Product Decisions

Prof. Kaleem Mohammed Khan

Department of Business Administration

Faculty of Management Studies & Research
Aligarh Muslim University, Aligarh

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Chapter Objectives
 Types of Product Decisions
 Product Mix Decisions
 Dimensions of Product Mix
 Product Line Decisions
 Product Line Analysis
 Product Line Length Decisions
 Individual Product and Service Decisions
 Product and Services Attributes
 Branding
 Building Strong Brands

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 Types of Product Decisions
In managing the products the company takes various
decisions at three levels.

Top Level

Product
Mix
Decisions

Middle Product Line

Level Decisions

Individual product or Brand

Lower Level decisions

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 PRODUCT MIX DECISIONS
 Very few companies manufacture a single product or brand. Most of
them offer a large number of products and brands.

 A product mix (or product portfolio) is a set of all the product and
items that a particular seller offers for sale.

 Avon’s product mix consists of four major product lines: cosmetics,

jewelry, fashions, and household items. Each product line may
consists of several sub lines.

 For example, cosmetics breaks down into lipstick, eyeliner, powder,

and so on. Each line and sub line has many individual items.
Altogether, Avon’s product mix includes 1,300 items.

 We will discuss the conceptualization of product mix in the next slide.

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 Conceptualization of Product
Mix
DEPTH

Product
Line 1 1 2 3 4a 4b

Product

WIDTH
Line 2
1 2
# of lines = 4
Product
# of items = 13 1 2 3
Line 3

Product
Line 4 1 2 3 4

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 Dimensions of Product Mix
 A company’s product mix has four important dimensions:
width, length, depth, and consistency.

 Product mix width refers to the number of different product

lines the company carries. For example, P&G markets wide
product mix consisting of many product lines, including food,
household cleaning, cosmetics, and personal care products.

 Product mix length refers to the total number of items the

company carries within its product lines. P&G carries many
brands within each line. For example, it sells 8 laundry
detergents, 6 soaps, 6 shampoos, and 4 detergents.

 Product line depth refers to the number of versions offered of

each product line. Thus, P&G’s Crest toothpaste comes in
three sizes and two formulations (paste and gel).

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 Dimensions of Product Mix

(Cont)
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.

 The company can increase its business in four ways.

1. It can add new product lines, thus widening its product mix. In this
way, its new lines build on company’s reputation in its other lines.

2. The company can lengthen its existing product lines by adding

new products/brands to become a more full-line company.

3. It can add more versions of each product and thus deepen its
product mix.

4. Finally, the company can pursue more product line consistency-or

less-depending on whether it wants to have a strong reputation in
a single field or in several fields.

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 Product-Mix Width and Product-
Line Length for P&G
Product-Mix Width
Disposable Paper
Detergents Toothpaste Bar Soap Diapers Tissue
Ivory Snow Gleem (1952) Ivory Pampers Charmin
(1930) (1879) (1961) (1928)
Crest (1955)
PRODUCT Dreft Kirk’s Luvs Puffs
-LINE (1933) (1885) (1976) (1960)
LENGTH
Tide Lava Banner
(1946) (1893) (1982)

Cheer Camay Summit

(1950) (1926) (1992)

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 PRODUCT LINE DECISIONS
 Product mix consists of various product lines.
 A product line is a group of products that are closely related
because they function in a similar manner, are sold to the same
customer groups, are marketed through the same types of
outlets, or fall within given price ranges.
 For example, Nike produces several lines of athletic shoes,
Sony produces several lines of electronic goods. In developing
product line strategies, marketers face a number of tough
decisions.
 Each product line of a company is managed by a Product Line
Manager. He/she has two important responsibilities.
 1. Periodic Product Line Analysis
 2. Product line length decisions

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 Product Line Analysis
 Sales and Profits analysis

 This requires the periodic evaluation of the sales and profit position
of various items in the product line.

 This is needed because in a product line all items may not give equal
sales and profits.

 Some items give more sales and profits, some average sales and
profits and some give very low sales and profits. Some items may
give less sales but more profits and some more sales and less
profits and even some may not be giving any profits to the company.

 Therefore, this analysis provides a picture of various items within the

product line. Accordingly the manager has to take decision.

 The figure in the next slide shows this.

