CH - 5

Chapter Five
PRODUCT STRATEGY
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1
Discussion Points
What a product?
What is branding, brand, brand mark,
brand name, trademark?
What is packaging?
What is labeling ?
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 12-2
Discussion Points
Product is 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 .
Branding is the process of giving a name for a product
A brand is a name, sign, symbol, or design, or a combination of these that identifies

the maker or seller of a product.
Brand mark is a brand that cannot be pronounced or spoken.
Brand name is a brand that can be pronounced or spoken
Trademark is legally registered name of a product.
Packaging involves designing and producing the container or wrapper for a

product. the primary function of the package was to hold and protect the product .
Labeling is a decision on printed information appearing on or within the package.
 We can define a product as anything that can be
offered to a market for attention, acquisition, use,
or consumption that might satisfy a want or need.
OR
 A product is 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.
 They are the consequence of the firm's efforts to
satisfy both consumer and organization goals
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 4
Levels of product
 Product planners need to think about the product

on three levels. Each level adds more customer
value. The most basic level is
 The core product, which addresses the question:
What is the buyer really buying?
 consists of the core, problem-solving benefits that
consumers seek.
 A woman buying lipstick buys more than lip color.
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. -5
Chapter Objectives
 At the second level, actual product. They need to
develop product and service features, design, a
quality level, a brand name, and packaging.
 Finally, product planners must build an
augmented product around the core benefit and
actual product by offering additional consumer
services and benefits.
 E.g. give buyers a warranty, instructions on how
to use the device, and quick repair services
Explain the levels of a product by taking a
product of your choice.
For Example, Warm Coat

 Core Product: need for protection from the cold and the rain.
 Basic Product: all the qualities of the product including fit,

material, rain repellent ability, high-quality fasteners, etc.
 Augmented product: additional factors which sets the
product apart from that of the competition.
 Additional factors such as service, warranty and
good value for money
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Classification of Product
1. Durability
 Durable products are products that can normally be
used for many years. E.g. TV, washing machines,
refrigerator, etc.
 Non-durable products are products which normally be
consumed in one or a few periods. For example, soap,
salt, biscuit, etc.
2. Tangibility
 Goods(Tangible products) are products which can
physically be seen and touched.
 Services( intangibles products) are intangible,
inseparable, variable and perishable products.
The Special Characteristics of Services
Intangibility
Intangibility Perishability
Perishability
Inseparability
Inseparability Heterogeneity
Heterogeneity
3. Use (who uses the product)
i. Consumer products:
 Consumer products are targeted toward individuals and
households for final consumption. Marketers usually
classify these products based on how consumers go about
buying them.
 These include
1. Convenience products,
2. Shopping products,
3. Specialty products, and
4. Unsought products.
Convenience products
 these are products which consumers buy frequently,
immediately, and with a minimum of comparison and buying
effort. E.g. soap, candy, newspapers. Convenience products are
usually low priced and available in many locations
 Consumer products can be further classified in to three
categories.
i. Stable products: consumers purchase on a regular basis. E.g.
Tooth Paste& salt
ii. Impulse products: customers purchase them without any
planning or search effort e.g. newspaper, chewing gum,
Chocolate, etc.
iii. Emergency products: consumers purchase them on urgent
needs. E.g. we buy syrup when infected with cough, Umbrella
Shopping products:
 Shopping products are less frequently purchased
products that consumers compare among brands
carefully on suitability, quality, price and style.
 When buying shopping products, consumers spend
much time and effort in gathering information and
making comparisons. Examples include furniture,
clothing, used cars, major appliances, and hotel and
airline services.
 Shopping products marketers usually distribute their
products through fewer outlets
Specialty products:
 These are consumer products with unique

characteristics or brand identification for which a
significant group of buyers are willing to make a special
purchase effort.
 Examples include specific brands of cars, high-priced
photographic equipment, designer clothes
Unsought products:
 These are products that the consumer either doesn’t
know or knows about but doesn’t normally think of
buying.
 Classic examples of known but unsought products
and services are new innovations, insurance, blood
donations to the Red Cross etc.
 By their very nature, unsought products require a lot
of advertising, personal selling, and other marketing
efforts.
ii. Industrial products
 Industrial products are those products purchased for

