Chapter 6: Product Strategy

Prepared by:
Tewodros Wuhib (Assistant Professor)
Department of Management , AAU
Academic Year 2019/20

Prepared by Tewodros Wuhib ( Asst Professor)

 Chapter 6: Product Strategy
6.1 Product Strategy for Export Market
6.1.1 Meaning of a product
6.1.2 Classification of a Product
6.1.3 New Product Planning and Development
6.1.4 Product Mix and Product line
6.1.5 Product Mix strategy
6.2 Product Identification
6.2.1 Branding
6.2.2Labelling
6.2.3 Packaging
6.2.3 Marking

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 Chapter 6: Product Strategy
At the end of this chapter, students will be
able to:
Define the term Product
Explain the classification of products
Describe product line and mix
Explain the product mix strategy
Identify the elements of product
identification

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 Discussion Questions
Define the term product? And briefly discuss its
classification?
There are two strategic options the firm has
while entering in to international marketing (
standardization or customization). Briefly discuss
the situation when to use either of them and their
merits and demerits?

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 Skill Development 1
1. You are running a VCR company in
the U.S.A. You are diversifying your
market to Europe targeting France and
Germany. What would be your product
strategy (Standardization or Customization).
Give your argument for the decision
you have made. Why and why not?

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 Chapter 6: Product Strategy
6.1 Product Strategy
People satisfy their needs and wants with products. A product is anything
that can be offered to satisfy a need or want. A product can consists of as
many as three components:- Physical goods, service(s), and idea(s). To
transform marketing strategy in to marketing programs, marketing
managers must make basic decisions on marketing expenditures,
marketing mix, and marketing allocation..

Marketing mix is one of the key concepts in modern marketing theory.

Marketing mix is the set of marketing tools that the firm uses to pursue its
marketing objectives in the target market. The four-factor classification of
marketing mix namely the ‘4 P’s are:- Product, price, Place & Promotion.

The most basic marketing mix tool is product. The firm’s tangible offer to
the market which includes: the product quality, design, features, branding
and packaging. As a part of product offering, some companies provide
various services, such as leasing, delivery, repair, and training. Such
support services can provide a competitive advantage in the globally
competitive market place.
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 Chapter 6: Product Strategy
6.1.1 Meaning of a product
“A product is anything that can be offered to satisfy a need or want.” A
product consists of as many as three components: Physical good(s)
service(s) and idea (s). Products that are marketed include physical goods
(automobiles, books etc), service (concerts, professional advice), persons
(Mr A, B, C), places (Langano, Sodere), organizations (Health association,
social clubs) (, and ideas (family planning, safe driving) etc.
6.1.2 Classification of a Product
Marketers have traditionally classified products on the basis of varying
products characteristics: durability, tangibility, and use (consumer or
industrial). Each product type has an appropriate marketing mix strategy.
Durability & Tangibility
Products can be classified into three groups, according to their durability,
tangibility and use. Products based up on Durability could be classifies as
Durable and Non-Durable goods

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 Chapter 6: Product Strategy
Non-durable goods
Non-durable goods are tangible goods that normally are consumed in
one or few uses. i.e. soap, beet etc. since these goods are consumed
quickly and purchased frequently, the appropriate strategy is to make
them available in many locations, charge only a small mark up, and
advertise heavily to induce trail and build preference.
Durable goods
Durable goods are tangible goods that normally service many uses. i.e.
refrigerators, machine tools, clothing etc. Durable products normally
require more personal selling and service, command a higher margin, and
require more seller guarantees.
B) Tangibility
Products further more could be classified based upon tangibility. On this
basis we could find: Tangible and Intangible Products

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 Chapter 6: Product Strategy
Intangible Product (Service)
Intangible products (Service) are those products that cannot be touched,
seen, felt etc. Services are intangible, inseparable, variable, and perishable.
So as a result they normally require more quality control, supplier
credibility, and adaptability. e.g. repairs, professional services.
Tangible Products
Tangible products are those products that can be seen, touched, felt etc.
E.g Refrigerator, Car, Stereo
C) Use
Products further could be classified based up on their use. Accordingly
they will be classified as: Consumer Goods and Industrial Goods
i) Consumer -Goods classification
Consumers buy a vast array of goods. These goods can be classified on
the basis of consumer shopping habits. They can be classified as
convenience, shopping, specialty and unsought goods.

