Marketing Management

Part :

Product

Chapter-12

Setting Product Strategy

Marketing Management

MARKETING MANAGEMENT
12th edition

12 Setting Product Strategy

Kotler

Marketing Management

Keller

Chapter Questions

What are the characteristics of products and how can they be classified?
How can companies differentiate products? How can a company build and manage its product mix and product lines? How can companies combine products to create strong co-brands or ingredient brands?

How can companies use packaging, labeling, warranties, and guarantees as marketing tools?
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Product

Anything that can be offered to a market to satisfy a want or need.

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Product

A Product is anything that can be offered to a market to satisfy a need or want.

Products include :

Physical Goods, Services, Experiences, Events, Persons, Places, Properties, Organization, Information and Ideas.

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Product Strategy

In formulating the product strategy, the following related product issues are to be covered.
Product Positioning (Already covered in CH-10) Product Levels Product Classification Product Differentiation, Design, Service Differentiation Branding (Already covered in CH-09 & 10) Product Mix Packaging Labelling Product Warranty
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a. b. c. d. e. f. g. h. i.

Product Levels Five Levels

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Product Levels Five Levels

1.

Core Benefit : The benefit which the customer is actually buying. Like a hotel guest is actually buying rest and sleep.
Basic Product : The marketer has to turn the core benefit into a basic product. Like a hotel room includes a bed, bathroom, towels, chairs etc. Expected Product : A set of attributes and conditions buyers normally expect when they purchase this product. Like the hotel guest expects a clean bed, fresh towels, working lamps and a relative degree of quiet. In developing countries such as China, India and Pakistan, normally the competition takes place at this level of product.

2.

3.

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Product Levels Five Levels

4.

Augmented Product : At the fourth level, marketer prepares an augmented product that exceeds customer expectations. Like 5-Star hotel facilities for hotel guests. In developed countries, normally the competition takes place at this level of product.
Potential Product : Which encompasses all the possible augmentations and transformations the product might undergo in the future. Here is where companies search for new ways to satisfy customers and distinguish their offer. For example, P&G has developed Reflect.com, which offers customized beauty products created interactively on the website.
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5.

Product Classifications
1. 2.

Marketers have traditionally classified products on the basis of Characteristics (Durability and Tangibility) Use (Consumer or Industrial)

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Product Classifications
Product Classifications

Durability and Tangibility

Use

Nondurable Goods

Durable Goods

Services

Consumer Goods

Industrial Goods

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Product Classifications 1-On the basis of Durability and Tangibility

a.

Nondurable Goods : These are the tangible goods which are quickly consumed, worn-out or outdated like soap, shampoo, milk etc. Because these goods are consumed quickly and 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 build preference.
Durable Goods : These are the tangible goods which function over an extended period and normally survive many uses and , like refrigerators, machine tools, and clothing. These goods require more personal selling and service, command a higher margin, and require more seller guarantees/warrantees.

b.

c.

Services : These are intangible, inseparable, variable and perishable products, hence they require more quality control, supplier credibility, and adaptability. Examples include haircuts, legal advice, and appliance repairs etc. (Will be discussed in detail in CH-13)
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Product Classifications 2-On the basis of Use

Materials and Parts
Convenience Goods

Industrial Goods Supplies and Business Services Capital Items

Unsought Goods

Consumer Goods

Shopping Goods

Specialty Goods

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Product Classifications 2-On the basis of Use-Consumer Goods

A)

Consumer Goods : Purchased by the end consumers for their personal consumption.
The Consumer Goods are classified as follows. Convenience Goods : A relatively inexpensive, regularly purchased consumer product bought without much thought and with minimum shopping effort. The examples include Staples Goods (goods purchased on regular basis like ketchups, toothpaste etc.), Impulse Goods (goods purchased without any planning or search effort like candies, magazines, soft drink etc.), Emergency Goods (goods purchased when a need is urgent, like candles, umbrellas etc.)
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a.

Product Classifications 2-On the basis of Use-Consumer Goods

b.