further processing or for use in conducting a business.
 The three groups of industrial products and
services include
1. Materials and parts,
2. Capital items, and
3. Supplies and services. are convenience
products of the industrial field because they are
usually purchased with a minimum of effort.
Materials and parts
 Materials and parts: they fall into two classes- raw
materials and manufactured materials and parts.
i. Raw materials consist of farm products (wheat, cotton, etc)
and natural products (fish, lumber, iron ore, crude oil, etc).
ii. Manufactured materials and parts consist of component
materials (yarn, cement, and wire) and component parts
(small motors and tire). Most manufactured materials and
parts are sold directly to industrial users.
Capital items
 Capital items: these are long lasting goods that
facilitate developing or managing the finished
products. They include two groups-installations and
accessory equipments.
i. Installation consists of major purchases such as
buildings and fixed equipments (generator, drill
presses, large computer systems, factories).
ii. Accessory equipments include hand tools, computers,
fax machines, desks. They have short service life
than installations.
Supplies and services
 Supplies and services: these are short lasting
products that facilitate developing and managing the
finished products.
 Supplies are convenience products of the industrial
field because they are usually purchased with a
minimum of effort.
 Supplies include operating supplies (like lubricants,
pen, and paper) and repair and maintenance items
(paint, nails, broom).
 Business services include maintenance and repair
services and business advisory services (legal,
management consulting, advertising, window
cleaning and computer repair).
Product and service decisions
 Marketers make product and service decisions at

three levels:
1. Individual product decisions
2. Product line decisions, and
3. Product mix decisions.
Individual Product and service decisions
The important decisions in the development

and marketing of an individual product are on
1. Product attributes
2. Branding
3. Packaging
4. Labeling and
5. Product support services.
12-
21
1. Product Attributes Developing a product involves
defining the benefits. These benefits are communicated
and delivered by product attributes such as quality,
features, style and design. Decisions about these
attributes are particularly important as they greatly affect
consumer
a) Product quality can be defined as ‘freedom from
defects’. Quality is the characteristic of a product that
bear on its ability to satisfy stated or implied customer
need
b) Product style and design:
 Design is a larger concept than style. Style simply
describes the appearance of a product.
 Style can be eye catching or yarn producing. Design is
more than the skin deep. It goes to the very heart of a
product
.
c. Product Features A product can be offered with
varying features.
 The company can create higher-level models by
adding more features.
2. Branding A brand is a name, sign, symbol, or
design, or a combination of these that identifies
the maker or seller of a product.
3. Packaging
 Packaging involves designing and producing the
container or wrapper for a product. the primary
function of the package was to hold and protect
the product.
4.Labeling is a decision on printed information appearing
on or within the package.
Labels perform several functions:
 Identify the product or brand
 Describe the product- who made it, where it was made,
when it was made, its contents, how it is to be used and
how to use it safely.
 Promote the product through attractive graphics
5. Product Support Services
 Customer service is another element of individual product
strategy which can be minor or major parts of the total
offering.
2. Product Line Decisions
 Beyond decisions about individual products, strategy
also calls for building a product line.
 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 a given price
range. Or a group of related products that a company
sells under a single brand. For example, Nike produces
several lines of athletic shoes
 A company can lengthen its product line in two ways:
by line stretching or line filling. Product line
stretching occurs when a company lengthens its
product line beyond its current range.
 is product line filling, adding more items within the present range of
the line.
3. Product mix decisions
 An organization with several product line has a product mix
(product assortment) consists of all the product lines and items that
a particular seller offers for sale. A company’s product mix has four
important dimensions.
 Product mix width refers to the number of different product lines
the company carries.
 Product line length refers to the total number of items the company
carries within its product lines.
 Product line depth refers to the number of versions offered to each
product in the line.
 Consistency of the product mix refers to how closely related the
various product lines are in end use, production requirements,
channels of distribution or some other ways.
New-Product Development Strategy
Two ways to obtain new products
 Acquisition refers to the buying of a whole

company, a patent, or a license to produce
someone else’s product
 New product development refers to original

products, product improvements, product
modifications, and new brands developed from
the firm’s own research and development. New
product includes all goods and services perceived by
certain groups as new. New products are key to a
company’s continued survival
New-Product Development
Reasons for new product failure
Overestimation of market size
Poor design
Incorrect positioning
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition
New Product Development Process
1. Idea Generation the systematic search for new-product ideas.
 The purpose of idea generation is to create a large number of
ideas.
Sources of new-product ideas
 Internal
 External
 Internal sources refer to the company’s own formal research

and development, management and staff, and entrepreneurial
programs
 External sources refer to sources outside the company such as