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 Chapter 6: Product Strategy
Convenience goods: are goods that the customers usually purchase
frequently, immediately, and with a minimum of efforts, i.e. soaps,
newspapers, etc.
Shopping goods: are goods that the customer, in the process of
selection and purchase, characteristically compares on such bases as
suitability, quality, price, and style. i.e. furniture, clothing, cars & major
appliances etc.
Specialty goods: are goods with unique characteristics and/or brand
identification for which a significant group of buyers is habitually willing to
make a special purchasing effort i.e. specific brands and types of fancy
goods, cars stereo components, photographic equipment etc.
Unsought goods: are goods that the consumer does not know about
or knows about but does not normally think of buying? New products,
such as smoke detectors, food processors, are unsought goods until the
consumer is made aware of them through advertising. The classic
examples of known but unsought goods are life insurance, cemetery
plots, gravestones, & encyclopedias etc.
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 Chapter 6: Product Strategy
ii) Industrial goods classification
Organizations buy a vast array of goods and services. Industrial
goods can be classified in terms of how they enter the production
process and their relative costliness. They are classified as: material
& parts, capital items, and supplies and business services.
Materials and parts
Are goods that enter the manufacturer's product completely?
They fall into two classes: raw materials, and manufactured
materials and parts. Raw materials fall into two major classes:
Farm products - wheat, cotton, livestock, fruits etc, and
Natural products - fish, lumber, crude petroleum etc.
Manufactured materials and parts divided into two categories:
Component materials - Iron, yarn, cement, wires and
 Component parts - small mortars, tires, casting etc.
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 Chapter 6: Product Strategy

Capital Item:
Are long-lasting goods that facilitate developing and/or
managing the finished product? They include installation and
equipment.
Installations consist of building (i.e. factories & offices) and
equipment (i.e. generators, drill presses, computers, elevators).
Installations are major purchases. They are usually brought
directly from the producer, with the typical sale preceded by a
long negotiation period.
Equipment comprises portable factory equipment and tools (hand tools,
life trucks) and office equipment (e.g. personal computers, desks). These
types of equipment do not become part of the finished product.
Supplies and Business Services are short-lasting goods and services that
facilitate developing and/or managing the finished product.
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 Chapter 6: Product Strategy
Supplies are of two kinds: operating supplies (e.g. lubricants, coal,
writing paper, pencils) and maintenance and repair items (paint,
nails, brooms): supplies are the equivalent of convenience goods in
the industrial field; they are usually purchased with a minimum
effort on a straight re-buy basis.
Business services include maintenance and repair services (e.g.
window cleaning, typewriter repair etc.) and Business advisory
service (e.g. legal, management, consulting, and advertising)
maintenance services are often provided by small producers, and
repair services are often available from the manufacturers of the
original equipment. Business advisory services are usually
purchased in new task-buying situations, and the industrial buyer
will choose the supplier on the basis of the supplier's reputation
and people.

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 Chapter 6: Product Strategy
6.1.3 New Product Planning and Development
The steps to be followed in the global new product development
(NPD) process are by-and-large very similar to domestic
marketing situations. Every new product starts with an idea.
Sources for new product ideas are manifold. Companies can tap
into any of the so-called 4 C’s—company, customers, competition
and collaborators (e.g., distribution channels, suppliers)—for
creative new product ideas. Obviously, many successful new
products originally started at the R&D labs.
Other internal sources include salespeople, employees, and market
researchers. Multinational companies often capitalize on their
global know-how by transplanting new product ideas that were
successful in one country to other markets. Guided by a
company's new-product strategy, a new product is best developed
through a series of six stages. Major steps in development process
include
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Wuhib ( Asstfollowings:
Professor)
 Chapter 6: Product Strategy

6.1.3 New Product Planning and Development

1. Generating new product ideas
New product development starts with an idea. A system must be
designed for stimulating new ideas within an organization and then
acknowledging and reviewing them promptly. Customers should
also be encouraged to propose innovations.
2. Screening ideas
Clearly not all new product ideas are winners. Once new product
ideas have been identified, they need to be screened. The goal here
is to weed out ideas with little potential. This filtering process can
take the form of a formal scoring model. One example of a scoring
model is NewProd, which was based on almost two hundred
projects from a hundred companies.
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 Chapter 6: Product Strategy