Shopping Goods : Goods for which a consumer wants to compare quality, price, and style before making a purchase. The examples include furniture, clothing, appliances etc. Specialty Goods : Goods for which a consumer has a strong brand preference and is wiling to spend a substantial time and effort in locating the desired brand. The examples include cars (like Mercedes), expensive suitings, health foods etc. Unsought Goods : Those goods about which the consumer does not know about or is aware but does not think of buying. The examples include life gravestones, electric cars etc.
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c.

d.

insurance,

cemetery

plots,

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Product Classifications 2-On the basis of Use-Industrial Goods

B)

Industrial or Business or Organizational Goods : Purchased by organizations or business entities for further process, resale or to operate an organization. The Industrial Goods are classified as follows. Materials and Parts : Raw Materials (Farm Products-like cotton, wheat, livestock etc., Natural Products-like lumber, petroleum, iron ore etc.), Manufactured Materials and Parts (Component Materials-like yarn, cement, wires etc., Component Parts-like small motors, tires, castings etc.) Capital Items : Installations (like factory or office buildings), Equipments (like portable factory equipment and tools such as hand tools, lift trucks, or office computers)

a.

b.

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Product Classifications 2-On the basis of Use-Industrial Goods

c.

Supplies and Business Services : Maintenance and Repair Items (like paint, nails etc.), Operating Supplies (like lubricants, diesel, coal, writing papers, pens etc.), Maintenance and Repair Services (like window cleaning, copier/fax/printer repair etc.), Business Advisory Services (legal, management consulting, advertising etc.)

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Product Line and Stock Keeping Unit (SKU)

Product Line : A group of products that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels, or fall within given price ranges. Stock Keeping Unit (SKU) : A distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute. It is also called an Item or Product Variant.
Examples of SKUs : Haleeb, Milk, Tetra Pack, 01 litre; Uniworth, 100% Cotton Dress Shirt, White Color, Size M.

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Product Mix

Product Mix or Product Assortment : It is the set of all products and items a particular seller offers for sale. A Product Mix consists of various product lines.
A companys product mix has a certain width, length, depth, and consistency.

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Product Mix
Product Mix

Product Mix Width

Product Mix Length

Product Mix Depth

Product Mix Consistency

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Product Mix
a.

Product Mix (Width) : The width of a product mix refers to how many different product lines the company carries. The table of next slide shows the product mix-width of 5 lines.
Product Mix (Length) : The length of a product mix refers to the total number of items the company carries within its product lines. In the table of next slide, there are 15 items of 5 lines, so average product length is 3. Product Mix (Depth) : The depth of a product mix refers to how many variants (versions) are offered of each product in the line. For Example, Crest toothpaste comes in 16 varieties.

b.

c.

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Product Mix
d.

Product Mix (Consistency) : The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels or some other way. In the example, P&Gs product lines are consistent as they are consumer goods that go through the same distribution channels. The lines are less consistent as they perform different functions for the consumers.

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Product Mix
Product Mix-Width (For P&G Products)
Detergents Toothpaste Soap Dreft Tide Arial (For P&G Dash Products) Gain
Product MixLength

Diapers

Paper Products Charmin Puffs

Crest Gleem

Zest Pampers Safeguard Luvs Camay Oil of Olay

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Product Line Length

Product Lines tend to lengthen over time. Two ways of lengthening product line are Line Stretching and Line Filling.
Line Stretching : Line Stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line down-market, up-market or both ways.

a.

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Line Stretching

Down-Market Stretch

Up-Market Stretch Two-Way Stretch

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Product Line Length a) Line Stretching

i.

Down-Market Stretch : When a company positioned at the upper end of the market decides to introduce a lower-priced line. Example : DaimlerChrylsler stretched its Mercedes line downward after noticing slow growth in luxury car market and attacks by Japanese auto-makers on its high-end positioning. Up-Market Stretch : When a company positioned at the lower end of the market decides to introduce a higher-priced line. Example : Each of Japanese auto companies introduced an upmarketautomobile (Lexus by Toyota, Infinity by Nissan, Acura by Honda). Two-Way Stretch : When a company positioned in the middle market decides to stretch its line both ways (upward and downward). Example : Marriott did this with its hotel product line. Along-with regular Marriott Hotels, it has added new branded hotels to serve both the upper (Renaissance for top executives) and lower (Fairfield Inns for those who have tight travel Marketing budget) ends of the market.
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ii.

iii.

Product Line Length b) Line Filling

b.

Line Filling : A product can also be lengthened by adding more items within the present range.
There may be several motives for line filling, like for more profits, trying to satisfy dealers who complain about lost sales due to missing items in the line, and trying to plug holes to keep out competitors. Example : Sony filled its Walkman line by adding solarpowered and water-proof Walkmans, ultra-light models for exercises, the CD Walkman etc.