customers, competitors, distributors, suppliers, and outside
design firms
2. Screening Idea
The purpose of the succeeding stages is to reduce
number of idea to a manageable few which
deserve further attention.
 screening is to spot good ideas and drop poor ones
as soon as possible.
 In screening ideas, the firm must avoid two types
of errors. Namely, drop errors and go-errors.
 Drop error occurs when the firm dismisses the
good idea.
 Answers should be provided to a number of questions:
 Is there a real consumer need?
 Does the company have the resources and technical competence
to market and manufacture the new product?
 Is the potential market large enough to generate profits that
correspond to the company’s needs?
 If the answer to any of these questions is negative, then no further
work should be undertaken. Or by using
 R-W-W Screening Framework:
 Is it real?
 Can we win?
 Is it worth doing?
3. Concept development and testing
 its elaborated version expressed in meaningful customer
terms is a product concept.
the major consumer benefits and features defining the
new product.
 The new product concept can be verbal or written
description. It may be in the form of a picture, diagram,
model
4. Marketing Strategy Development
 After developing and testing the new product concept, a

new product manager should proceed to develop a
marketing strategy plan for introducing the product into
the market.
5.Business Analysis
 it can evaluate the business attractiveness of
the proposal.
 The business analysis consists of assessing
the new product’s market potential, growth
rate, likely competitive strengths, and
compatibility of the proposed product with
organizational resources
6 Product Development
 the stage of conversion into an actual
product. It is in this stage that an idea gets
the shape of a concrete product associated
with all the necessary attributes
7. Test Marketing
• the stage at which the product and marketing
programs are introduced into more realistic
market setting.
8. Commercialization
In this stage, the firm establishes marketing
strategies, and funds outlays for production and
marketing
Product Life Cycle (PLC) strategies
1. Introduction: starts when the new product is first
launched.
 This stage is characterized by:
• Negative or low profit because of high marketing costs
• Low volume of sales, High costs ,High risks, Few
competitors
• The company and its competitors offer the basic version of
the product
Appropriate marketing mix strategies for
this stage are:
 Penetration pricing
 Awareness creating advertising with heavy
spending
 Use of long channels of distribution
Growth stage
 This stage is characterized by the following features:
 Sales volume grows quickly, growth in profit,
penetration of product into the market.
 Attracted by the opportunities for profit new
competitors will enter the market.
Appropriate marketing mix strategies
 Improving product quality, add new product features
and entering into a new market segments
 Shifting promotion from awareness creating to
persuasive
 Reducing price to attract those buyers who are price
sensitive
Maturity stage
 This stage is characterized by
• Sales continue to rise, but at a slower rate
• The product is bought by the majority
• At early stage, profit reaches its peak-point but starts
declining later on
• Well-established competition exists because many
companies face overcapacity
• Weaker competitors start dropping out and eventually
the industry contains Well-established competitors
• Lasts longer than other stages
• High research and development cost to find better
versions of the product this leads to a drop in profit
Appropriate marketing strategies
 Product modification
-Quality improvement
-Feature improvement
 Package modification
 Market modification by convincing non-users
of the product and by attracting competitors’
customers
 Use reminder advertising
Decline stage
 In this stage sales and profit decline, the

product becomes obsolete, substitute products
may appear, customers’ taste changes.
Appropriate marketing strategies
 Investing further in order to dominate the market
 Maintaining the product if investing is not warranty
 Harvesting (milking) the product, i.e. reducing costs that
are related to the product.
 Dropping out of the business either by selling it or
transferring it.
Product Life Cycle Diagram

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Chapter Five

A brand is a name, sign, symbol, or design, or a combination of these that identifies

Brand mark is a brand that cannot be pronounced or spoken.

Brand name is a brand that can be pronounced or spoken

Trademark is legally registered name of a product.

Packaging involves designing and producing the container or wrapper for a

 Product planners need to think about the product

For Example, Warm Coat

 Basic Product: all the qualities of the product including fit,

 These are consumer products with unique

 Industrial products are those products purchased for

 Marketers make product and service decisions at

The important decisions in the development

Two ways to obtain new products

 Acquisition refers to the buying of a whole

 New product development refers to original

Overestimation of market size

Priced too high

High development costs

 Internal sources refer to the company’s own formal research

 External sources refer to sources outside the company such as

 After developing and testing the new product concept, a

 In this stage sales and profit decline, the

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