6.1.3 New Product Planning and Development

3. Business Analysis
A surviving idea is expanded in to a concrete business proposal.
This means management (a) identifies product features (b)
estimates a market demand, competition, and the products
profitability (c) establishes a program to develop the product, and
(d) assigns responsibility for further study of the products
feasibility
4. Prototype Development
If the result of the business analysis is feasible, then a prototype
(or trail model) of the product is developed. In the cases of goods,
a small quantity of the trail model is manufactured to designated
specifications.
5. Market Tests
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Unlike the internal tests conducted during prototype development,
 Chapter 6: Product Strategy
6.1.3 New Product Planning and Development
5. Market Tests
Unlike the internal tests conducted during prototype development,
this test involves actual customers. A new tangible product may be
given to a sample of people for use in their households (in the
case of consumer good) or their organization (a business good).
Following this trail, consumers are asked to evaluate the product.
Consumers use tests are less practical for services due to their
intangible nature.
6. Commercialization
In this stage, full-scale production and marketing programs are
planned and finally, implemented, up to this point in development,
management has virtually complete control over the product.

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 Chapter 6: Product Strategy
6.1.4 Product Mix and Product line
i) Meaning of Product Line
A broad group of products, intended for essentially similar uses
and having similar physical characteristics, constitutes a product
line.
Meaning of Product Mix
The set of all products offered for sale by a company is a called a
product mix. The structure of a product mix has both breadth &
depth. Its breadth is measured by the number of product lines
carried, its depth by the variety of sizes, colors, and models offered
with in each product line.
3.1.5 Product Mix strategy
To be successful in marketing, producers and middlemen need
carefully planned strategies for managing their product mixes.
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 Chapter 6: Product Strategy
The major product mix strategies include: Positioning;
Alteration; Expansion; Contraction
Positioning the Product
Positioning means developing the image that a product
projects in relation to competitive products and to the firm's
other products. Marketing executives can choose from a
variety of positioning strategies. Sometimes they decided to
use more than one for particular products. Several types of
positioning includes :
Positioning in relation to a competitor
Positioning in relation to a product class or attribute
Positioning by price and quality
Positioning in relation to a target market
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 Chapter 6: Product Strategy

Product Mix Expansions

Product mix expansion is accomplished by increasing the depth with in a
particular line and/or the number of lines a firm offers to consumers.
When a company adds a similar item to an existing product line with the
same brand name, is termed as line extension.
Another way to expand the product mix, referred to as mix extension.
Under a mix extension the company is to add a new product line to its
present assortment. The new line may be related or unrelated to current
products. Furthermore, it may carry one of the company's existing brand
names or may be given a entirely new name.
The product strategies of trading up and trading down involve a change in
product positioning and an expansion of the product line; trading up
means adding a higher price product to a line to attract a broader market.
Also the seller intends that the new product's prestige will help the sale
of its existing lower price products; trading down means adding a lower-
price product to a company's product line.
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 Chapter 6: Product Strategy
Alterations of Existing Products
Product alteration is often improving an established product. Product
alteration can be more profitable and less risky than developing a new
one. Redesigning the product itself can sustain its appeal or even initiate
its renaissance. Alternatively, especially for consumer goods, the product
itself is not changed but its packaging is altered.
Product Mix Contractions
Another product strategy, product mix contraction, is carried out either
by eliminating an entire line or by simplifying the assortment with in a
lien. Thinner and/or shorter product lines or mixes can weed out low-
profit and unprofitable products. The intended result of product-mix
contraction is higher profits form fewer products. As firms find that they
have an unmanageable number of products or that various terms or lines
are unprofitable, or both, product-mix pruning is likely.

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 Chapter 6: Product Strategy
6.1.5.1 Global Product Strategies
Companies can pursue three global strategies to penetrate foreign
markets. Some firms simply adopt the same product or
communication policy used in their home market as an extension
of their homegrown product/communication strategies to their
foreign markets. Other companies prefer to adapt their strategy to
the local marketplace.
This strategy of adaptation enables the firm to cater to the needs
and wants of its foreign customers. A third alternative is to adopt
an invention strategy by which products are designed from scratch
for the global market place.
Using the extension/adaptation/invention framework for product
and communications decision leads to five strategic options. Let us
look at each one of these options in greater detail.

