CHAPTER

12

SETTING PRODU T STRATEG!

LEARNING OBJECTIVES
After reading this chapter, students should:

Know what are the characteristics of products and how can they be classified Know how companies can differentiate products Know how a company can build and manage its product mix and product lines Know how companies can combine products to create strong co-brands or ingredient brands Know how companies can use packaging, labeling, warranties, and guarantees as marketing tools

CHAPTER SUMMARY
Product is the first and most important element of the marketing mix. Product strategy calls for making coordinated decisions on product mixes, product lines, brands, and packaging and labeling. In planning its market offering, the marketer needs to think through the five levels of the product: the core benefit, the basic product, the expected product, the augmented product, and the potential product that encompasses all the augmentations and transformations the product might ultimately undergo. Products can be classified in several ways. In terms of durability and reliability, products can be nondurable goods, durable goods, or services. In the consumer-goods category, products are convenience goods staples, impulse goods, emergency goods!, shopping goods homogeneous and heterogeneous!, specialty goods, or unsought goods. In the industrial-goods category, products fall into one of three categories: materials and parts raw materials and manufactured materials and parts!, capital items installations and e"uipment!, or suppliers and business services operating supplies, maintenance and repair items, maintenance and repair services, and business advisory services!. #rands can be differentiated on the basis of a number of different product or service dimensions: product form, features, performance, conformance, durability, reliability, repairability, style, and design, as well as such service dimensions as ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair.

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(ost companies sell more than one product. ) product mix can be classified according to width, length, depth, and consistency. *hese four dimensions are the tools for developing the company+s marketing strategy and deciding which product lines to grow, maintain, harvest, and divest. *o analy,e a product line and decide how many resources should be invested in that line, product-line manages need to look at sales and profits and market profile. ) company can change the product component of its marketing mix by lengthening its product via line stretching down-market, up-market, or both! or line filling, by moderni,ing its products, featuring certain products, and pruning its products to eliminate the least profitable. #rands are often sold or marketed -ointly with other brands. Ingredient brands and co-brands can add value assuming they have e"uity and are perceived as fitting appropriately. Physical products have to be packaged and labeled. .ell-designed packages can create convenience value for customers and promotional value for producers. In effect, they can act as /five-second commercials0 for the product. .arranties and guarantees can offer further assurance to consumers.

OPENING THOUGHT
1tudents will be familiar with their /idea0 of a tangible product2the physical manifestation2their cell phone or the shoes they are wearing for example. 3owever, students may have trouble understanding the /totality0 of the product physically demonstrated2the core benefit, the basic product, expected product, augmented, and potential product. *he instructor is encouraged to use the class period to allow the students to try to uncover or explore these additional components of the /product0 concept so that the students will begin to understand these dimensions better. 1tudents should have no problems understanding the concepts of durability and reliability, nor should they have problems with brands differentiation or product line depth and breath. Perhaps, the most challenging concept of the chapter is the concept of line stretching, and4or line filling. )gain, the instructor is encouraged to use examples from manufacturers+ and4or personal experience to communicate these concepts successfully. 5inally, the labeling of a product includes both advertising copy and governmental regulations will be new material for many students.

TEACHING STRATEGY AND CLASS ORGANIZATION

PROJECTS
6. )t this point for the semester-long pro-ect, students should have set their group pro-ect+s product or service strategy. Instructors are to evaluate their submissions on the product or services! features, "uality, and price and other the other considerations of /product0 found in this chapter.

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9. In planning its market offering, the marketer needs to address five product levels: core benefit, basic product, expected product, augmented product, and potential product. 1tudents should select a firm within an industry and through research Internet and other formats! outline the firm+s five product levels for its products. In their research, students should be challenged to discover the firm+s perception of the customer+s value hierarchy and total consumption system. $. Sonic PDA Marketin P!an :ecisions about products are critical elements of any marketing plan. :uring the planning process, marketers must consider issues related to product mix and product lines. Product marketers distinguish five levels of product, each adding more customer value: core benefit, basic, expected, augmented, and potential. In assessing product strategy: 3ow would you define the core benefit for 1onic 6888; 3ow would you define the augmented product for 1onic 9888, the second product to be launched by 1onic next year;

.rite your answers to the "uestions in a written marketing plan or enter it in the Product <ffering and (arketing (ix sections of (arketing Plan Pro.

