Product Strategy and Demand
Measurement
Presentation Outline
• Different levels of a product
• Characteristics of products and services
• Types of consumer and industrial goods
• Product mix concept
• Product mix pricing
• Brand Development Strategy
• Ingredient Branding
• Demand measurement
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Products and Services
• Products and services are offered to the
market to satisfy a consumer need or want.
• Products are tangible in nature whereas
services are intangible in nature.
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The different levels of a product
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The different levels of a product
• Core benefit level: is the core customer value and the core customer
need that is being provided/fulfilled by a product or service.
• Basic product level: are the basic different attributes of a product
which delivers the core benefit to the customers.
• Expected product level: are the different attributes and performance
marks a consumer expects from a product or service.
• Augmented product level: are the additional customer services and
benefits that a company provides to its customers.
• Potential product level: are all the possible augmentations and
transformations the product or offering might undergo in the
future.
• Discussion: do you think expected product level increases as
competition increases?
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Durable and non durable products
• Durable product are tangible goods that normally
survive many uses: refrigerators, machine tools,
clothing. Durable products require more personal
selling, command a higher margin, and require more
seller guarantees.
• Non durable products are tangible goods normally
consumed in one or few uses, such as soft drinks and
soap. Because these goods are purchased frequently,
the appropriate strategy is to make them available in
many locations, charge only a small markup, and
advertise heavily to induce trial and preference.
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Characteristics of Services
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Consumer Goods Classifications
• Convenience goods are products that are
purchased frequently, immediately, and with
minimal purchasing effort and comparison
shopping.
• The company pursues mass promotion and
widespread distribution. Furthermore, the price of
the product is less.
• Example: toothpaste, newspaper, chewing gum,
fast food shops.
• Habitual or variety seeking buying behavior
occurs incase of purchasing convenience goods.
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Consumer Goods Classifications
• Shopping goods are products that are not purchased
frequently. Furthermore, consumer compares carefully
on suitability, quality, price, and style.
• The company pursues selective distribution in fewer
outlets, where there is more promotional effort by the
company. Furthermore, the price of the product or
service is more than convenience product.
• Example: furniture, clothing, hotel and airline services.
• Dissonance reducing or complex buying behavior
occurs incase of purchasing shopping goods.
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Consumer Goods Classifications
• Specialty goods are products with unique
characteristics and brand identity. These specialty
goods have few reasonable substitutes so consumers
put forth a special effort to purchase them.
• The company pursues exclusive distribution with
carefully targeted promotional effort. Furthermore,
the price of the product or service is very high.
• Example: Rolex watches, Lamborghini automobiles,
Tiffany Jewelry.
• Complex buying behavior occurs incase of purchasing
specialty goods.
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Consumer Goods Classifications
• Unsought goods are products consumers aren’t
aware of or haven’t thought of buying until they
need them.
• Aggressive promotional effort by the producer to
create brand awareness.
• Example: funeral services, car towing services.
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Industrial Goods Classifications
• Materials and parts include raw materials (coconut, cotton,
fruits, vegetables, crude petroleum) and manufactured
materials (cement, tires) usually sold directly to industrial
users.
• Capital items are long lasting industrial products that aid in
the buyer’s production or operations. Example: factories,
offices, generators, large computer systems, elevators.
• Supplies: include operating supplies (paper, pencils,
markers, printer ink) which are needed to conduct the
operations of the business.
• Business Services: include services that a company takes
from other organizations to achieve its goals. Example:
advertising firms, legal firms, consultancy firms.
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Concepts of Product Mix
• Product line is a group of products under the same product category
that are closely related because they perform a similar function, are
marketed through the same channel or fall within a given price range.
• Product mix consists of all the products (product lines) and items that
a particular seller offers for sale.
• Product Mix width refers to how many different product lines the
company carries.
• Product mix length refers to total number of items in the mix.
• Product mix depth refers to how many variants are offered of each
product in the line.
• Product mix consistency refers to how closely related the various
product lines are in end use, production requirements, distribution
channels, or some other way.
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Concepts of Product Mix
• Discussion: if you want to increase the
revenues and profits of the business of
Unilever – what strategy can you pursue?
• Add new product lines, thus widening the
product mix.
• It can lengthen each product line
• It can add more product variants to each
product and deepen its product mix.
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Concepts of Product Line
• Line stretching occurs when a company lengthens its product line
beyond its current range, whether down market, up market, or
both.
• A company can add products that are higher priced than the
existing line (up market stretch). example: Lexus/Acura/crowne
plaza/priority banking/Icon.
• A company can add products that are lower priced than the
existing line (down market stretch). Example: Mercedes C-class
cars/Genstar/Luvs/Kodak Funtime.
• A company can add products in both directions (two way stretch).