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 Chapter 6: Product Strategy

Strategic Option 1: Product And Communication Extension—

Dual Extension
At one extreme, a company might choose to market a standardized
product using a uniform communications strategy. Early entrants in the
global arena often opt for this approach. Also, small companies with few
resources typically prefer this option. For them, the potential payoffs of
customized products and/or advertising campaigns usually do not justify
the incremental costs of adaptation.
Strategic Option 2: Product Extension—Communications
Adaptation
Due to differences in the cultural or competitive environment, the same
product often is used to offer benefits or functions that dramatically
differ from those in the home market. Such gaps between the foreign and
home market drive companies to market the same product using
customized advertising campaigns.

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 Chapter 6: Product Strategy
Strategic Option 3: Product Adaptation— Communications
Extension
Alternatively, firms might adapt their product but market it using a
standardized communications strategy. Local market circumstances often
favor the case of product adaptation. Another reason for product
adaptation could be the company’s expansion strategy.

Strategic Option4: Product And Communications Adaptation—

Dual Adaptation
Differences in both the cultural and physical environment across
countries call for a dual adaptation strategy. Under such circumstances,
adaptation of the company’s product and communication strategy is the
most viable option for international expansion. Slim-Fast adapts both
product and advertising to comply with varying government regulations
for weight-loss products. When Slim-Fast was first launched in Germany,
its ads used a local celebrity. In Great Britain, testimonials for diet aids
were not allowed to feature celebrities.
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Strategic Option 5: Product Invention
 Chapter 6: Product Strategy
Strategic Option 5: Product Invention
Genuinely global marketers try to figure out how to create
products with a global scope rather than just for a single country.
Instead of simply adapting existing products or services to the
local market conditions, their mindset is to zero in on global
market opportunities. The product invention strategy consists of
developing and launching products with a global mindset.
6.1.5.2 Standardization Versus Customization
A recurrent theme in global marketing is whether companies
should aim for a standardized or country-tailored product strategy.
Standardization means offering a uniform product on a regional or
worldwide basis. Minor alternations are usually made to meet local
regulations or market conditions. (for instance, voltage
adjustments for electrical appliances). However, by and large, these
changes only lead to minor cost increases.
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 Chapter 6: Product Strategy
6.1.5.2 Forces that favor a Globalized Product
Strategy Include:
1. Common customer needs. For many product categories,
consumer needs are very similar in different countries. The
functions for which the product is used might be identical.
Likewise, the usage conditions or the benefits sought might be
similar. One example of a product that targets a global segment is
Apple’s iPhone. Since Apple launched iPhone in early 2007, Apple
has sold about 13 million by October 2008.
Apart from offering the features and benefits that competing
smart phones offer, the iPhone’s emotional benefit of ‘‘coolness’’ is
also a major reason for its popularity worldwide, especially among
young audiences. Many product categories also show a gradual but
steady convergence in consumer preferences.

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 Chapter 6: Product Strategy
2. Global Customers. In business-to-business marketing, the
shift toward globalization means that a significant part of the
business of many companies comes from MNCs that are
essentially global customers. Buying and sourcing decisions are
commonly centralized or at the least regionalized. As a result, such
customers typically demand services or products that are
harmonized worldwide.
3. Scale Economies. Cost savings from scale economies in the
manufacturing and distribution of globalized products is inmany
cases the key driver behind standardization moves. Savings are also
often realized because of sourcing efficiencies or lowered R&D
expenditures. These savings can be passed through to the
company’s end customers via lower prices. Scale economies offer
global competitors a tremendous competitive advantage over local
or regional competitors.
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 Chapter 6: Product Strategy
4. Time-to-Market. In scores of industries, being innovative is
not enough to be competitive. Companies must also seek ways to
shorten the time to bring new product projects to the market.
This is especially true for categories with shortening product life
cycles. By centralizing research and consolidating new product
development efforts on fewer projects, companies are often able
to reduce the time-to market cycle.
5. Regional market agreements. The formation of regional
market agreements such as the Single European Market
encourages companies to launch regional (e.g., pan- European)
products or redesign existing products as pan-regional brands. The
legislation leading to the creation of the Single European Market in
January 1993 sought to remove most barriers to trade within the
European Union.