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 Product-Item Contribution: Sales
and Profits
Product Item: Horizontal Axis
Percentage Contribution to sales and profit:
Vertical Axis

60
S ales
50
40 P ro fits
30
20
10
0
1 2 3 4 5

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Product-Item Contribution: Sales
and
 Profits
A company can classify its products in the line according to
their contribution to sales and profits into four types.
1. Core Products: Those that produce high sales volume and
heavily promoted with low margins.
2. Staples: Items with lower sales volume and no promotion.
These give some what more profits.
3. Specialties: Items with lower sales volume but which may be
highly promoted because they give high profits.
4. Convenience Items: Peripheral items that sell in high volume
but receive less promotions such as in case of computers,
monitors, printers, etc. These items carry high margins.
 The point is that companies should recognize these items
differ in their potential for being priced higher or advertised
more as ways to increase their sales, margins or both.

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 Product Line Length

Decisions
Product line decision involves product line length—the number
of items in the product line. The line is too short if the manager
can increase profits by adding items; the line is too long if the
manager can increase profits by dropping items.
 Reasons of product line length: Product line length is
influenced by company objectives and resources.
 Products lines tend to lengthen over time. The sales force and
distributors may pressure the product company for a more
complete line to satisfy their customers. The company may
want to add items to the product line to create growth in sales
and profits.
 The company, therefore, should systematically increase the
length of its product line in two ways:
 By stretching its line (Line Stretching)
 By filling its line. (Line Filling)

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 Product Line Decisions
Product Line
Product Line Length
Length 

Stretching Filling
Lengthen beyond Lengthen within
current range of current range of
quality & price quality & price

Upward

Downward + Prestige
- May not be credible

Both-way + Appeals to value-oriented

customers
- Erodes image/positioning
Tuesday, December 4, 2012 - Cannibalizes
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 Line Stretching
 When a company lengthens its product line beyond its current
range. The company can stretch its line four ways.

 Down-market /downward stretch: Here, company introduces a

new product/brand/model on the lower end of the market with
lesser features, lower quality, lower price or any other variable.

 Up-market/upward stretch: Here, company may introduce a

new product/brand/model on the higher end of the market with
more features, more quality, higher price or adding any other
new variable.

 Two-way stretch or stretching: Companies serving the middle

market decide to stretch their product line in both directions—
upward and downward.

 Line filling: An existing line may be increased by adding more

items within the present range.

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 Illustration of Line Stretching
Down-market /downward stretch
Up Down
Existing Existing Existing Existing New market
market

Up-market/upward stretch

Up Down
market
New Existing Existing Existing Existing market

Two-way stretch
Up Down
market New Existing Existing Existing Existing New market

Line filling
Up Down
market Existing Existing New Existing Existing market

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 Individual Product Decisions
Following are important decisions in the marketing of individual
products and services.

Product
attributes
Branding

Packaging &
labeling
Product support
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services
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 Product Attributes
Product attributes are the benefits of the product or service.
Developing a product involves defining the benefits that
it will offer such as:

Define
Define inin terms
terms ofof customer
customer
satisfaction
satisfaction
Product
Product quality
quality
-- Ability
Ability of
of product
product toto perform
perform its
its
functions
functions (performance
(performance quality)
quality)
-- Consistency
Consistency (conformance
(conformance
quality)
quality)
Product
Product features
features Can
Can differentiate
differentiate the
the product
product from
from
the
the competition
competition

Style
Style == appearance
appearance
Product
Product style
style Design
Design == performance
performance // function
function
&& design
design (as
(as well
well as
as appearance)
appearance)

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 Branding
 Most distinctive skill of marketers is their ability to create,
maintain, protect, and enhance brands of their products and
services.
 A brand is a name, term, sign, symbol, or design, or a
combination of these, that identifies the maker or seller of a
product or service.
 Consumers view a brand as an important part of a product, and
branding can add value to a product.
 Branding has become so common that today hardly anything
goes unbranded.
 Brand names help consumer identify products that benefit
them.
 Brands also tell the buyer something about product quality.

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Branding Strategy: Building
Strong Brands
 Strong brands are the most valuable assets of a company.

 Before we examine key branding strategies. We will try to

understand the concept of brand equity.

 Brand Equity

 A set of stored values that consumers associated with a brand.

 A brand with strong brand equity is a very valuable asset.