ASSIGNMENTS
S"a!! Gro#$ A%%i n"ent% 6. *he opening vignette of this chapter details the success of 1teinway Piano+s in their delivery of a superior product. *here are numerous examples of companies delivering offerings that meet the target customers+ needs or wants. In this assignment, the students are challenged to compile a list of at least three other examples of company products performing at exceptional levels despite intense competition. In their report, students should not only identify the products and companies in terms of the definition of /product0 described in this chapter, but also be able to delineate the salient characteristics of their selected products. 9. 'onvenience items and capital good items can be seen as two ends of the /product continuum.0 'onvenience items are purchased fre"uently, immediately, and with minimum of effort. 'apital goods are those items that last a long period of time and are purchased infre"uently by consumers. 1tudents should select a convenience good and a capital good of their choice and compare and contrast the consumers value hierarchy and users total consumption system for each item. In&i'i&#a! A%%i n"ent% 6. )ssign the following readings to students: =obert #ordley, /:etermining the )ppropriate :epth and #reath of a 5irm+s Product Portfolio,0 Journal of Marketing Research, %8 5ebruary!, 988$, pp. $7>&$ or Peter #oatwright and ?oseph '. @unes, /=educing )ssortment: )n )ttribute-#ased )pproach,0 Journal of Marketing, A& ?uly!, 9886, pp.&8>A$. )fter reading each article, students should submit a paper

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summari,ing their findings and illustrating the concepts exposed in these papers to the material covered in this chapter. 9. .hen the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving their "uality. Bxamples of adding value in the service component of a product include computers, education, and pi,,as. Bach student is to select a product in which they think that the additional value present lies in the service and "uality components. 1tudents should be prepared to defend their selections using the material presented in this chapter. T(ink)Pair)S(are 6. In the (arketing (emo entitled, Making Ingredient Branding Work, the authors list four re"uirements for success in ingredient branding. )s a group, students should collect examples of ingredient branding currently present in the marketplace supermarkets, hotels4motels, automobile companies, and causal dining establishments are good places to start! and examine these examples versus the four re"uirements stated in the memo. 1tudents should be able to defend their positions in comparing these products to the statements in the (arketing (emo. 9. Product differentiation is essential to the branding process. In choosing to differentiate a product, a marketer has the choice of form, features, performance "uality, conformance "uality, durability, reliability, repairability, and style. 'ollect examples of currently produced products that have been differentiated and branded for each of these design parameters.

MARKETING TODAYCLASS DISCUSSION TOPICS

<ne of the /hottest0 consumer trends of recent years is the /low-carb0 diet. (arketers and manufacturers of food products and food establishments have introduced numerous new and revised products to the marketplace labeled /low-carb0 to capitali,e on their consumers+ desire to limit their carbohydrate intakes. In reviewing some of the currently available /low-carb,0 products consumer products and restaurant menu choices! discuss whether or not: )! *he products are actually lower in carbohydrates than the previously produced product product differentiation!. #! *hat the product+s labeling is abiding with the current labeling laws. '! *he firm has -ust reclassified the product as /low-carb0 in order to take advantage of this trend.