Line Filling should not result in self-cannibalization and customer confusion. The company needs to differentiate each item in the consumers mind.
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Line Filling

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Co-Branding and Ingredient Branding

Co-Branding : Products are often combined with products from other companies in various ways. A rising phenomenon is the emergence of Co-Branding or Dual Branding in which two or more existing brands are combined into a joint product or marketed together.
??????Examples : McDonalds Everyday, Dalda and Olpers. and Warid, Lipton and

A necessary condition for branding success is that the two brands separately have brand equity, i.e. adequate brand awareness and positive brand image; and also a logical fit between the two brands.
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Co-Branding and Ingredient Branding

Ingredient Branding : It 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.
Example : Intels consumer-directed brand campaign convinced many personal computer buyers to buy only computer brands with Intel Inside. As a result, major PC manufacturers-IBM, Dell, Compaq-purchase their chips from Intel at a premium price rather than buying equivalent chips from an unknown supplier. Example : Another example is of DuPont, Lycra brand. The garments with DuPont Lycra are having DuPont Lycra tags on them with assures consumers the usage of DuPont Lycra in the garment.
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Ingredient Branding

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Packaging

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

a. b.

Primary Package (e.g. a Perfume comes in a glass bottle)

Secondary Package (e.g. Perfume glass bottle is put in a cardboard box) Shipping Package (e.g. when cardboard boxes of perfume are packed in a corrugated box)

c.

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Levels of Packaging
Primary Package Secondary Package Shipping Package

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Purposes and Importance of Packaging

a. b. c. d.

To To To To

protect the product on its way to the consumer. provide the protection after the product is purchased. help gain acceptance of the product from middlemen. help persuade consumers to buy the product.

Packaging as a Marketing Tool : Various factors have contributed to the growing use of packaging as a marketing tool; such as
Self-Service Consumer Affluence Company and Brand Image Innovation Opportunity (Tetra Pak)

i. ii.

iii.
iv.

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Aesthetic and Functional Components of Packaging

To achieve the marketing objectives for the brand and satisfy the desires of the consumers, the aesthetic and functional components of packaging must be chosen correctly.
Aesthetics considerations relate to a packages size and shape, material, colour, text, and graphics. Functional considerations relate to packages becoming resealable, temper-proof, more convenient to use etc.

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Package Testing

After packaging is designed, it must be tested. The following tests are normally conducted.
Engineering Tests : These tests are conducted to ensure that the package stands up under normal conditions. Visual Tests : These tests are conducted to ensure that the script is legible and the colours are harmonious. Dealer tests : These tests are conducted to ensure that the dealers find the packages attractive and easy to handle. Consumer Tests : These tests are conducted to ensure the favourable consumer response.

a.

b.

c.

d.

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Labeling

Labelling : A label is the part of a product that carries information about the product and the seller. A label may be part of package, it may be a tag attached to the product.
Types of Labels : There are three kinds of labels: Brand Label : It is simply the brand alone applied to the product or package. Descriptive Label : It gives the objective information about the products use, construction, care, performance and other pertinent features.

a.

b.

c.

Grade Label: : It identifies the products judged quality with a letter, number, or word; like canned fruit are grade-labeled A, B, C, and corn and wheat are grade-labeled as 1 and 2.
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Types of Labels

Types of Labels

Brand Label

Descriptive Label

Grade Label

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Functions of Labeling
i. ii. iii. iv.

Label perform several functions, like

It It It It identifies the product or brand. might grade the product. might describe the product. might promote the product through attractive graphics.

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Labeling Universal Product Code (UPC)

The Universal Product Code (UPC) is a barcode symbology (i.e., a specific type of barcode), that is widely used for tracking of products in stores.
Most consumer packages goods are labelled with an appropriate UPC which appears as an array of black bars readable by optical scanner. The UPC permits the computerization of tasks such as managing inventories and sales volume information etc.

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Warranties and Guarantees

The terms Warranty and Guarantee are interchangeably used. Warranties are the formal statements of expected product performance by the manufacturer. Products under warranty can be returned to the manufacturer or designated repair centres for repair, replacement, or refund. Warrantees, whether expressed (written) or implied (intended but not written), are legally enforceable. Service Guarantees : Customer Service Guarantees are becoming more common as a way to attract and retain the customers; e.g., Pizza Hut guarantees a luncheon pizza in 5 minutes or its free.
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Purposes of Warranties/Guarantees

Warranties/Guarantees reduce the buyers perceived risk.

They suggest that the product is of high quality and that the company and its service performance are dependable. This enables the company to charge a higher price than a competitor who is not offering an equivalent warranty/guarantee. Warranties/Guarantees are most effective in two situations :

a.
b.

If the company or product is not well known. If the products quality is superior to the competition.
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Activity

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