MGMT 120
Principles of Marketing
Lecture 12:
Product Strategy and Product Line Management
Outline
•
•
•
Define product and major classifications.
Product line and product mix decisions.
Individual product decisions
– Product attributes;
– Branding;
– Packaging and labeling;
– Product support service.
The Product Area Involves Many Strategy Decisions
What is a Product?
• A product is anything that can be offered to a market for attention, acquisition,
use, or consumption that might satisfy a want or need.
• Product can be
– The physical goods
– Services
MGMT 120 Lecture Notes
©Professor Freddy Lee
–
–
–
–
Places
Persons
Organizations
Ideas
Blends of Physical Goods and Services
The Goods-Service Continuum
Dinner in an
Restaurant
Tires
Hair
Styling
Pure Goods
Pure Services
Three Levels of a Product
Augmented
product
Warranty
Design &
Styling
After-sale
service
Actual
product
Quality
Branding
Core
Benefit
Features
Core
product
Installation
Packaging
& Labeling
Delivery &
credit
Major Product Attributes
•
•
Features
– Important for competition;
– Often comes from customers and marketing research;
– Weigh a feature’s customer value with the costs of its provision.
Product quality: the ability of a product to perform its functions, such as
durability, reliability, precision, ease of operations and repair, etc.
MGMT 120 Lecture Notes
©Professor Freddy Lee
•
Style and design
Product Line and Product Mix
•
A product line is a group of products in a firm that are closely related because
they
– Function in a similar manner, or
– Sold to the same customer groups, or
– Marketed through the same types of outlets, or
– Fall within given price ranges.
•
Product mix (or product assortment) is the set of all product lines and items that
a particular firm offers for sale.
Product Mix Decisions
• Product mix length
The total number of items the company carries.
• Product mix width
The number of different product lines carried by the company.
• Product line depth
The number of versions of the product offered of each product in the line.
• Product mix/assortment consistency
The degree to which different product lines are related in end use, production
requirements, distribution, or in some other ways.
Product Mix
Product Mix Width
Detergent Toothpaste Bar Soap Deodorants Fruit Juices Lotions
Ivory Snow
Dreft
Length Tide
Joy
Of
Cheer
Each Oxydol
Product Dash
Line Cascade
Ivory Liquid
Gain
Dawn
Ariel
Bold 3
Liquid Tide
Gleem
Crest
Complete
Denquel
Secret
Ivory
Sure
Camay
Lava Kirk’s
Zest
Safeguard
Coast Oil
of Olay
Citrus Hill
Sunny D
Winter Hill
Texsun
Lincoln
Speas
Farm
Wondra
Noxema
Oil of
Olay
Camay
Raintree
Tropic
Tan
Bain de
Soleil
MGMT 120 Lecture Notes
©Professor Freddy Lee
Product Line Stretching
A company lengthens its product line beyond its current coverage
High
Two-Way
New
P
d t
Product
Price
Current
Product
New
P
d t
Product
Low
Upward
Downward
High
Quality
Classifying Products
•
How many times it can be used?
•
Who use it?
– Nondurable products
– Durable products
– Consumer products
– Business products
Consumer Products
Staples – gum/cigarettes
Impulse products - snacks
Convenience
Emergency - Batteries
Shopping
Consumer
Product
Classes
Homogeneous – W Machines
Heterogeneous - Clothes
Specialty
Limited Edition
Unsought
New unsought - Segway
Regular unsought - Insurance
MGMT 120 Lecture Notes
©Professor Freddy Lee
Consumer Products: Comparison
•
Brand attitude
– Convenience products: aware of brands, but willing to accept substitute
brands.
– Shopping products: prefer specific brands, but willing to accept substitutes.
– Specialty products: very brand loyal, will not accept substitutes.
– Unsought products: will accept substitutes.
Business Products
Installations
Professional
Services
Accessories
Business
Product
Classes
MRO
Supplies
Maintenance supplies
Raw
Materials
Component
Parts and
Materials
Repair supplies
Component parts
Operating supplies
Component materials
Vocabulary of Brand
• Branding refers to the use of a name, term, symbol, or design, or a combination
of these, to identify a product.
• Brand name: what can be vocalized;
• Brand mark : what can be recognized;
• Trademark: legal protection of a symbol or name.