 Powerful brand enjoys a high level of consumer brand loyalty.

 Above all, a powerful brand offers the company some defense

against fierce price competition.

 Analysts see brands as the major asset of a company.

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 Major Brand Strategy
Decisions
Must avoid
For Building Strong Brands
short-term actions that erode
Brand
Brand Positioning
Positioning Decision
Decision
positioning and brand equity Attributes,
Attributes, Benefits,
Benefits, Beliefs
Beliefs &
& Values
Values

Brand Name Decision

Selection, Protection

Too important
to leave to Brand
Brand Sponsorship
Sponsorship Decision
Decision
brand managers Manufacturer’s
Manufacturer’s Brand,
Brand, Private
Private Brand
Brand
 brand equity Licensing,
Licensing, Co-branding
Co-branding
managers
Brand Development Decision
New Brands, Multibrands
Line Extensions, Brand Extensions

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 Brand Positioning
 Companies are required to position their brands clearly in
target market’s minds.

 Brands can be positioned on any of the three levels.

 Brands can be positioned on Product attributes. For example

Hero Honda positioned on fuel consumption. They are least
desirable as others can match easily.

 Brand can be better positioned by associating its name on

desired benefits. For example Hero Honda also says that it
gives fuel economy.

 Brands can be positioned beyond attribute and benefit to

strong beliefs and values. This is strongest way of positioning
a brand. For example, Hero Honda through its ads creates the
confidence of Honda. Splendor ka barosa kahan milega

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 Brand Name Selection
 A good name can add greatly to a product’s success. However,
finding the best brand name is a difficult task.

 Desirable qualities for a brand name include the following:

1. It should suggest about the product’s benefits and qualities.

2. It should be easy to pronounce, recognize, and remember.

Examples: Tide, Aim, puffs.

3. It should be distinctive. Examples: Kodak, Exxon.

4. The name should translate easily into foreign languages.

5. It should be capable of registration and legal protection.

 Once chosen, the brand name must be protected.

 Many firms try to build a brand name that will eventually become
identified with the product category.

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 Brand Sponsor Decisions
 Manufacturers’ brands have long dominate the retail scene.

 In recent times, however, an increasing number of retailers and

wholesalers have created several names.. Wal-Mart offers its
own brands.

 Licensing: Many companies have mastered the art of licensing

their established brands to other company.

 The company who give license is called licensor and the

company who takes the license is called licensee.

 The licensee pays fees or give some part of the profits to the
licensor for a particular period.

 Co-Branding: Co-branding occurs when two established brand

names of different companies are used on the same product.
Intel Inside logo

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Brand Sponsor Decisions

Manufacturer’s Brands

Co-Branding Licensed Brands

Four Options

Private
Brands

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 Brand Development Strategies
(BDS)
A company has four choices when it comes to brand
development strategy.

Brand Product
Name Existing Category New

Brand
Brand Extension
Extension
Line Extension
Existin
g

New
Multibrands
Multibrands New
New Brands
Brands

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BDS: Line Extensions & Brand
Extension.
 Line extensions occur when a company introduces additional
items a same product category under the same brand name,
such as new flavors, forms, colors, ingredients, or package
sizes. The vast majority of new-product activity consists of line
extensions.
 Line extension works best when it takes sales away from
competing brands, not when it “cannibalizes” the company’s
other items.
 Brand Extension: A brand extension involves the use of a
successful brand name to launch new or modified products in
a new category.
 Mattel has extended its incredibly popular and enduring Barbie
Doll brand into new categories ranging from Barbie home
furnishings, Barbie cosmetics, and Barbie electronics to Barbie
books, Barbie sporting goods.
 A brand extension gives a new product instant recognition and
faster acceptance.

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 BDS: Multibrands & New Brands.
 Companies often introduce additional brands in the same
category.
 Thus, P&G markets many different brands in each of its
product categories.
 Multibranding offers a way to establish different features and
appeal to different buying motives. It also allows a company to
lock up more reseller shelf space.
 A major drawback of multibranding is that each brand might
obtain only a small market share, and none may be very
profitable
 New Brands: A company may create a new brand name when it
enters a new product category for which none of the
company’s current brand names are appropriate.
 For example, Japan’s Matsushita uses separate names for its
different families of products: Techniques, Panasonic,
National, and Quassar.

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