Chapter 12Chapter 12

Setting Product Setting Product StrategyStrategy

Objectives

Identify the various characteristics of products. Learn how companies build and manage product lines and mixes. Understand how companies make better brand decisions. Comprehend how packaging and labeling can be used as marketing tools. Warranties & guarantees can offer further assurance to consumers.

Product is a key element in the market offering. Is the first and the most important element of the

marketing mix. Product strategy calls for making coordinated

decisions on product mixes, product lines, product brands, packaging and labeling.

Who should ultimately design the product? The customer of course.The customer will Judge the offering by three basic elements:

Product features and quality. Services mix and quality. Price.

The product is any thing that can be offered to market to satisfy a want or a need.

What is a Product?

GoodsPlaces

Events

A Product can be Services

Experiences

Persons

Information

Properties

Ideas

Organizations

According to Kotler there are 5 levels

According to Kotler there are 5 levels

Core benefit

Basic Product

Expected product

Augmented product

Potential Product

The Product and Product MixThe Product and Product Mix

The customer value hierarchyThe customer value hierarchy::

Core benefitThe service or benefit the customer is really buying.

Basic productThe marketer has to turn the core benefit into basic product .

Expected productA set of attributes and conditions buyers normally expect when they purchase the products.

Augmented product The product exceeds customer expectation.

Potential productAll possible augmentations and transformations the product or offering might undergo in the future.

Quality Packing

Feature

Style

Brand

NameCore

BenefitDelivery

AndCredit

Installation

After sale services

Warranty

Core benefit

Actual product

Augmented product

According to Armestrock There are 3 levels

According to Armestrock There are 3 levels

The Product Levels

Product Classification

1 .Durability and Tangibility.

2 .Consumer Goods.

3 .Industrial Goods.

Product Classification

1 .Durability and tangibility

Nondurable goods Tangible Rapidly consumed in one or a few uses. Example: Milk - Soap

Durable goods Tangible

Lasts a long time Example: Oven – electronics

Services Intangible Example: Appliance repairs, Transportation Services

2 .Consumer Goods Classifications

Convenience goods

Shopping goods

Specialty goods

Unsought goods

Classified by shopping habitsClassified by shopping habits

2 .Consumer Goods Classifications

Consumer Goods

Convenience goods Shopping goods Specialty goods Unsought goods

Staples Goods

Impulse Goods

Emergency Goods

HomogeneousGoods

HeterogeneousGoods

2 .Consumer Goods Classification

2.1 Convenience goods:

Staples Goods: Goods consumers purchase on a regular basis (Toothpast).

Impulse Goods:Purchased without any planning or search efforts (Magazines).

Emergency Goods:Are purchased when a need is urgent (umbrellas during a rainstorm).

2 .Consumer Goods Classification

2.2 Shopping goods:

The bases are the suitability quality, price and style

Homogeneous shopping goods:

Are similar quality but different enough in price to justify shopping comparisons.

Heterogeneous shopping goods:

Offer in product features & services that maybe more important than price.

Shopping GoodsConvenience Goods

Limit DistributionConvenience Distribution

High PriceReasonable Price

Low life cycleHigh life cycle

Needs planning or search efforts

Purchased without planning or search efforts

Selective distribution policyIntensive distribution policy

ComparativeComparative Between Convenience & Shopping GoodsBetween Convenience & Shopping Goods

3 .Industrial goods Classifications

Are goods that enter the manufactures product completely

3.1 Materials and parts

Farm products ( Wheat, Cotton, Fruits …) Natural products (Fish, Crude petroleum …) Component materials (Iron, cement, wires…)

Component parts ( Small motors, tires …)

3.2 Capital items Installations (Factories, offices)

Equipment (drill presses, personal computer, elevators).

3.3 Supplies and business services Maintenance and repair (paint, window cleaning, copier repair…) Advisory services (Legal, management consulting, advertising)

Industrial goods classification

Industrial Goods

Material & partsCapital Items

Supplies & business services

Farm materials

Natural products

Installations

Equipment

Maintenance & repair

Advisory services

Component materials

Component parts

Form

Feature

Performance quality

Durability

Many products can be differentiated in form (Size, shape, physical structure of a product.