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END-OF-CHAPTER SUPPORT
MAR*ETING DEBATE+Are Line E,ten%ion% Goo& or Ba&*he /form versus function0 debate applies in many arenas, including marketing. 1ome marketers believe that product performance is the end all and be all. <ther marketers maintain that the looks, feel, and other design elements of products are what really make the difference. Ta"e a position: Product functionality is the key to brand success versus product design is the key to brand success. S# e%te& Re%$on%e Pro: 'onsumers buy products to satisfy a need. ) consumer uses products and decides on a product based upon their own consumption system2the way the product is by the consumer getting the product, using the product, and disposing of the product!. )dditionally, the customer value hierarchy core benefit, basic product, expected product, augmented product, and potential product! enters into the decision-making process for a consumer. *herefore, a product must perform to an acceptable level according to the consumer+s perception of benefits in their customer value hierarchy. ) low price, low function product, like a disposable ra,or must at least perform the task to which it was created. ) more expensive product, an electric ra,or, must meet the function to which it was created, although these functions are at a higher level than the disposable ra,or. If either product does not perform to the consumer+s basic product definition then the product will be discarded and not re-purchased. 'on: Products have uni"ue characteristics and specific brand identifications that meet consumers+ need that are not related to functionability. 1uch needs as status, self-actuali,ation, and style appeal to a wide audience. 5or example, most automobiles will perform the task of taking a person from point ) to point #. 3owever, it is the design of the automobile specific make4type: i.e. sports car, luxury car! that appeals to the buyer. 5or many consumers style plays a more important role, for some, the only role in their buying decision. ) well-designed product can also be a point-of-difference in the marketplace aiding consumer acceptance through its ease of use, durability, reliability, or packaging. ) well-designed product can be a competitive advantage for smaller firms. .hatever, the design, however, the product must at least meet the consumers+ definition of a basic product. <nce that definition is met, design can be a powerful marketing asset. MAR*ETING DISCUSSION 'onsider the diverse means of differentiating products and services. .hich ones have the most impact on your choices; .hy; 'an you think of certain brands that excel on a number of these different means of differentiation;

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Student ans#ers #ill differ according to the product$ser%ices chosen& 'o#e%er, student ans#ers should enco(pass the follo#ing distinctions: Products differentiation includes: 5orm 5eatures Performance "uality 'onformance "uality :urability =eliability =epairability 1tyle 1ervices differentiation includes: <rdering ease :elivery installation 'ustomer training 'ustomer consulting (aintenance and repair MAR*ETING SPOTLIGHT+To.ota :iscussion Cuestions 6! .hat have been the key success factors for *oyota; a. Product differentiation features. b. 1ervice differentiation features. 9! .here is *oyota vulnerable; a. =apid changes in the market for automobiles due to environmental or governmental changes. b. =apid copying by competitors. $! .hat should marketers watch out for; a. Bxternal changes to the automobile market created by environmental or governmental regulations.

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'hapter 69: 1etting Product 1trategy

b. 'hanges in consumer attitudes and preferences in their consumption system and customer value hierarchy. %! .hat recommendations would you make to senior marketing executives going forward; a. :o not rest on past successes. b. 'ontinue to keep abreast in your target markets consumption system and customer value hierarchy. &! .hat should they be sure to do with their marketing; a. )ppeal to those factors that are present in their target markets definitions of: core benefit, basic product, expected product, augmented product, and potential product. b. :eliver to the /potential product0 while ensuring that the core, basic, expected, and augmented products meet consumers definitions.

DETAILED CHAPTER OUTLINE

At the heart of a great )rand is a great product& Product is a "e* ele(ent in the (ar"et offering& +ar"et leaders generall* offer products and ser%ices of superior ,ualit*& +ar"eting planning )egins #ith for(ulation an offering to (eet target custo(ersneeds or #ants& The custo(er #ill .udge the offering )* three )asic ele(ents: product features and ,ualit*, ser%ices (i/ and ,ualit*, and price& 0igure 12&1 sho#s co(ponents of the (ar"et offering&

PRODUCT CHARACTERISTICS AND CLASSI/ICATIONS

A product is an*thing that can )e offered to a (ar"et to satisf* a #ant or need& )! Products that are marketed include: 6! Physical goods. 9! 1ervices. $! Bxperiences. %! Bvents. &! Persons. A! Places. D! Properties. E! <rgani,ations. 7! Information. 68! Ideas. 7&

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Pro&#ct Le'e!%0 T(e C#%to"er Va!#e Hierarc(.

