tax Status People Based Unskilled Skilled Professional Equipment Based Automated Monitored Operated Not-for-Profit For-Profit 7

Product/Service Strategy:

Product/Service Strategy The key to a product/service strategy is to determine the best mix of products & services needed to satisfy your customers’ need and wants  “Product Mix” Service Line 1 Service Line 2 Service Line 3 Service Line 4 Service Line 5 Service A Service B Service C Service D Service E Service F Service G Service H Service I Service J Service K Service L Service M Service N Service O Service P Service Q 8

Product Mix Breadth & Depth:

Madison Hospital’s Product Mix Service Line 1 Service Line 2 Service Line 3 Service Line 4 Service A Service B Service C Service D Service E Service G Service H Service I Service L Service M Service O Service P Service Q Service R Service J Service K Service N Product Mix Breadth & Depth Lincoln Hospital’s Product Mix Service Line 1 Service A Service B Service C Service Line 2 Service D Service E Service F Service Line 3 Service G Service H Service Line 4 Service I Service J Service K Service Line 5 Service L Service M Service N Service Line 6 Service O Service P Service Line 7 Service Q Service R Service F GREATER PRODUCT MIX BREADTH GREATER PRODUCT MIX DEPTH 9

Product Line Management:

No ideal mix of breadth and depth – depends on the target market, competition, and the organization Advantages of expanding product mix breadth and/or depth: Attract new customers Serve more needs of current customers Increase revenue Disadvantages of expanding product mix breadth and/or depth: Cost and complexity Cannibalization of existing lines and products Product Line Management 10

Typical Product Life Cycle:

Typical Product Life Cycle Introduction Growth Maturity Decline TIME GROWTH 11

Introduction Stage:

Key considerations Few competitors Product quality must meet expectations Pricing strategy is critical Price skimming Penetration pricing Promotion aimed at creating primary demand, awareness, & interest Place (distribution) is usually limited Profit is usually negative due to heavy up-front investment Introduction Stage 12

Growth Stage:

Key considerations Increasing number of competitors Product mix and market growth decisions Pricing increases or decreases Promotion aimed at creating selective demand (preference) Place (distribution) – personal selling more important Profit should turn positive and begin to grow Growth Stage 13

Maturity Stage:

Key considerations Marginal competitors begin to drop out of market May offer opportunities to pick up abandoned market share Otherwise, objective is to maintain market share Product strategy Possibly introduce produce line extensions to move back along product life cycle to growth phase Beware of cannibalism of existing products Pricing becomes more competitive Discounts may be required to maintain market share Maturity Stage 14

Maturity Stage:

Key considerations, continued Promotion should focus on customer retention “Loyalty clubs” Place: focus resources on most profitable distribution channels May require retrenchment of less profitable locations Maturity Stage 15

Decline Stage:

Key considerations Services in decline stage require careful management Can consumer disproportionate share of management time and financial resources in return for no growth Decision to drop service can be difficult Emotional, cultural attachments Community needs and reactions Internal politics Might consider outsourcing service to a contract provider Might consider harvesting strategy Decline Stage 16

Alternative Product Life Cycles:

Alternative Product Life Cycles Introduction Growth Maturity Decline TIME GROWTH High Learning Product 17

Alternative Product Life Cycles:

Alternative Product Life Cycles Introduction Growth Maturity Decline TIME GROWTH Low Learning Product 18

Alternative Product Life Cycles:

Alternative Product Life Cycles TIME GROWTH Fashion Product 19

Alternative Product Life Cycles:

Alternative Product Life Cycles Introduction Growth Maturity Decline TIME GROWTH Fad Product 20

Life Cycle of Health Care Services:

Difficult to affect length of product life cycle Length of life cycle varies across different services and different settings Especially inpatient vs. outpatient Strongly affected by external environment Difficult for organizations to react quickly, especially for resource-intensive services Manager’s job is to monitor environment, anticipate changes before they happen Life Cycle of Health Care Services 21

Life Cycle of Hospital Services:

Extended growth stage through early 1980s Fueled by Medicare & Medicaid, increasing population, medical advancements No real maturity stage Decline began in mid-1980s with prospective payment and managed care Still in decline today, but will not disappear Many hospitals are using harvesting strategies for inpatient care Life Cycle of Hospital Services 22

Modifying the Product Life Cycle:

Modifying the Product Life Cycle Product Modification Quality Features Performance Appearance Market Modification New customers New uses for product Increased frequency of use Repositioning the Product New target segments New brand image 23

Branding:

Identifies the product/service in the mind of the consumer Shorthand for the qualities, characteristics, values, and personality of the product or service Effective branding enhances awareness, recall, and loyalty Additional value of the brand is “brand equity” 24 Branding

Components of a Brand:

25 Components of a Brand Brand Content What you deliver in your brand including quality, customer service, concepts, ideas, feelings, etc. Includes your values, ethos, philosophy Brand Graphics Visual appearance or representations Name, logo, colors, typeface, symbols , design, images, online material Brand Style Language, style, tone of voice of the brand Vocabulary, attitude, IQ, sense of humor, character, personality

Keys to Effective Branding:

Don’t promise more than you can deliver Brand should be aspirational, but realistic Understand that EVERY aspect of the organization must support the brand All elements of the marketing mix Every customer interaction How you treat and interact with your own employees Every association or affiliation with other organizations, brands, or people NEVER think of your brand as just a logo A logo does not represent the brand any more than a name represents everything you are about as a person 26 Keys to Effective Branding

Branding Strategies:

Different ways to handle the use of brands relative to your products and/or services Multi-product branding strategies Multi-brand strategies Reseller strategy Mixed strategies Co-branding strategies 27 Branding Strategies

Multi-Product Brand Strategy:

Using same brand name across multiple product/service categories Advantages: Enhances brand equity Easier to introduce new products under old brand Tends to reduce overall promotion costs Disadvantages: Puts brand equity at risk if one or more products/services is unsuccessful Generally need some continuity across product/services to make sense 28 Multi-Product Brand Strategy

Multi-Brand Strategy:

Using different brand name on each product/service category Advantages: Allows organization to offer different products/services to multiple target markets No carry-over effects from other products/services Disadvantages: Each new product/service must establish its own awareness and recognition Promotion is more costly 29 Multi-Brand Strategy

Reseller Strategy:

Also known as licensing Organization sells its products under an established brand name, OR Organization lends its brand name to someone else’s product/ service Licensing fee is paid by the party using the other’s brand name Advantages: Allows the product/service to “ride the coat tails” of an established brand (if you license another brand name) Easy source of revenue (if someone else licenses your brand name) Disadvantages: More expensive Don’t have control over the brand name and/or other uses 30 Reseller Strategy

Mixed Strategy:

Organization sells some products/services under its own brand name, others under a licensed brand name, OR Organization sells some products/services under its own brand name, allows other organizations to sell its services under their brand name Advantages: Avoids carry-over effects of different levels/qualities of services Disadvantages: Managerial complexity 31 Mixed Strategy

Co-Branding Strategy:

Organization markets its brand alongside another brand name Increasingly used in health care to indicate affiliations with larger hospitals or centers of excellence 32 Co-Branding Strategy Advantages: Synergistic effect of well-matched brands Maximizes promotional budgets of both organizations Disadvantages: Brands must share similar values Loss of control puts brand equity at risk

Diffusion of Innovation:

33 Diffusion of Innovation

Factors Affecting Adoption:

GENERAL Relative advantage Compatibility Complexity Divisibility Communicability 34 Factors Affecting Adoption HEALTH CARE Homogeneous groups Pace of innovation Norms, roles, social networks Infrastructure