Chapter 12
Setting Product
Strategy
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?
Information
Goods
Properties
Places
Organizations
A Product
can be
Experiences
Services
Events
Ideas
Persons
Potential Product
Augmented product
Expected product
Basic Product
Core
benefit
According to Kotler
there are 5 levels
The Product and Product Mix
The customer value hierarchy:
 Core benefit
The service or benefit the customer is really buying.
 Basic product
The marketer has to turn the core benefit into basic product.
 Expected product
A set of attributes and conditions buyers normally expect when they
purchase the products.
 Augmented product
The product exceeds customer expectation.
 Potential product
All possible augmentations and transformations the product or offering
might undergo in the future.
The Product Levels
Augmented product
Installation
Quality
Packing
Delivery
And
Credit
Feature
Core
Benefit
Actual product
Brand
Name
After
sale
services
Style
Core benefit
Warranty
According to Armestrock
There are 3 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
Classified by shopping habits
 Convenience goods
 Shopping goods
 Specialty goods
 Unsought goods
2. Consumer Goods Classifications
Consumer Goods
Convenience goods
Staples Goods
Impulse Goods
Emergency Goods
Shopping goods
Homogeneous
Goods
Specialty goods
Heterogeneous
Goods
Unsought goods
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.
Comparative Between Convenience & Shopping Goods
Shopping Goods
Convenience Goods
Limit Distribution
Convenience Distribution
High Price
Reasonable Price
Low life cycle
High life cycle
Needs planning or search
efforts
Purchased without planning or
search efforts
Selective distribution policy
Intensive distribution policy
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 & parts
Capital Items
Farm materials
Natural products
Component materials
Component parts
Supplies & business
services
Installations
Equipment
Maintenance & repair
Advisory services
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
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.
Conformance
Quality
Is the degree to which all the produced units are
identical and meet the promised specifications
Repairability
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 family
The core need that underlies the existence of a product family
(Security).
Product family
All the product classes that can satisfy a core need with reasonable
effectiveness (Saving, income)
Product class
A group of products within the product family recognized as having a
certain functional coherence (financial instruments)
Product line
A group of products within a product class that are closely related
because they perform a similar function.
Product type
A 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
The set of all products and items that a particular seller
offers for sale.
 A Product mix consists of various product lines.
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)
Product mix
Width = 4
Product
Line 4
Product
Line 3
Product
Line 2
Product
Line 1
Sweets
Snakes
Soft
Drinks
Coffee
Mars
In Pizza
Tang
Nescafe
kinder
Burger
Coca Cola
Bream
Twix
Kentucky
Meranda
Sanca
Depth L1 = 3
Length = 12
The Width
The
Depth
Product-Line Decisions
Product-Line Analysis
Product line managers need to know the
sales and profit items in their lines in order
to determine which items to built, maintain,
harvest and divest.
Product-Line Analysis
Percentage Contribution
to Sales and Profit
Product-Item Contributions to a Product Line's
Total Sales and Profits
60
50
40
Sales
30
Profits
20
10
0
1
2
3
Product Item
4
Market Profile
 Product line managers need to look at
market 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 of
affixed 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:
Attributes
A brand bring to mind certain attributes.
Benefits
Attributes must be translated in to functional & emotional benefits
Values
The brand say something about the product (Mercedes-Safety)
Culture
It may represent a certain culture (Mercedes- German)
Personality
It project a certain personality
User
It 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 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 Branding
Co-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
After Packaging is designed it must be tested
Engineering Tests:
Conducted to ensure that the package stand up under
normal conditions.
Visual Tests:
To ensure that the scrip is legible & the colors harmonious.
Dealer tests:
To ensure that dealers find the packages attractive & easy
to handle.
Customer tests:
To ensure favorable consumer response.
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
many products.
Warranties & 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.