In planning its (ar"et offering, the (ar"eter needs to address fi%e product le%els& Each le%el adds (ore custo(er %alue, and the fi%e constitute a custo(er %alue hierarch*& 0igure 12&2 sho#s fi%e product le%els& )! *he fundamental level is the core )enefit: *he service or benefit the customer is really buying. (arketers must see themselves as benefit providers. #! )t the second level, the marketer has to turn the core benefit into a )asic product. '! )t the third level, the marketer prepares an e/pected product, a set of attributes and conditions buyers normally expect when they purchase this product. :! )t the fourth level, the marketer prepares an aug(ented product that exceeds customer expectations. 6! :ifferentiation arises on the basis of product augmentation. Product augmentation also leads the marketer to look at the total consu(ption s*ste(: the way the user performs the tasks of getting and using products and related services. 9! 1ome things should be noted about product-augmentation strategy: a. 5irst, each augmentation adds costs. b. 1econd, augmented benefits soon become expected benefits and necessary points-of-parity. c. *hird, as companies raise the price of their augmented product, some competitors offer a /stripped-down0 version at a much lower price. B! )t the fifth level stands the potential product that encompasses all the possible augmentations and transformations the product or offering might undergo in the future. 6! 3ere is where companies search for new ways to satisfy customers and distinguish its individual offer. Re%ie# 3e* Definitions here: core )enefit, )asic product, e/pected product, aug(ented product, total consu(ption s*ste(, and potential product

Pro&#ct C!a%%i1ication%
+ar"eters ha%e traditionall* classified products on the )asis of characteristics: dura)ilit*, tangi)ilit*, and use& Each product t*pe has an appropriate (ar"eting4 (i/ strateg*&

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'hapter 69: 1etting Product 1trategy

D#ra2i!it. an& Tan i2i!it.

Products can )e classified into three groups, according to dura)ilit* and tangi)ilit*: )! @ondurable goods: tangible consumed in one or a few uses. #! :urable goods: tangible that normally survives many uses. :urable goods re"uire more personal selling and service, command a higher margin, and re"uire more seller guarantees. '! 1ervices: intangible, inseparable, variable, and perishable products that re"uire more "uality control, supplier credibility, and adaptability.

Con%#"er)Goo&% C!a%%i1ication
The %ast arra* of goods consu(ers )u* can )e classified on the )asis of shopping ha)its& )! *he consumer usually purchases con%enience goods fre"uently, immediately, and with a minimum of effort. #! 1hopping goods are goods that the consumer, in the process of selection and purchase, characteristically compares on such basis as suitability, "uality, price, and style. 6! 'o(ogeneous shopping goods are similar in "uality but different enough on price to ad-ust shopping comparisons. 9! 'eterogeneous shopping goods differ in product features and services that may be more important than price. $! Specialt* goods have uni"ue characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. %! Unsought goods are those that the consumer does not know about or does not normally think of buying. *he classic examples of known but unsought goods are life insurance and cemetery plots. Re%ie# 3e* Definitions here: con%enience goods, shopping goods, ho(ogeneous shopping goods, heterogeneous shopping goods, specialt* goods, and unsought goods

In&#%tria!)Goo&% C!a%%i1ication
An Industrial good can )e classified in ter(s of ho# it enters the production process and its relati%e costliness& 5e can distinguish three groups of industrial goods: (aterials and parts, capital ite(s, and suppliers and )usiness ser%ices& )! (aterials and parts. 6! *hese are goods enter the manufacturer+s product completely. *hey fall into two ma-or groups: a. =aw materials include:

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i! 5arm products2commodity characteristics. ii! @atural products2are in limited supply. b. (anufactured materials and parts fall into two categories: i! 'omponent materials. ii! 'omponent parts. #! Capital items are long-lasting goods that facilitate developing or managing the finished product. *hey include: 6! Installations. 9! B"uipment. '! Supplies and usiness services are short-term goods and services that facilitate developing or managing the finished product. 1upplies are two kinds: 6! (aintenance and repair items including business advisory services such as, legal, consulting, and advertising!. 9! <perating supplies.

