Chapter 12 - SETTING PRODUCT STRATEGY

Products that are marketed include:

Physical goods. Services. Experiences. Events. Persons.
Places. Properties. Organizations. Information. Ideas.
Product Levels

1. Core Product - The service or benefit the consumer receives from the
product
2. Basic Product - What specifically the actual product is
3. Expected Product - A set of buyers normally
expect when they purchase the product
4. Augmented Product -Features that go
and differentiate the product from competitors
Each augmentation adds costs.
Augmented benefits soon become and necessary points-of-parity.
As companies raise the price of their augmented product, some competitors offer a “
version at a much lower price
5. Potential Product - All the possible augmentations and transformations the product or
offering might undergo in the future

Product Classifications
Nondurable goods - Tangible, consumed in
Durable goods - Tangible, normally survives .
Services - Intangible, inseparable, variable, and perishable products.

Consumer Goods
Consumer goods can be classified on the basis of .

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Consumer Goods
1. Convenience Goods - Purchased frequently and with of
comparison
2. Homogeneous Shopping Goods - Similar in quality but different enough on price to
adjust shopping comparisons.
3. Heterogeneous Shopping Goods - Differ in product features and services that may be
more
4. Specialty Goods - Have or brand
identification for which a sufficient number of buyers are willing to make a special
purchasing effort.
5. Good that the consumer does not know about or does not
normally think of buying.

Industrial-Goods Classification
Can be classified in terms of how it and its relative
costliness.
1. Materials and parts. - These are goods enter the manufacturer’s product
completed.
2. Raw materials
3. Manufactured materials
4. Capital items - Long-lasting goods that facilitate developing or managing the
finished product.
5. Supplies and business services
6. Short-term goods and services that facilitate developing or managing the finished
product.
7. Maintenance and repair items (including business advisory services such as, legal,
consulting, and advertising).
8. Operating supplies.
9.
Product Differentiation
Form Feature Performance Quality
Conformance QualityDurability Reliability Style

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Product Differentiation - Form:
Size, shape, or physical structure of a product.
Features: - the product’s basic function.
Performance quality: - The level at which the product’s primary characteristics operate.
Conformance quality: - The degree to which all the produced units are

Durability: - A measure of the product’s expected operating life under natural or stressful
conditions
Reliability: - A measure of the that a product will not malfunction
or fail within a specified time period
Style: - Describes the product’s look and feel to the buyer.

Design: The Integrative Force

To the company, a well-designed product is one that is

, a well-designed product is one that is

pleasant to look at and easy to open, install, use, repair, and dispose of.

Services Differentiation
Ordering Ease Delivery Installation Customer Training Maintenance & Repair

Product Hierarchy
Need family - The that underlies the existence of the product (security)

Product family - All the that can satisfy the core need (alarms,
savings account, health insurance, etc.)

- A group of product within the product family recognized as having a

level of functional coherence (Stolen Car Locator, Immobilizing Devices, Car Alarm)

Product line - that

are closely related because they perform a similar function, or are sold to the same customer
group. (Immobilizing Devices)

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Product type - A group of products within the product line that share one of several possible
forms (Steering wheel locks)

Item - A within the brand or product line. Also

known as stock keeping unit. (The club, pink)

Product Systems and Mixes

A group of diverse but related items that function in a compatible manner.
Example:I-pod
Headset, I-tunes, Carrying Case, Speakers, Charger, Car FM Transmitter, Arm Band,
Headset Splitter, etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc.,

Product Mix - (also called a product assortment)

The set of a particular seller offers for sale. A
product mix consists of various product lines.

Depth of Mix - Refers to how many different product lines the company carries.
Length of Mix - Refers to the total number of items in the mix.
Width of Mix - Refers to how many variants are offered of each product in the line.
Consistency of Mix - Refers to how closely related the various product lines are in end use,
production requirements, distribution channels, or some other way

Product-Line Analysis
Product-line managers need to know the of each item
in their line in order to determine which items to build, maintain, harvest, or divest.

Sales & Profit Analysis

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 Every company’s product portfolio contains products with different margins.
A company can classify its products into four types that yield different gross margins,
depending on sales volume and promotion.
Core product
Staples
Specialties
Convenience items
Classification of Products
Core Staples Specialties Convenience
SalesVolume High Low Low High
Margin Low Somewhat Higher High High
Promotion High None High Lower

Market Profile (page 383)

Product-Line Length
Company objectives influence product-line length.
1. Create a product line to induce
2. Create a product line that facilitates cross selling.
3. Create a product line that protects against economic ups and downs.
Product lines tend to over time.
A company lengthens its product line in two ways.
1. Line Stretching
2. Line Filling

Line Stretching -Occurs when a company lengthens its product line beyond its current
range.
Down-Market Stretch -A company introduces a lower-priced line.

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Moving down-market carries risk.

Up-Market Stretch
Companies may wish to enter the high end of the market for:
More growth.
Higher margins.
Simply to position themselves as a full-line manufacturer.

Two-Way Stretch - Companies serving the middle market might decide to stretch the line
in both directions.

Motives for line filling:

1. Reaching for incremental profits.
2. Trying to satisfy dealers who complain about lost sales because of missing items
in the line.
3. Trying to utilize excess capacity.
4. Trying to be the leading full-line company.
5. Trying to plug holes to keep out competitors.

Line filling is overdone

Results in and customer confusion.
The proposed item does not meets a market need and is being added simply to satisfy an
internal need.

Product-Mix Pricing
Product-Line Optional – Feature Captive – Product
Two – Part By- Product Product - Bundle
Price Lining
The use of a for all your product offerings
Must establish perceived that justify
Gaps in price must be big enough to justify
Gaps must be to encourage customer to step up to higher priced item

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Captive Product Pricing
Product composed of two element
Reusable – Priced
Consumable - Priced

Two-Part Pricing
Consist of a plus a usage fee
Example: Cell phone
Flat monthly fee for X minutes
Per minute fee for going over your minutes

By-Product Pricing
The production of certain goods often results in by-products.
If the by-products have value to a customer group, they should be priced on their value.

Product-Bundling Pricing
Pure bundling -Occurs when a firm only offers its products as a bundle (tied-in sales).
Mixed-bundling - The seller offers goods both individually and in bundles.
The seller normally charges for the bundle than if the items were
purchased separately.

Co-Branding
well known existing brands are combined into a
joint product and/or marketed together in some fashion.
Forms of co-branding
Same-company co-branding
Joint-venture co-branding
Multi-sponsor co-branding

Packaging
All the activities of designing and producing the container for a product.
Packages might include up to three levels of material:
Primary package

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Secondary package
Shipping package

Various factors have contributed to the growing use of packaging as a marketing tool:
Self-service.
Consumer affluence.
Company and brand image.
Innovation opportunity.

Packaging Objectives
.- Convey descriptive and persuasive information.
Facilitate product transportation and protection.
Attract
Make it easy for to display and to store..
Aid product .

Packaging Aesthetics
Size and shape
Material
Color
Text
Graphics

Brand Name
Reflect a attribute
Easy to pronounce and spell

Easy to into a foreign language

Legally
Can easily be

Labeling

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Labels perform several functions:
The label identifies the product or brand.
The label might also the product.
The label might describe the product.
The label might promote the product through attractive graphics

Labels eventually become outdated

Warranties and Guarantees

Warranties are formal statements of expected product performance by the manufacturer.
Warranties, whether expressed or implied are
Guarantees reduce the buyer’s .
Guarantees are most effective in two situations:
Where the company or the product is .
Where the product’s quality is superior to the competition.

End Chapter 12