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 Chapter 6: Product Strategy
4. Time-to-Market. In scores of industries, being innovative is
not enough to be competitive. Companies must also seek ways to
shorten the time to bring new product projects to the market.
This is especially true for categories with shortening product life
cycles. By centralizing research and consolidating new product
development efforts on fewer projects, companies are often able
to reduce the time-to market cycle.
5. Regional market agreements. The formation of regional
market agreements such as the Single European Market
encourages companies to launch regional (e.g., pan- European)
products or redesign existing products as pan-regional brands. The
legislation leading to the creation of the Single European Market in
January 1993 sought to remove most barriers to trade within the
European Union.

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 Chapter 6: Product Strategy
6.2 Product Identification
Branding, packaging and labeling are integrated activities. The seller
attempts to identify its product offer through brand. Even after a
product is developed and branded, strategies must still be
developed for other product related aspects of the marketing mix.
One such product feature, and a critical one for some products, is
packaging, which consists of all activities of designing and
producing the container or wrapper. The other may include a label.
A label may be part of the package, or it may be a tag attached to
the product.
6.2.1 Branding
In developing a marketing strategy for individual products, the
seller has to confront the branding decision, branding is a major
issue in product strategy. On the one hand, developing a branded
product requires a great deal of long-term investment spending,
especially from advertising, promotion, and packaging.
Perhaps the most distinctive skill of professional marketers is their
ability to create, maintain, protect, and enhance brands; marketers
say that "Branding is the art and cornerstone of marketing."

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 Chapter 6: Product Strategy
6.2 Product Identification
The American marketing association defines a brand as follows: -
"A Brand is a name, term, sign, symbol, or design, or a combination of them,
intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors".

A brand is essentially a seller's promise to consistently deliver a specific

set of features, benefits, and services to the buyers.
A brand name is the part of brand consisting of words, letters, and/or numbers
that can be vocalized. A trademark is defined as a brand that is given legal
protection.
Therefore, trademark is a legal term meaning the words, names, or
symbols that the law designates as trademarks.

A brand name needs to be carefully managed so that its brand equity

doesn't depreciate. Thus requires maintaining or improving over time
brand awareness, brand perceived quality and functionality, positive brand
associates, and so on.

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 Chapter 6: Product Strategy
6.2 Product Identification
A good name can add greatly to a products' success. However,
finding the best brand name is a difficult task. It begins with a
careful review of the product and its benefits, the target market
and proposed marketing strategies. Desirable qualities for a brand
name includes:-
It should suggest something about the product's benefits &
qualities
It should be easy to pronounce, recognize, and remember. The
brand name should be distinctive
It should be capable of registration and legal protection

Once, chosen, the brand name must be protected. Many times try
to build a brand name that will eventually become identified with
the product category.

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 Chapter 6: Product Strategy
6.2 Product Identification
A) Branding Decisions
To understand the role of trademark in strategic planning, one must understand
what a trademark is from a legal standpoint. In many countries, branding may be
nothing more than the simple process of putting a manufacturer’s name, signature
or picture on a product or its package. The basic purpose of branding is the same
everywhere in the world. In general the functions of a brand are: -
Create identification and brand awareness
 Guarantee a certain level of quality, quantity and satisfaction and
Used as a promotional tool etc.
There are four levels of branding decisions: No brand Vs brand ;Private brand Vs
manufacture’s brand ;Single brand Vs multiple brands and ; Local brands Vs
worldwide brand
1. Branding Vs No Brand
Branding is not a cost free preposition because of the added cost associated with
marking, labeling, packaging and legal procedures. Branding is then probably
undesirable because brand promotion is ineffective in a practical sense and adds
unnecessary expenses to operations costs. On the positive side, branded
products allow flexibility in quality and quantity control, resulting in lower
production costs along with lower marketing and legal costs. Branding makes
pricing possible because of better identification, awareness, promotion,
differentiation, consumer confidence, brand loyalty, and repeats sales.
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 Chapter 6: Product Strategy
6.2 Product Identification
2. Private Brand Vs manufacturer’s Brand
Branding to promote sales and move products require a further branding
decision: whether the manufacturers should use its own brand or a
distributor’s brand on its product. Distributors in the world of
international business include trading companies, importers, and retailers,
among others; their brands are called private brands.
Clearly, the manufacturer has two basic alternatives: 1) its brand or
2) private brand. Its choice depends in part on its bargaining power. If the
distributor is prominent and the manufacturer itself is unknown and
anxious to penetrate a market, then the latter may have to use the
formers brand on the product. But, if the manufacturer has superior
strength, it can afford to put its own brand on the product and can insist
that the distributor accept that brand as part of the product.
3. Single Brand Vs Multiple Brand
When a single brand is marketed by the manufacturer, the brand is
assured of receiving full attention for maximum impact. But a company
may choose to make several brands within a single market based on the
assumption that the market is heterogeneous and, thus, be segmented.