DI//ERENTIATION
To )e )randed, products (ust )e differentiated& Ph*sical products %ar* in potential for differentiation& !) (arketers are always looking for new dimensions of differentiation.

Pro&#ct Di11erentiation
)! 0or(: (any products can be differentiated in form2the si,e, shape, or physical structure of a product. #! 0eatures: (ost products can be offered with varying features that supplement its basic function. 6! ) company can identify and select appropriate features by surveying buyers and then calculating customer !alue versus company cost for each feature. 9! Bach company must decide whether to offer feature customi,ation at a higher cost or a few standard packages at a lower cost. '! Perfor(ance ,ualit*: (ost products are established at one of four performance levels: low, average, high, or superior. 6! "erformance #uality is the level at which the product+s primary characteristics operate. 9! *he manufacturer must design a performance level appropriate to the target market and competitors+ performance levels. $! ) company must mange performance "uality through time.

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a. Cuality is becoming an increasingly important parameter for differentiation as companies adopt a value model and provide higher "uality for less money. :! onfor(ance ,ualit*: #uyers expect products to have a high conformance "uality that is the degree to which all the produced units are identical and meet the promised specifications. 6! the problem with low conformance "uality is that the product will disappoint some buyers. B! Dura)ilit*: ) measure of the product+s expected operating life under natural or stressful conditions 6! :urability is a valued attribute for certain products. 9! #uyers will generally pay more for products that have a reputation for being long lasting. 5! Relia)ilit*: #uyers normally will pay a premium for more reliable products. =eliability is a measure of the probability that a product will not malfunction or fail within a specified time period F! St*le: :escribes the product+s look and feel to the buyer. 6! 1tyle has the advantage of creating distinctiveness that is difficult to copy. 9! 1trong style does not always mean high performance. Re%ie# 3e* Definitions here: for(, features, perfor(ance ,ualit*, confor(ance ,ualit*, dura)ilit*, relia)ilit*, and st*le

De%i n0 T(e Inte rati'e /orce

As co(petition intensifies, design offers a potent #a* to differentiate and position a co(pan*-s products and ser%ices& Design is the totalit* of features that affect ho# a product loo"s and functions in ter(s of custo(er re,uire(ents& )! *o the company, a well-designed product is one that is easy to manufacture and distribute. #! *o the customer, a well-designed product is one that is pleasant to look at and easy to open, install, use, repair, and dispose of.

Ser'ice% Di11erentiation
5hen the ph*sical product cannot easil* )e differentiated, the "e* to co(petiti%e success (a* lie in adding %alued ser%ices and i(pro%ing ,ualit*& The (ain ser%ice differentiators are ordering ease, deli%er*, installation, custo(er training, custo(er consulting, and (aintenance and repair&

Or&erin Ea%e
!) $rdering ease refers to how easy it is for the customer to place an order with the company.

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De!i'er.
!) %eli!ery refers to how well the product or service is delivered to the customer. It includes speed, accuracy, and care attending the delivery process.

In%ta!!ation
)! Installation refers to the work done to make a product operational in its planned location. #! :ifferentiating at this point in the consumption chain is particularly important for companies with complex products2ease of installation becomes a true selling point.

C#%to"er Trainin
)! Customer training refers to training the customer+s employees to use the vendor+s e"uipment properly and efficiently.

C#%to"er Con%#!tin
)! Customer consulting refers to data, information systems, and advice services that the seller offers to buyers.

Maintenance an& Re$air

)! Maintenance and repair describes the service program for helping customers keep purchased products in good working order.

PRODUCT AND BRAND RELATIONSHIPS

Each product can )e related to other products&

T(e Bran& Hierarc(.

The product hierarch* stretches fro( )asic needs to particular ite(s that satisf* those needs& 5e can identif* si/ le%els of the product hierarch*& )! @eed family. #! Product family. '! Product class. :! Product line. B! Product type. 5! Item, also called stockkeeping unit &S'() or product !ariant.