For example: Titan was serving the middle price middle quality
market. Gradually it added watches in the premium segment such
a Titan Edge, Nebula, and Xylux, where it competes with European
brands. In the Economy segment titan introduced Sonata. This is
how Titan dominated the category.
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Product Mix Pricing Strategies
• Product Line Pricing:
• Involves setting price steps between various products in
a product line based on the cost of making the product.
• A men’s clothing store might carry men’s shirts at three
price levels: 500 TK, 1000TK, 1500TK and above.
• The seller’s task is to establish perceived quality
differences that justify the price differences.
A presentation by Varqa Shamsi Bahar
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Product Mix Pricing Strategies
• Optional-Product
Pricing:
– Pricing optional or accessory
products sold with the main
product. E.g. sound system of
car, Inexpensive hotels.
• Captive-Product Pricing
– Pricing products that must be
used with the main product.
i.e. film for cameras, Blades
for Razor. (fixed fee, variable
usage rate).
A presentation by Varqa Shamsi Bahar
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Product Mix Pricing Strategies
• By-Product Pricing:
– Pricing lowvalue byproducts to get
rid of them and
make the main
product’s price
more
competitive.
– E.g. Food
wastes
– Salt from
desalination.
• Product-Bundling
Pricing:
– Combining several
products and
offering the
bundle at a
reduced price.
– Burger + fries +
pepsi.
– 3 day trip to Malaysia
@ TK 30,000
A presentation by Varqa Shamsi Bahar
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Brand Development Strategies
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Brand Development Strategies
• Line extensions
– Minor changes to existing products flavors, forms, package
sizes, colors, ingredients. E.g. Bata: sandals, regular shoes,
sport shoes, premium shoes.
• Brand extensions
– Successful brand names help introduce new products Dove
deodorant, body wash, bar soap, shampoo. Kool shaving
cream, shaving foam, bodyspray, deotalc, after shave gel.
Maggi noodles, ketchup, soup
• Multi-brands
– Multiple brand entries in a product category Close up,
Pepsodent. OR Wheel, Rin, Surf Excel.
• New brands
– New brand for a new product category
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Co-branding and Ingredient Branding
• In co-branding two or more well known brands
are combined into a joint product or marketed
together in some fashion.
• Co-branding reduces the cost of product
introduction because it combines two or more
well known brand images and speeds adoption.
• Unsatisfactory product performance may have
negative impact on the all the brands involved.
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Co-branding and Ingredient Branding
• Ingredient branding is a special case of cobranding. It creates brand equity for materials,
components, or parts that are necessarily
contained within other branded products.
• Ingredient brands are a signal of quality. For
example: Diet Coke Sweetened with Splenda.
• Ingredient brands can even become a necessity
for the category. For example: Visa ingredient
brand.
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Co-branding and Ingredient Branding
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Discussion:
Suggest an ingredient brand for:
A chocolate drink
A biscuit
The camera of a phone
A saree
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Packaging and Labeling
• Packaging helps in:
– Facilitate product transportation and protection.
– Aid product consumption (Example: Heinz)
– Assist at home storage (example Heinz)
– Identify the brand (example: Pringles)
• Labeling helps in:
– Convey information about the brand.
– Identify the brand.
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Forecasting and Demand Measurement
• A company must measure the size, growth, and profit potential
of each current SBU and any new opportunities that a company
wants to tap into.
• A sales forecast prepared by the marketing department will
help:
– The procurement department to purchase the right amount of raw
materials and packaging materials.
– The production department to establish production capacity to deliver
the required output.
– The HRM department to hire the right number of workers.
– Finance department to raise the right amount of money needed for
operations.
• Sales forecasts should be conducted for monthly, yearly, and
even 5 yearly.
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Different ways to break down a market
• A potential market is the set of consumers with a sufficient level of interest in a
market offer. However, their interest is not enough to define a market unless they
have sufficient income or access to the product.
• The available market is the set of consumers who have an interest, income, and
access to the product.
• The target market is the set of consumers amongst the available market that a
company wants to pursue.
• The penetrated market (from a company’s perspective) is the set of consumers who
are buying the company’s products or services.
• The penetrated market (from the category perspective) is the set of consumers who
are using the company’s and its competitor’s products.
• The non-penetrated market from the category perspective is the potential market.
• The non penetrated market from the company’s perspective are the set of
consumers from the available market who are not buying the company’s products.
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Different ways to break down a market
• If a company wants to increase its current sales then it can:
– Try to attract more consumers from the target market through
advertising and promotions so that they become part of the penetrated
market (from a company’s perspective).
– It can convert potential market into available market by increasing
distribution or my lowering down prices.
– It can launch different brands/sub-brands to tap into all the available
market (Example GP).
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THANK YOU