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 Chapter 6: Product Strategy
6.2 Product Identification
Multiple brands are suitable when a company wants to trade
either up or down because both moves have a tendency to hurt
the firm’s main business. If a company has the reputation of quality,
trading down without creating a new brand will hurt the prestige
of the existing brand. By the same rationale, if a company is known
for its low. Priced, mass produced products, trading up without
creating a new brand is hampered by the image of the existing
products.
4. Local Brands Vs Worldwide Brand
When the manufacture decides to put its own brand name on the
product, the problem does not end there if the manufacture is an
international marketer. The possibility of having to modify
trademark cannot be dismissed. The international marketer must
then consider whether to use just one brand name worldwide or
different brands for different markets or countries.

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 Chapter 6: Product Strategy
6.2 Product Identification
B) Branding Approaches
For many firms the brands they own are their most valuable assets. A
brand can be defined as ‘‘a name, term, sign, symbol, or combination of
them which is intended to identify the goods and services of one seller
or group of sellers and to differentiate them from those of
competitors.’’3 Linked to a brand name is a collection of assets and
liabilities—the brand equity tied to the brand name.
These include brand-name awareness, perceived quality, and any other
associations invoked by the brand name in the customer’s mind. The
concerns that are to be addressed when building up and managing brand
equity in a multinational setting include:
 How do we strike the balance between a global brand that shuns
cultural barriers and one that allows for local requirements?
What aspects of the brand policy can be adapted to global use? Which
ones should remain flexible?
 Which brands are destined to become ‘‘global’’ mega-brands? Which
ones should be kept as ‘‘local’’ brands?

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 Chapter 6: Product Strategy
6.2 Product Identification
How do you condense a multitude of local brands (like in the case of
Sara Lee) into a smaller, more manageable number of global (or regional)
brands?
How do you execute the changeover from a local to a global brand?
 How do you build up a portfolio of global mega-brands?
Suffice it to say, there are no simple answers to these questions. In what
follows, we will touch on the major issues regarding international
branding.

A key strategic issue that appears on international marketers’ agenda is

whether or not there should be a global brand. What conditions favor
launching a product with a single brand name worldwide? The same logo?
And perhaps even the same slogan? When is it more appropriate to keep
brand names local? Between these two extremes are several other
options. For instance, some companies use local brand names but at the
same time put a corporate banner brand name on their products (e.g.,
‘‘Findus by Nestl_e’’).

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 Chapter 6: Product Strategy
6.2 Product Identification
C) Global or Local Branding?
By now you probably realize that there are no simple answers to the
global-versus-local brand dilemma. The brand structure or brand portfolio
of a global marketer is the firm’s current set of brands across countries,
businesses, and product-markets. There are basically four main types of
branding approaches:
Solo branding. Each brand stands on its own, with a product or brand
manager running it (e.g., Unilever, Procter & Gambler).
Hallmark branding. The firm tags one brand, usually the corporate one,
to all products and services, and does not use any sub-brands (e.g., most
banks).
Family (umbrella) branding. This is a hierarchy of brands that uses the
corporate brand as an authority symbol and then has a number of sub-
brands under the corporate badge (e.g., Sony PlayStation).
Extension branding. The idea is to start with one product and then
stretch the brand to other categories, as far as possible (e.g., luxury and
fashion industries). A firm’s global brand structure is shaped by three
types of factors: firm-based drivers, product-market drivers, and market
dynamics.
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 Chapter 6: Product Strategy
6.2 Product Identification
D) Branding Strategy
A company has four choices when it comes to brand strategies, which are
explained as follows:-
i) Line extension:
Line extension occur when a company introduces additional items in the
same product category under the same brand name, usually with features,
such as new flavors, forms, colors, added ingredients, package sizes, and so
on.
ii)Brand Extension
A company may decide to use an existing brand name to launch a
product in a new category. Brand extension strategy offers a number of
advantages. A well-regarded brand name gives the new product instant
recognition and earlier acceptance. It enables the company to enter new
product categories more easily. For example, Sony puts its name on most
of its electronic products and instantly establishes a connection of the
new products high quality.

