“The aim of marketing is to

know and understand the

customer so well the product
or service fits him and sells
itself.”
– Peter Drucker
 Chapter 6

Setting
Product Strategy
Learning Outcomes
1. What are the characteristics of products, and how do marketers
classify product?
2. How can companies differentiate products?
3. Why is product design important, and what are the different
approaches taken?
4. How can marketers best manage luxury brands?
5. What environmental issues must marketers consider in their
product strategies?
6. How can a company build and manage its product mix and
product lines?
Product Characteristics and Classifications

• Product
– Anything that can be offered to a market to satisfy
a want or need, including physical goods, services,
experiences, events, persons, places, properties,
organizations, information, and ideas
Components of The Market Offering
Product Levels
Product Classifications

(i) Durability

(ii) Tangibility

(iii) Use
(consumer or industrial)
(i), (ii) Durability and Tangibility

Nondurable goods

Durable goods

Services
(iii) Use

(a) Consumer-Goods Classification

Convenience

Shopping

Specialty

Unsought
(b) Industrial-Goods Classification

Materials and parts

Capital items

Supplies and
business services
Product Differentiation
• Form • Reliability
• Features • Reparability
• Performance quality • Style
• Conformance quality • Customization
• Durability

“Most American vodkas seem Russian”.

Stolichnaya, the Russian vodka brand
Services Differentiation

 Ordering ease
 Delivery
 Installation
 Customer training
 Customer consulting
 Maintenance and repair
 Returns
The Product Hierarchy

6. Item

5. Product
type
4. Product
line
3. Product
class
2. Product
family
1. Need
family
Product Line and Mix Decisions
Product Systems and Mixes

• Product system
• Product mix/assortment
– Width
– Length
– Depth
– Consistency
 Honda Product Mix

Product Mix Width

Product Line Length
Product Line Analysis
• Sales and profits
Product Line Analysis

• Market profile and image

Product line length

• Line stretching
– Down-market stretch
– Up-market stretch
– Two-way stretch
• Line filling
• Line modernization
• Line featuring
• Line pruning
Business Standard, Mumbai, 1 October 2019
Product Mix Pricing
• The firm searches for a set of prices that maximizes
profits on the total mix
Optional-
Product line
feature
pricing
pricing

Product- Captive-
bundling product
pricing pricing

By-product Two-part
pricing pricing
Co-Branding
• Two or more well-known brands are combined
into a joint product or marketed together in
some fashion

 Same-company
 Joint-venture
 Multiple-sponsor
 Retail
Business Standard, Mumbai, 24 September 2019
Business Standard, Mumbai, 24 September 2019
 Ingredient branding

• Co-branding that creates brand equity for parts

that are necessarily contained within other
branded products
Business Standard, Mumbai, 24 September 2019
Packaging
Packaging
• All the activities of designing and producing
the container for a product
Used as a marketing tool Packaging objectives
•Self-service •Identify the brand
•Consumer affluence •Convey descriptive and
•Company and brand image persuasive information
•Innovation opportunity •Facilitate product
transportation and
protection
•Assist at-home storage
•Aid product consumption
Labeling, Warranties, and Guarantees
• Labeling
– Identifies, grades, describes, and promotes the
product
• Warranties
– Formal statements of expected product performance
by the manufacturer
• Guarantees
– Promise of general or complete satisfaction
Product life-cycle and Marketing Implications
Product life-cycle marketing strategies
• A company’s positioning and differentiation
strategy must change as its product, market, and
competitors change over the PLC
(i) Introduction Stage
• Pioneering advantages
– Recall of brand name
– Establishes product class attributes
– Captures more uses in middle of market
• Pioneering drawbacks
– Imitators can surpass innovators
– Once leadership is lost, it’s rarely regained
Long-Range Product Market Expansion Strategy
(ii) Growth Stage
• To sustain rapid market share growth now:
– Improve product quality and add new features
– Add new models and flanker products
– Enter new market segments
– Increase distribution coverage and enter new
distribution channels
– Shift from awareness and trial communications to
preference and loyalty communications
– Lower prices to attract the next layer of price-sensitive
buyers
(iii) Maturity Stage

Market modification

Product modification

Marketing program
modification
Market Modification
(iv) Decline Stage

• Eliminating Weak Products

• Harvesting and Divesting
New Product Development
New-Product Options
• Buy other companies
• Buy patents from other companies
• Buy a license or franchise from another company
• New-to-the-world items
• Improvine existing products
New-Product Development Process
(i) Generating Ideas
• Interacting with
employees
• Interacting with
outsiders
• Studying competitors
• Adopting creativity
techniques
Ways to draw new ideas from customers

 Observe customers using product

 Ask customers about product problems
 Ask customers about dream products
 Use customer advisory board
 Use Web sites
 Form brand community of enthusiasts
 Challenge customers to improve product
Adopting creativity techniques

Attribute Forced
listing relationships

Mind Morphological
mapping analysis

Reverse-
New contexts assumption
analysis
Forces Fighting New Ideas
(ii) Using Idea Screening
Using Idea Screening
• The company can monitor and revise its estimate of
the product’s overall probability of success, using the
following formula:
(iii) Concept development

– Figure 15.3(a): product-

positioning map

– Figure 15.3(b): brand-

positioning map
• Concept testing responses

Communicability &
Perceived value
believability

Need level Purchase intention

User targets, purchase

Gap level
occasions & frequency
(iv) Marketing strategy development

1. Target market’s size, structure, & behavior; the

planned brand positioning; the sales, market
share & profit goals in first few years
2. Planned price, distribution strategy, and
marketing budget for the first year
3. Long-run sales & profit goals and marketing-
mix strategy over time
(v) Business analysis

– Estimating total sales

– Figure 15.6: Product Life-

Cycle Sales for Three Types of
Products
• Estimating costs and profits
(vi) Product development

– Physical prototypes

– Customer tests: alpha &

beta testing
(vii) Market testing

– Consumer-goods market
testing

– Business-goods market
testing
Methods of Consumer-Goods Market Testing

Sales-wave research

Simulated test marketing

Controlled test marketing

Test markets
(viii) Commercialization
– Where (Geographic Strategy)
– To Whom (Target-Market Prospects)
– How (Introductory Market Strategy)
– When (Timing)

First entry

Parallel entry

Late entry
The Consumer-Adoption Process
• Adoption
– An individual’s decision to become a regular
user of a product
Stages in the Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption
Factors Influencing the Adoption Process

(i) Readiness to try new products and personal influence

(ii) Organizations’ readiness to adopt innovations
(iii) Characteristics of the innovation

 Relative advantage
 Compatibility
 Complexity
 Divisibility
 Communicability
Diffusion process