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Setting Product Strategy - 12
Setting Product Strategy - 12
SUMMARY by
Chapter
12
Product Levels
Marketers need to address 5 product levels:
Product:
Anything that can be offered to a market to satisfy a need or want, including physical goods, services, experiences, events, persons, places, properties.
Core Benefit: The benefit a customer really buys. E.g. Hotel guest buys rest and sleep Basic Product: e.g. hotel room includes bed, bathroom, desk, dresser, closet, towel etc Expected product: attributes that buyers normally expect along with their product. Augmented product: attributes that exceed buyer expectations. In developed countries, brand positioning and competition take place at this level, while in developing countries it takes place at expected product level.
Potential product: it encompasses all the augmentations and transformations the product or offering might undergo in the future.
Product classification
Durability and tangibility 1. Nondurable goods: tangible goods that are normally consumed in a day or two. E.g.: soaps, soft drinks. They are purchased frequently, thus should be made available in many locations, charged a small markup, and advertised heavily to induce trial. 2. Durable goods: tangible goods that survive many uses. E.g. Clothes, machines. Require more personal selling, higher margins, more seller guarantees. 3. Services: intangible, variable, perishable products. E.g. Haircuts, repairs. Require more quality control, supplier credibility, adaptability. Consumer goods classification: done on the basis of shopping habits. 4 types1. Convenience goods: purchased frequently, immediately, with minimum effort Staples: purchased on regular basis Impulse goods: purchased w/o planning e.g. Chocolates Emergency goods: purchased when need is urgent e.g. Umbrellas
3. Specialty goods: they have unique characteristics for which consumers can spend mo
4. Unsought goods: those that consumers do not know about or think of buying. E
Industrial goods classification: done on the basis of relative cost and how they enter t
Straddle Positing:
It is a common positioning technique used when a company tries to straddle between two frames of reference. E.g. BMW through a well crafted marketing program straddled Luxury and Performance as both POD and POP.
Raw materials: 2 kinds- Farm products, which are seasonal and require spec
marketing apart from advertising, and Natural products, which are limited in supp
Manufactured materials and parts: 2 kinds- component materials (e.g. Iro tires. These enter the final product w/o change.) products. They includethat personal selling important than advertising. They includeMaintenance and repair items. E.g. Paint, broom. Operating supplies. E.g. Lubricants, writing paper, pencils. products. They includeMaintenance and repair services. E.g. Air conditioner maintenance. Business advisory services. E.g. Management consulting, advertising.
cement. These are usually fabricated further), and component parts (e.g. Moto
2. Capital items: long lasting goods that facilitate developing or managing the finish
3. Supplies: short term goods that facilitate developing or managing finished produc
4. Business services: short term services that facilitate developing or managing finish
Product Differentiation Form: this includes size, shape, physical structure. Features: they supplement the basic function of the product. Company must compare customer value v/s company cost for each potential feature. Customization: requires gathering and using information about consumers. Mass customization is the ability of a company to meet each customers requirements. Performance quality: it is the level at which a products primary characteristics operate. 4 performance levels- low, average, high, and superior. The level must be appropriate to the target segment and not necessarily the best. Conformance quality: the degree to which all produced units is identical and meets the promised specifications. Durability: buyers generally pay more for more durable products. However, the extra price must not be excessive and the product must not be subject to rapid technological obsolescence Reliability: probability that a product will not fail within a specified time period. Reparability: the ease of fixing a product when it malfunctions or fails Style: the products look and feel. Creates distinctiveness that is difficult to copy.
Differentiation
Product Hierarchy
1. Need family: the core need that underlies the existence of a product family. E.g. Security. 2. Product family: product classes that satisfy a core need. E.g. Savings and income 3. Product class: a group of products within a family that have functional coherence 4. Product line: a group of products within a class that perform similar function, are sold to same customers, are marketed through same channels. E.g. Life insurance. 5. Product type: a group of items within a line that share of possible forms of the product. E.g. Term life insurance. 6. Item: a distinct unit within a brand or product line distinguishable by size, price, appearance, etc. ICICI prudential term life insurance.
Product system:
compatible manner.
Product Mix
It is the set of all products and items a particular seller offers for sale. Width: how many product lines the company carries. Length: the total no. of items in the mix. Depth: how many variants are offered of each product in the line? Consistency: how closely related the various product lines are in end use.
Product line
Product line analysis: based on Sales and Profit: a company can classify its products based on the margins. o Core products: basic products that have a high sales volume but with low margins as they are essentially undifferentiated commodities. E.g. Basic computers. o Staples: lower sales volume, higher margins, no promotions. E.g. Faster CPU o Specialties: lower sales volume, highly promoted. E.g. Installation, delivery. o Convenience items: peripherals selling in high volumes, less promotion, high margins. E.g. Software, carry cases. Market Profile: product line managers must review how the line is positioned against competitors lines.
Chapter 12 - Setting Product Strategy Line stretching: occurs when companies try to go beyond their current range
offered. Companies stretch in the following ways Down Market Stretch: introducing lower-priced line than the one being offered. It can be risky as the price may not be less enough for competitors or some customers may shift the cheaper version. Up-Marker Stretch: entering high end of market for better growth, higher margins. Two way Stretch: middle level companies entering both high end and low end markets. Helps in establishing market dominance. E.g. Titan started as mid level watch, and then introduced Sonata for low end and Edge, Xylus for high end. Note: a high end model of a low end brand is preferred over a low end model of a high end brand.
Line filling: lengthening product line by introducing more items in the present range. Line modernization, Featuring and Pruning:
product
lines need to change with the times. Can be done piecemeal or all at once. Piecemeal allows company to gauge the effect of change on consumers, but allows competitors to copy and pose greater challenge. Improvements must not occur too early (as they will affect sales of current product) and too late (as competitors would get more time). The company may choose between featuring their most selling items and promoting their weak items from time to time. Companies also need to optimize their brand portfolio. For this, they need to identify the weak items, and weed them away. E.g. Unilever found only 400 of its 1600 items generated 90% of companys profits.
marketed together in some fashion. It includes same company co-branding (Gillette launched Mach 3 Turbo with its shaving gel), joint venture co-branding (Indian oil and Citibank cobranded credit cards), multiple sponsor co-branding ( Taligent, a one time alliance of Apple, IBM and Motorola) and retail co-branding (2 retail establishments using the same location to optimize space and profits). It allows products to be convincingly positioned and generating greater sales as 2 well known images are combined. However, consumer expectations with the level of involvement are high, so an unsatisfactory performance will be damaging for the partner company as well.
Ingredient Branding:
special case of cobranding. It created brand equity for materials, components, parts that are contained products. Ingredient brands create preference for their products so that a host product which does not have that ingredient.
For co-branding to succeed, both brands must have brand equity, and must fit in terms of values, goals and capabilities.
Labeling: labels identify the product, grade the product, describe the product and
promote the product (through attractive graphics).
expected product performance by the manufacturer. Products under warranties can be Guarantees reduce the buyers perceived risk. They are especially helpful when the company is not well known or when product quality is superior to that of competitors.