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 Chapter 6: Product Strategy
6.2 Product Identification
iii) Multi brands
A company will often introduce additional brands in the same product
category. There are various motives for doing this. Sometimes the
company is trying to establish different features and/or appeal to different
buying motives. A multi branding strategy also enables the company to
lock up more distributors’ shelf space and to protect its major brand by
setting up flanker brands. For example, Seiko establishes different brand
names for its higher priced (Seiko LaSalle) and lower-priced watch
(pulsar) to protect its inferior quality.
iv) New brand
When a company launches products in a new category, it may find that
none of its current brand names are appropriate. In such instances,
company has no choices other than pursuing a new brand.
v) Co-brands
A rising phenomenon is the appearance of co-branding (also called dual
branding), is which two or more well-known brands are combined in an
offer. Each brand sponsor expects that the other brand name will
strengthen brand preference or purchase intention. In the case of co-
packaged products, each brand hopes it might be reaching a new audience
by associating with the other brand.
Prepared by Tewodros Wuhib ( Asst Professor)
 Chapter 6: Product Strategy
6.2 Product Identification
6.2.2Labelling
Labeling which is closely related to packaging is another product feature that
requires managerial attention. A label is a part of a product that carries
information about the product and the seller. A label may be part of the package,
or it may be a tag attached to the product. Obviously there is a close relationship
among labeling, packaging, and branding. Labels fall into three primary kinds:-
i) A brand label:-It is simply the brand name applied to the product or package.
ii)A descriptive label :- It gives objectives information about the products' use
construction, care, performance, and/or other pertinent features ingredients and
nutritional contents.
iii) A grade label: - It identifies the products judged quality with a letter, number,
or word. Canned peaches are grade labeled A, B, C, corn and wheat are grade
labeled 1 & 2.
Brand labeling is an acceptable form of labeling, but it does not supply sufficient
information to a buyer. Descriptive labels provide more product information but
not necessarily all that is needed or desired by a consumer in making a purchase
decision. Labeling performs several functions. Some of which are illustrated
below:-
The label identifies the product or brand
The label might also describe several things about the product, which made it,
where it was made, when it was made, its contents, how it is to be used, and how
to use it safely; the label might promote the product through attractive graphics
Prepared by Tewodros Wuhib ( Asst Professor)
 Chapter 6: Product Strategy
3.2 Product Identification
6.2.3 Packaging
Even after a product is developed and branded, strategies must
still be developed for other product related aspects of the
marketing mix. One such product feature, and a critical one for
some products, is packaging, which consists of all activities of
designing and producing the container or wrapper. Thus packaging
is a business function and a package is an item. Packaging can be
defined as follows:-
"Packaging includes the activities of designing and producing
the container or wrapper for a product."
The container or wrapper is called the package. Well-designed
packages can create convenience value for the consumer and
promotional value for the producer. Packaging and the resulting
package are intended to serve several vital purposes. Some of
these include the following:

Prepared by Tewodros Wuhib ( Asst Professor)

 Chapter 6: Product Strategy
6.2 Product Identification
i) Protect the product on its way to the consumer : A package
protects products during shipment. Furthermore, it can prevent
tampering with products, notably medications and food products, in the
warehouse or the retail store.
ii)Provide protection after the product is purchased Compared
with bulk (that is unpackaged) items, packaged goods generally are more
convenient, cleaner, and less susceptible to losses form evaporation,
spilling and spoilage.
iii) Be part of a company's trade marketing program:- A product
must be packaged to meet the needs of wholesaling and retailing
middlemen. For instance, a packages size and shape must be suitable for
displaying and stacking the product in the store.
iv) Be part of a company's consumer marketing program:
Packaging helps identify a product and thus may prevent substitution of
competitive product. At the point of purchase such as supermarket aisle
- the package can serve as a 'silent sales person'. Ultimately, a package
may become a product's differential advantage, or at least a significant
part of it. In the case of convenience goods and operating suppliers
buyers feel that are well-known brand is about as good as another.

