Chap006

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Chapter 6
Product and Brand Strategy
Key Terms
Tangible Product, Extended Product, Generic Product, Marketing
Myopia, Product, Product Classification, Vertical Market,
Horizontal Market, Quality, Value, Product Mix, Product Line,
Width, Depth, Brand, Line Extension, Franchisee Extension,
Dual Branding, Multibranding, Brand Equity, Packaging, Product
Life Cycle, Fashions, Fads, Innovators, Early Adopters, Late
Majority, Laggards, Product Audit, Attributes, Market Dimensions,
Benchmarking, Organization of Product Management, CrossFunctional Teams
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Elements of Product Strategy
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Three Perspectives of a Product
 Tangible product – Physical entity or service
offered
 Extended product – Tangible product along with
whole cluster of services that accompany it
 Generic product – Essential benefits the buyer
expects to receive from the product
 Marketing myopia – Executives who view their
company’s product too narrowly by
overemphasizing the physical object itself
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Product Definition and
Classification
 Product – The sum of the physical, psychological,
physiological, and sociological satisfactions the
buyer derives from purchase, ownership and
consumption
 Two basic criteria for product classification
 End use or market
 Degree of processing or physical transformation
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Categories of Product Classification
 Agricultural products and raw materials – Grown or
extracted from the land or the sea
 Fairly homogeneous
 Sold in large volume, and low value per unit
 Organizational goods – Purchased by firms for the
purpose of producing other goods
 Raw materials and semi-finished goods
 Major and minor equipment
 Parts needed to complete other finished goods
 Supplies or items used to operate the business
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Categories of Product Classification
 Consumer goods
 Convenience goods – Purchased frequently with
minimum effort
 Include items such as food and impulse goods
 Shopping goods – Purchased after some time and
energy are spent on comparing alternative
 Includes items such as appliances
 Specialty goods – Are unique in some way so the
consumer will make some effort to obtain them
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Organizational Market Characteristics
 A primary purchasing motive for organizational goods
is profit
 Organizational markets are concentrated
geographically as in the case of steel, auto or shoes
 Can be categorized into
 Vertical market – Limited number of buyers
 It is narrow and deep
 Horizontal market – Goods are purchased by all types of
firms in many different industries
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Product Quality and Value
 Quality – Defined as the degree of excellence or
superiority that an organization’s product possesses
 Total-quality management (TQM)
 ISO 9000 quality systems of standards
 Value – Defines as what the customer gets in
exchange for what the customer gives
 Customers perception of value based on
 Degree the product meets expected specifications
 Price
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Product Mix
 Full set of products offered for sale by an organization
 May consist of several product lines, or groups of
products sharing common characteristics, distribution
channels, customers, or uses
 Product mix described by
 Width – Number of product lines handled by
organization
 Depth – Average number of products in each line
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Product Line
 Product line planning revolves around the question of
how many product variants should be included
 Varying products offered for three reasons
 Potential customers rarely agree on a single set of
specifications
 Customers prefer variety
 Dynamics of competition lead to multiproduct lines
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Branding
 A brand identifies one seller’s good or service as
distinct from competitors
 Name, term, design, symbol, or any other feature
 Trademark – Legal term for brand
 Factors that increase strength of brand include
 Product quality
 Consistent advertising and marketing communication
 Distribution intensity
 Brand personality
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Branding
 Line extension – Brand name used to facilitate entry into a
new market segment
 Brand extension – Current brand name used to enter a
completely different product class
 Franchisee extension – Corporate name attached to a
product to enter a new market or a new product class
 Dual branding – Integration of two or more branded
products
 Multibranding – Different brand names assigned to each
product
 Private-label brands – Retail firms producing or marketing
their products
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Multi-Branding Strategy
 Advantages
 Firm can distance products from other offerings it markets
 Image of one product is not associated with other
products the company markets
 Products can be targeted at specific market segments
 If the product fails, the effect on other products is
minimized
 Disadvantages
 No consumer brand awareness due to different names
 Significant money spent on familiarizing new brands
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Elements of Brand Equity
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Packaging
 Differentiates relatively homogeneous products
 Contributes to creating new attributes of value in a
brand
 Creates urgent salability within a target market
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Product Life Cycle
 Introduction – High costs, low or no profit
 Growth – Increased profits, positively correlated with
sales
 Maturity – Profits do not keep pace with sales due to
high competition
 Decline – Seller must decide whether to
 Drop the product
 Alter the product
 Seek new uses for the product
 Seek new markets
 Continue with more of the same
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Product Life Cycle
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Product Life Cycle – Limitations
 Accuracy pertaining to the longevity of the product in
different stages of the cycle can’t be predicted
 Misjudging when a stage is ending and implementing
an inappropriate strategy
 Variations in life cycle exists
 Fashion – These are accepted and popular product
styles
 Fads – Products which experience high but brief
popularity
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Marketing Strategy Implications of the
Product Life Cycle
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Product Adoption And Diffusion
 Adopter categories
 Innovators
 Early adopters
 Early majority
 Late majority
 Laggards
 Diffusion – Spread of the product through the
population is known as the diffusion of innovation
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Adopter Categories
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Product Audit
 A marketing management technique whereby the
company’s current product offerings are reviewed to
ascertain whether each product should be continued
as is, improved, modified, or deleted
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Deletions
 Deletion decisions are difficult because of the
potential impact on customers and the firm
 Considerations in the deletion decision include
 Sales trends – Have sales moved over time? What has
happened to market share?
 Profit contribution – What has been the profit
contribution of the product to the company?
 Product life cycle – Has the product reached a level of
maturity?
 Customer migration patterns – If the product is deleted,
will customers switch to another product marketed by
our firm?
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Product Improvement
 Another important objective of the audit is to ascertain
whether to alter the product in some way or leave
things the way they are
 Attributes – Refer mainly to product features, design,
package and so forth
 Marketing dimensions – Refer to features like pricing,
promotion strategy and distribution channels
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Product Improvement
 Benchmarking – Continuous process of measuring
products, services, and practices against those of the
toughest competitors or companies renowned as
leaders
 Advantages
 Boosting product quality
 Developing more user-friendly products
 Improving customer order processing activities
 Shortening delivery lead times
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Advantages of Rejuvenating a
Product
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Organizing for Product Management
 Market management system – One person is
responsible for overseeing an entire product line with
all of the functional areas of marketing such as
research, advertising, sales promotion, sales, and
product planning
 Brand management system – A manager focuses on
a single product or a very small group of new and
existing products
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Cross Functional Teams
 Use of cross functional teams has become an
important way to manage the development of new
products
 Venture team – A cross-functional team responsible
for all tasks involved in development of new product
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Some Requirements for the Effective Use of CrossFunctional Teams in Product Management and New Product
Development
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