The company should consider how many people want each feature, how much it would take to introduce each feature, and think of feature bundles or packages.

Most products are established at one of four performance levels: Low, average, high or superior.

A measure of the product's expected operating life under natural or stressful conditions, is a valued attribute for certain products.

Reliability

Style

Conformance Quality

Repairability

Measure of the probability that a product will not fail within a specified time period.

Describe the product's look and feel to the buyer.

Is the degree to which all the produced units are identical and meet the promised specifications

Is a measure of the ease of fixing a product when it malfunction or fails.

Services Differentiation:

Ordering ease: refers to how easy it is for the customer to place an order with the company.

Delivery: to how well the product or service is delivered to the customer.

Installation: refers to the work done to make a product operational in its planned location .

Services Differentiation:

Customer training: refers to training the customer’s employees to use the vendor’s equipment properly and

efficiently.

Customer consulting: refers to data, information systems, and advice services that the seller offers to

buyers.

Maintenance & repair: describes the service program for helping customers keep purchased products in

good working order.

The Product Hierarchy:Need familyThe core need that underlies the existence of a product family (Security).

Product familyAll the product classes that can satisfy a core need with reasonable effectiveness (Saving, income)

Product classA group of products within the product family recognized as having a certain functional coherence (financial instruments)

Product lineA group of products within a product class that are closely related because they perform a similar function.

Product typeA group of items within a product line that share one of several possible forms of the product.

Item.A distinct unit within a brand or product line distinguishable by size, price, appearance or some other attribute.

Product mix

Product mix dimensions::Product mix dimensions::

The Width: Number of product lines.

The Length: Total number of items in mix.

The Depth: How many variants are offered of each product in the line.

Consistency: Degree to which product lines are related.

(Production requirements, distribution channels)

The set of all products and items that a particular seller offers for sale.

A Product mix consists of various product lines.A Product mix consists of various product lines.

Product mix

Product Line 4

Product Line 3

Product Line 2

Product Line 1

SweetsSnakesSoft Drinks

Coffee

MarsPizza InTangNescafe

kinderBurgerCoca ColaBream

TwixKentuckyMerandaSanca

The Width

The

Depth

Width = 4

Depth L1 = 3

Length = 12

Product-Line Decisions

Product-Line Analysis

Product line managers need to know the sales and profit itemssales and profit items in their lines in order to determine which items to built, maintain, harvest and divest.

Product-Line Analysis

Product-Item Contributions to a Product Line's Total Sales and Profits

0

10

20

30

40

50

60

1 2 3 4

Product Item

Perc

en

tag

e C

on

trib

uti

on

to S

ale

s a

nd

Pro

fit

Sales

Profits

Market Profile

Product line managers need to look at market profilemarket profile..

The manager must review how the line is positioned against competitor’s lines.

The product map is useful for designing product line marketing strategy & identifies market segments.

Market Profile

Product Map for a Paper-product Line

Product Line Length

A company lengthen its product line in two ways:1 .Line stretching: involves the question of whether a

particular line should be extended:

Down market: it introduces a lower priced line for any three reasons:

1- The company may notice strong growth opportunities in the down market.2- To tie up lower end competitors who might other wise try to move up market.3- The middle market is declining.

• - Upward stretch: Enter the high end of market for more growth , higher margins.

• -The two way stretch: The line in both direction

•2 -Line filling: A product line can be lengthened by adding more items within the present rang like reaching for incremental profits, trying to satisfy dealers,

• -Line modernizations: whether the line needs a new look.

•In rapidly changing product markets , modernization is continuous.

•A major issue is timing improvements , so they do not appear too early ( damaging sales of the current line ) or too late ( after the competition has established a strong

reputation for more advanced equipment) .

• -Line pruning : How to delete and remove weaker items from the line,

Product mix pricing

There are six situation involving product mix pricing:

1 (Product line pricing:

Companies normally develop product lines rather than single products and introduce price steps.