Pro&#ct S.%te"% an& Mi,e%

A product s*ste( is a group of di%erse )ut related ite(s that function in a co(pati)le (anner&

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'hapter 69: 1etting Product 1trategy

)! ) product mi* also called a product assortment! is a set of all products and items a particular seller offers for sale. ) product mix consists of various product lines. #! ) company+s product mix has a certain width, length, depth, and consistency. '! *he depth of a product mix refers to how many different product lines the company carries. 6! *he length of a product mix refers to the total number of items in the mix. a. .e can also talk about the average length of a line. *his is obtained by dividing the total length by the number of lines. 9! *he width of a product mix refers to how many variants are offered of each product in the line. $! *he consistency of the product mix refers to how closely related the various product lines are in end use, production re"uirements, distribution channels, or some other way. Ta)le 12.1 sho#s so(e product lines for P6G&

Pro&#ct)Line Ana!.%i%
)! In offering a product line, companies normally develop a basic platform and modules that can be added to meet different customer re"uirements. #! Product-line managers need to know the sales and profits of each item in their line in order to determine which items to build, maintain, harvest, or divest.

Sa!e% an& Pro1it%

0igure 12&7 sho#s a sales and profit report for a fi%e4ite( product line& )! Bvery company+s product portfolio contains products with different margins. #! ) company can classify its products into four types that yield different gross margins, depending on sales volume and promotion. 6! 'ore product. 9! 1taples. $! 1pecialties. %! 'onvenience items.

Market Pro1i!e
The product4line (anager (ust re%ie# ho# the line is positioned against co(petitors- lines& 0igure 12&8 sho#s the location of the %arious product4line ite(s of co(pan* 9 and four co(petitors&

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)! *he product map shows which competitors+ items are competing against company G+s items. #! *he map also reveals possible locations for new items. '! )nother benefit of product mapping is that it identifies market segments. :! Product-line analysis provides information for two key decision areas2product-line length and product-mix pricing.

Pro&#ct)Line Len t(
)! 'ompany ob-ectives influence product-line length. #! <ne ob-ective is to create a product line to induce upselling. '! ) different ob-ective is to create a product line that facilitates cross selling. :! 1till another ob-ective is to create a product line that protects against economic ups and downs. B! Product lines tend to lengthen over time. 5! ) company lengthens its product line in two ways: by line stretching and line filling.

Line Stretc(in
)! Hine stretching occurs when a company lengthens its product line beyond its current range. #! %o+n,market stretch is when a company positioned in the middle market may want to introduce a lower-priced line. 6! (oving down-market carries risk. '! (p,market stretchcompanies may wish to enter the high end of the market for: 6! (ore growth. 9! 3igher margins. $! 1imply to position themselves as a full-line manufacturer. :! -+o,+ay stretch is where companies serving the middle market might decide to stretch the line in both directions.

Line /i!!in
)! ) product line can also be lengthened by adding more items within the present range. *here are several motives for line filling: 6! =eaching for incremental profits. 9! *rying to satisfy dealers who complain about lost sales because of missing items in the line. $! *rying to utili,e excess capacity.

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%! *rying to be the leading full-line company. &! *rying to plug holes to keep out competitors. #! Hine filling is overdone if it results in self-cannibali,ation and customer confusion. '! *he company needs to differentiate each item in the consumer+s mind. :! Bach item should possess a -ust-noticeable difference. B! *he company should also check that the proposed item meets a market need and is not being added simply to satisfy an internal need.

Line Mo&erni3ation4 /eat#rin 4 an& Pr#nin

Product lines need to )e (oderni:ed& In rapidl* changing product (ar"ets, (oderni:ation is continuous& )! 'ompanies plan improvement to encourage customer migration to higher-valued, higher-priced items. #! *he product-line manager typically select one or a few items in the line to feature. '! Product-line mangers must periodically review the line for deadwood that is depressing profits.