Prepared by Tewodros Wuhib ( Asst Professor)

 Chapter 6: Product Strategy
6.2 Product Identification
i) Protect the product on its way to the consumer : A package
protects products during shipment. Furthermore, it can prevent
tampering with products, notably medications and food products, in the
warehouse or the retail store.
ii)Provide protection after the product is purchased Compared
with bulk (that is unpackaged) items, packaged goods generally are more
convenient, cleaner, and less susceptible to losses form evaporation,
spilling and spoilage.
iii) Be part of a company's trade marketing program:- A product
must be packaged to meet the needs of wholesaling and retailing
middlemen. For instance, a packages size and shape must be suitable for
displaying and stacking the product in the store.
iv) Be part of a company's consumer marketing program:
Packaging helps identify a product and thus may prevent substitution of
competitive product. At the point of purchase such as supermarket aisle
- the package can serve as a 'silent sales person'. Ultimately, a package
may become a product's differential advantage, or at least a significant
part of it. In the case of convenience goods and operating suppliers
buyers feel that are well-known brand is about as good as another.

Prepared by Tewodros Wuhib ( Asst Professor)

Chapter 6: Product Strategy
Product Entry Strategy
 Timing of Entry: Waterfall vs. Sprinkler Strategies
Waterfall Strategy: Global phased rollout where new
products trickle down in a cascade-like manner
Introduce the product first in the company’s home
market
The innovation is launched in other advanced markets
In the final phase, market the product in less advanced
countries
 Chapter 6 : Product Strategy
Sprinkler Strategy: Simultaneous worldwide entry
Under this scenario, the global rollout takes place
within a very narrow time frame
 The water fall strategy is preferable if the following are true:
The lifecycle of the product is relatively long
Non favorable conditions in the foreign market, such as:
Small foreign markets compared to the home market
Slow growth
High fixed costs of entry
The foreign market has weak competitive climate:
Very weak local competitors
Competitors willing to cooperate
No competitors
Chapter 6: Product Strategy
 Global NPD and Culture
 Cultural differences heavily influence the NPD process
 Therefore, it is good to identify global linkages b/n the new
product development process & national cultures
 Differences b/n European & North American new product
development programs:
The NPD process among European firms is much more
formalized
European Go/No Go standards tend to be far stricter than
American norms
NPD projects within European firms are more likely to have
a well-defined project leader & an assigned team of players
than projects run by North American companies

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 Chapter 6: Product Strategy 48

 Country-of-Origin (COO) Influences on Consumers

◦ For many products, the “made in” label matters a great deal
to consumers. Key research findings of COO effects:
COO effects are not stable
Consumers prefer domestic products over imports
Both the country of design & the country of
manufacturing/assembly play a role in consumer attraction.
COO particularly influences the elderly, less educated &
politically conservative
Consumer expertise also makes a difference.
Cultural orientation play a role.
Consumers are likely to use the origin of a product as a cue
when they are unfamiliar with the brand name carried by the
product.
COO effects depend on the product category.
Chapter 6: Product Strategy 49
Chapter 6: Product Strategy 50
Chapter 6: Product Strategy 51

Global Marketing of Services

 Challenges in Marketing Services Internationally:
Protectionism
Immediate Face to Face Contacts with Service
Transactions
Difficulties in Measuring Customer Satisfaction Overseas
 Opportunities in the Global Service Industries:
Deregulation of Service Industries
Increasing Demand for Premium Services
Increased Value Consciousness
 Global Service Marketing Strategies:
Capitalize on Cultural Forces in the Host Market
Standardize & Customize
Give Information Technologies (IT) a Central Role
Add Value by Differentiation
Chapter 6: Product Strategy
Product Piracy

Any aspect of the product is vulnerable to piracy, including the

brand name, the logo, the design, and the package

 Product piracy is one of the downsides that marketers with

popular global brand names face

 The World Customs Organization estimated that 7% of

world merchandise trade ($512 billion) in 2004 could have
been bogus (fake) products

 Factors behind the rise of piracy in countries such as China

can be the spread of advanced technology (color copying
machines, know-how stolen from MNCs by local partners) is
one catalyst
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Chapter 6: Product Strategy
Product Piracy
 Strategic Options Against Product Piracy:

Lobbying Activities

Legal Action

Customs

Product Policy Options

Distribution

Communication Options
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Hand Tool Exercises
1) Define the term Product and Explain in brief the
steps involve in developing new product?
2) Explain in brief the branding approaches and
strategy?
3) Define the term packaging and explain in brief the
types of package (consumer and inductrial)?

Prepared by Tewodros Wuhib ( Asst

Professor)
THE END !!!!!!!!!