2 (Optional feature pricing:

Many companies offer optional products, features and service a long with their main product.

3 (Captive product pricing:

Some products require the use of ancillary or captive products.

4 (Two part pricing product:

Service firms often engage in two-part pricing consisting ofaffixed fee plus variable usage fee.

5 (By-product pricing:

The production of certain goods-meats, petroleum products often results in by-products.

6 (Product bundling:Sellers often bundle products and features.

Mixed Bundling

The seller offers goods both individually and in bundles.

When offering a mixed bundle, the seller normally charges less for the bundle than if the items were purchased separately.

Brand Decision

The AMA definition of a brand:

“A name, term, sign, symbol, or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate

them from the competition”.

Brand Decisions

Brands can convey six levels of meaning:

AttributesA brand bring to mind certain attributes.

BenefitsAttributes must be translated in to functional & emotional benefits

ValuesThe brand say something about the product (Mercedes-Safety)

CultureIt may represent a certain culture (Mercedes- German)

PersonalityIt project a certain personality

UserIt suggests the kind of consumer who buys or use the product.

Brand Decision

Companies need to develop brand policies for the individual product items in their lines.

-They must decide whether to brand at all , whether to use family or individual brand names, whether to extend the brand name to new products , and whether to create multiple brands.

Brand DecisionBrand Decision

In developing marketing strategy for individual product, the seller has to confront the branding decision.

Branding is a major issue in product strategy.

Developing branded product requires a great deal of long term investment spending especially for advertising, promotion, and packaging.

Companies need to develop brand polices for individual product items in their lines.

Co-Branding & Ingredient BrandingCo-Branding & Ingredient Branding

Co-BrandingCo-Branding::

It called dual branding or brand bundling, in which two or more well known existing brands are combined into a joint product or marketed together in some fashion.

Integrated Branding:

Is a special case of co-branding.

It involves creating brand equity for materials, components or parts that are necessarily contained within other branded products.

Packaging and Labeling

Packaging:

Is all the activities of designing and producing the container for a product.

Packaging includes: The primary package

The secondary package

The shipping package

Packaging has become as marketing tool, well designed packages can create convenience & promotional value.

•The factors that help in increasing using packaging as a marketing tool:

1 -Self service: The package must perform many of the sales tasks: attract attention, describe the product features, create consumer confidence and make a favorable impression.

2 -Consumer affluence: Consumers are willing to pay a little more per the convenience appearance, dependability and prestige of better packages.

3 -company and brand Image: Packages contribute to instant recognition of the company or brand.

4 -Innovation opportunity: Innovative packaging can bring large benefits to consumes and profits to producers.( easy to carry , easy to open , easy to pour and close).

Developing an effective package:

Determine the packaging concept

Determine key package elements

Testing:

Engineering tests

Visual tests

Dealer tests

Consumer tests

Engineering Tests:Conducted to ensure that the package stand up under Conducted to ensure that the package stand up under normal conditionsnormal conditions..

Visual Tests:To ensure that the scrip is legible & the colors harmoniousTo ensure that the scrip is legible & the colors harmonious..

Dealer tests:To ensure that dealers find the packages attractive & easy To ensure that dealers find the packages attractive & easy to handleto handle..

Customer tests:To ensure favorable consumer responseTo ensure favorable consumer response..

After Packaging is designed it must be testedAfter Packaging is designed it must be tested

The label may be a simple tag attached to the product or an elaborately designed graphic that is part of the package.

Labeling functions:

Identifies the product or brand

May identify product grade

May describe the product

May promote the product

Legal restrictions impact packaging for Legal restrictions impact packaging for many productsmany products..

Warranties & guaranteesWarranties & guarantees

Warranties:are formal statements of expected product performance by the manufacturer.

Guarantees are most effective in two situations:

The company or the product is not well know. The product's quality is superior to the

competition.

Warranties and guarantiees

•Guarantees

1 -Reduce the buyer perceived risk.2 -Suggest that the product is of high quality.3 -Company and its service performance are

dependable.4 -Enables the company to charge a higher

price than a competitor who is not offering an equivalent guarantee.