Pro&#ct)Mi, Pricin
)! Price-setting logic must be modified when the product is part of a product mix. #! Pricing is difficult because the various products have demand, cost interrelationships, and are sub-ect to different degrees of competition. '! .e can distinguish six situations involving product-mix pricing: product-line pricing, optional-feature pricing, captive-product pricing, two-part pricing, by-product pricing, and product bundling pricing. 6! Product4line pricing& a. 'ompanies normally develop product lines rather than single products and introduce price steps. b. In many lines of trade, sellers use well-established price points for the products in its personal line. c. *he seller+s task is to establish perceived-"uality differences that -ustify the price differences. 9! Optional4feature pricing& a. (any companies offer optional products, features, and services along with their main product. b. Pricing is a sticky problem, because companies must decide which items to include in the standard price and which to offer as options.

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$!

apti%e4product pricing& a. 1ome products re"uire the use of ancillary or captive products. b. *here is a danger in pricing the captive product too high in the aftermarket.

%! T#o4part pricing& a! 1ervice firms often engage in two-part pricing, consisting of a fixed fee plus a variable usage fee. &! ;*4product pricing& a! *he production of certain goods often results in by-products. If the byproducts have value to a customer group, they should be priced on their value. A! Product4)undling pricing& a. 1ellers often bundle product and features. b. Pure )undling occurs when a firm only offers its products as a bundle tied-in sales!. c. In (i/ed4)undling, the seller offers goods both individually and in bundles. d. .hen offering a mixed bundle, the seller normally charges less for the bundle than if the items were purchased separately. e. 1ome customers will want less than the whole bundle. f. 1tudies have shown that as promotional activity increases on individual items in the bundle, buyers perceive less savings on the bundle and are less apt to pay for the bundle. g. *his research has offered the following three suggested guidelines for correctly implementing a bundling strategy: i! :on+t promote individual products in a package as fre"uently and cheaply as the bundle. *he bundle price should be much lower than the sum of individual products or the consumer will not perceive its attractiveness. ii! Himit promotions to a single item in the mix if you still want to promote individual products. )nother option: alternate promotions, one after another, in order to avoid conflicting promotions. iii!If you decide to offer large rebates on individual products, it must be the absolute exception and done with discretion. <therwise, the consumer uses the price of individual products as an external reference for the bundle that then loses value. Re%ie# 3e* Definitions here: product line pricing, optional4feature pricing, capti%e4product pricing, t#o4part pricing, )*4product pricing, product4)undling pricing, pure )undling pricing, and (i/ed4)undling

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'hapter 69: 1etting Product 1trategy

Co)Bran&in
)! Products are often combined with products from other companies in various ways. #! o4)randing2is also called dual randing or rand undling. !6 Is in which two or more well known existing brands are combined into a -oint product and4or marketed together in some fashion. '! <ne form of co-branding is sa(e4co(pan* co4)randing& :! 1till another form is .oint4%enture co4)randing& B! +ulti4sponsor co4)randing& 6! *he main advantage to co-branding is that a product may be convincingly positioned by virtue of the multiple brands involved. 5! 'o-branding can generate greater sales from the existing target market as well as open additional opportunities with new consumers and channels. 6! 'o-branding can also reduce the cost of product introduction because two wellknown images are combined, accelerating potential adoption. F! *he potential disadvantages of co-branding are: 6! *he risks and lack of control from becoming aligned with another brand in the minds of consumers. 9! 'onsumer expectations about the level of involvement and commitment with cobrands are likely to be high, so unsatisfactory performance could have negative repercussions for the brands involved. $! =isk of overexposure if the other brand has entered into a number of co-branding arrangements. %! It may also result in a lack of focus on existing brands. 3! ) necessary condition for co-branding success is that the two brands separately have brand e"uity2ade"uate brand awareness and a sufficiently positive brand image. I! *he most important re"uirement is that there is a logical fit between the two brands such that the combined brand or marketing activity maximi,es the advantages of the individual brands while minimi,ing the disadvantage. ?! =esearch studies show that consumers are more apt to perceive co-brands favorable if the two brands are complementary rather than similar. K! 'o-branding ventures must be entered into and executed carefully. H! *here must be the right kind of fit in value, capabilities, and goals, in addition to an appropriate balance of brand e"uity. Re%ie# 3e* Definitions here: co4)randing, sa(e4co(pan* co4)randing, .oint4 %enture co4)randing, (ulti4sponsor co4)randing