Percentage of Users Loyal to One Brand
71%
Cigarettes
Mayonnaise
65%
Toothpaste
61%
Coffee
58%
Film
56%
Ketchup
51%
Beer
48%
Soft Drinks
44%
33%
Blue Jeans
Athletic Shoes
Canned Vegetables
Garbage Bags
27%
25%
23%
Source: Wall Street Journal Centennial Survey
MGMT 120 Lecture Notes
©Professor Freddy Lee
Over the Years …
"I try to stick to well-known brand names"
"I try to stick to well-known brand names"
93
93
91
91
89
89
Year
Year
87
87
85
85
83
83
81
81
Mal
e
79
79
77
77
75
75
% who Agreed
% who Agreed
90%
90%
85%
85%
80%
80%
75%
75%
70%
70%
65%
65%
60% Femal
60%
e
55%
55%
50%
50%
45%
45%
Source: A.W. Fawcett, “Lifestyle Study: The Latest Results of DDB Needham’s 18-Year Survey,”
Advertising Age, 1994
Brand Familiarity
Rejection
Focus
: Change Position
Nonrecognition
Focus
:
Increase
Recognition
Focus
:
Continue
Preference
Focus
:
Maintain
Insistence
Focus
Develop High
: Brand Equity
Brand Equity
•
Brand equity refers to a brand’s overall value and strength in the market.
•
Mega-brands
MGMT 120 Lecture Notes
©Professor Freddy Lee
$50 billion
$21 billion
$25 billion
$18 billion
The Right Brand Name Can Help
Short &
& Simple
Short
Simple
Easy
Spell & &
Read
Easy
totoSpell
Read
to Recognize & &
Remember
Easy Easy
to Recognize
Remember
Easyto
to Pronounce
Pronounce
Easy
Can Pronounce in
OneOne
Way Way
Can Pronounce
inOnly
Only
Can Pronounce in
Languages
Can Pronounce
inAllAll
Languages
SuggestsProduct
Product Benefits
Suggests
Benefits
Packaging/Labeling NeedsNeeds
MeetsMeets
Packaging/Labeling
No Undesirable Imagery
No Undesirable
Imagery
Always Timely
Always
Timely
Adapts
to AnyAdvertising
Advertising Medium
Adapts
to Any
Medium
Legally Available for Use
Protecting Brand Names & Trademarks
Lanham Act
You Must Protect
Your Own
Counterfeiting is Accepted
In Some Cultures
MGMT 120 Lecture Notes
©Professor Freddy Lee
Branding Family and Sponsor
• Brand family decisions
– Family brand – Honda, Toyota, Mercedes ;
– Individual brand – Civic, Accord, Corolla, SLK.
• Brand sponsor decisions
– Manufacturer’s brand (i.e., national brands): brand created by producers –IBM,
Kellogg’s;
– Private brand (i.e., private label, store brand): brand created by intermediaries
– Richmond Honda;
– Licensed brand – Starbucks on United;
– Co-branding – IBM computers with Intel.
Four Brand Strategies
Product category
Brand Existing
name
New
Existing
New
Line
extension
Brand
extension
Multibrands
New
brands
Packaging and Labeling
•
Packaging includes activities of designing and producing the container or wrapper
for a product
•
Role of packaging and labeling
– Attract attention;
– “Five-second commercial”;
– Functional benefits;
– Communication benefits;
– Perceptual benefits.
Other Issues
• Safety and environmental concerns about packaging – Hazardous Products Act
• Legal and ethical concerns about labels
– Clear and truthful;
– Includes needed safety warnings.
• Legislation
– The Consumer Packaging and Labeling Act;
– Weights and Measures Act.
MGMT 120 Lecture Notes
©Professor Freddy Lee
Product-Support Services
• Product-support services augment actual product.
• Very important tool in gaining competitive advantage.
• Know what services your customers value and the relative importance of them.
• How to deliver services?
– By own service support people
– Let distributors and dealers do it
– Contract out to third party organizations
• Warranties
To Increase Business
•
•
•
•
Add new product lines
Lengthen existing lines
Add more versions to each product
Pursue line consistency
– More consistency: specialization
– Less consistency: diversification
MGMT 120 Lecture Notes
©Professor Freddy Lee