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'hapter-by-'hapter Instructional (aterial

In re&ient Bran&in
Ingredient )randing is a special case of co4)randing that in%ol%es creating )rand e,uit* for (aterials, co(ponents, or parts that are necessaril* contained #ithin other )randed products& )! )n interesting take on ingredient branding is /self-branding0 in which companies advertise and even trademark their own branded ingredients. #! Ingredient brands attempt to create sufficient awareness and preference for their product such that consumers will not buy a /host0 product that does not contain the ingredient.

PAC*AGING4 LABELING4 5ARRANTIES4 AND GUARANTEES

+ost ph*sical products ha%e to )e pac"aged and la)eled& +an* (ar"eters ha%e called pac"aging a fifth P& +ost (ar"eters, ho#e%er, treat pac"aging and la)eling as an ele(ent of product strateg*&

Packa in
5e define pac"aging as all the acti%ities of designing and producing the container for a product& )! Packages might include up to three levels of material: 6! "rimary package. 9! Secondary package. $! Shipping package. #! .ell-designed packages can create convenience and promotional value. '! .e must include packaging as a styling weapon. :! *he package is the buyer+s first encounter with the product and is capable of turning the buyer on or off. B! Iarious factors have contributed to the growing use of packaging as a marketing tool: 6! 1elf-service. 9! 'onsumer affluence. $! 'ompany and brand image. %! Innovation opportunity. 5! :eveloping an effective package re"uires a number of decisions. 6! 5rom the perspective of both the firm and consumers, packaging must achieve a number of ob-ectives: a. Identify the brand. b. 'onvey descriptive and persuasive information. c. 5acilitate product transportation and protection. 68A

'hapter 69: 1etting Product 1trategy

d. )ssist at-home storage. e. )id product consumption. F! *o achieve the marketing ob-ectives for the brand and satisfy the desires of consumers, the aesthetic and functional components of packing must be chosen correctly. 6! )esthetic considerations relate to a package+s: a. 1i,e and shape. b. (aterial. c. 'olor. d. *ext. e. Fraphics. 9! 5unctionally, structural design is crucial. 3! *he various packaging elements must be harmoni,ed. I! )fter packaging is designed, it must be tested. 6! .ngineering tests are conducted to ensure that the package stands up under normal conditions. 9! /isual tests are used to ensure that the script is legible and the colors harmonious. $! %ealer tests are performed to ensure that dealers find the packages attractive and easy to handle. %! Consumer tests ensure favorable consumer response. Re%ie# 3e* Definition here: pac"aging

La2e!in
)! 1ellers must label products. #! Habels perform several functions: 6! *he label identifies the product or brand. 9! *he label might also grade the product. $! *he label might descri e the product. %! 5inally, the label might promote the product through attractive graphics. '! Habels eventually become outmoded and need freshening up. :! 'ompanies with labels that have become icons need to tread very carefully when initiating a redesign. B! *he 5air Packaging and Habeling )ct of 67AD, sets mandatory labeling re"uirements, and allows federal agencies to set packaging regulations in specific industries. 5! *he 5ood and :rug )dministration 5:)! sets other labeling re"uirements.

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'hapter-by-'hapter Instructional (aterial

F! 'onsumerists have lobbied for additional labeling laws to re"uire: 6! $pen dating. 9! (nit pricing. $! 0rade la eling. %! "ercentage la eling.

5arrantie% an& G#arantee%

5arranties are for(al state(ents of e/pected product perfor(ance )* the (anufacturer& 5arranties, #hether e/pressed or i(plied are legall* enforcea)le& )! (any sellers offer either general guarantees or specific guarantees. #! Fuarantees reduce the buyer+s perceived risk. '! Fuarantees are most effective in two situations: 6! .here the company or the product is not well-known. 9! .here the product+s "uality is superior to the competition.

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