CHAPTER 12: SETTING PRODUCT STRATEGY

SETTING PRODUCT STRATEGY

CHAPTER QUESTIONS
 What are the characteristics of products and how do marketers classify products?
 How can companies differentiate products?
 How can a company build and manage its product mix and product lines?
 How can companies combine products to create strong co-brands or ingredient brands?
 How can companies use packaging, labeling, warranties, and guarantees as marketing
tools?

THE MAIN SUB TOPICS COVERED IN THIS CHAPTER

1. PRODUCTS
2. PRODUCT CLASSIFICATION SCHEME
3. DURABILITY AND TANGIBILITY
4. CONSUMER GOODS CLASSIFICATION
5. INDUSTRIAL GOODS CLASSIFICATION
6. PRODUCT DIFFERENTIATION
7. SERVICE DIFFERENTIATION
8. THE PRODUCT HIERARCHY
9. PRODUCT SYSTEMS AND MIXES
10. PRODUCT LINE ANALYSIS
11. LINE STRETCHING
12. PRUNING
13. PRODUCT – MIX PRICING
14. BENEFIT OF FIFTH P
15. PACKAGING OBJECTIVES
16. FACTORS CONTRIBUTING TO THE EMPHASIS ON PACKAGING
17. MARKETING DEBATE

WHAT IS A PRODUCT?
 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.

PRODUCT CLASSIFICATION SCHEMES

 Durability - a measure of the product’s expected operating life under natural or stressful
conditions is a valued attribute for vehicles, kitchen appliances, and other durable goods.
 Tangibility - capable of being touched; discernible by the touch; material or substantial.
 Use – by consumer or industrial
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DURABILITY AND TANGIBILITY

 Nondurable goods - are tangible goods normally consumed in one or a few uses, such as
beer and shampoo.
 Durable goods - are tangible goods that normally survive many uses: refrigerators,
machine tools, and clothing.
 Services - are intangible, inseparable, variable, and perishable products that normally
require more quality control, supplier credibility, and adaptability. Examples include
haircuts, legal advice, and appliance repairs.
CONSUMER GOODS CLASSIFICATION
 Convenience goods – are goods the buyers purchase frequently, immediately with
minimal effort. Consumers buy them in regular basis, e.g. soft drinks, soap and news
papers.
 Shopping goods - are those the consumer characteristically compares on such bases as
suitability, quality, price, and style. Examples include furniture, clothing, and major
appliances.
 Specialty goods - have unique characteristics or brand identification for which enough
buyers are willing to make a special purchasing effort. Examples include cars, audio-
video components, and men’s suits.
 Unsought goods - are those the consumer does not know about or normally think of
buying, such as smoke detectors. Other classic examples are life insurance, cemetery
plots, and gravestones.

INDUSTRIAL GOODS CLASSIFICATION

 Materials and parts - are goods that enter the manufacturer’s product completely. They
fall into two classes: raw materials and manufactured materials and parts.
 Capital items - are long-lasting goods that facilitate developing or managing the finished
product. They fall into two groups: installations and equipment.
 Supplies and business services - are short-term goods and services that facilitate
developing or managing the finished product.

PRODUCT DIFFERENTIATION
1. Product form - the size, shape, or physical structure of a product.
2. Features - Most products can be offered with varying features that supplement their
basic function. A company can identify and select appropriate new features by surveying
recent buyers and then calculating customer value versus company cost for each potential
feature
3. Customization - customized products and marketing allow firms to be highly relevant
and differentiating by finding out exactly what a person wants—and doesn’t want—and
delivering on that.
4. Performance quality - is the level at which the product’s primary characteristics operate.
5. Conformance quality - the degree to which all produced units are identical and meet
promised specifications.
6. Durability - a measure of the product’s expected operating life under natural or stressful
conditions is a valued attribute for vehicles, kitchen appliances, and other durable goods.
 CHAPTER 12: SETTING PRODUCT STRATEGY

7. Reliability - is a measure of the probability that a product will not malfunction or fail
within a specified time period.
8. Reparability - measures the ease of fixing a product when it malfunctions or fails.
9. Style - describes the product’s look and feel to the buyer and creates distinctiveness that
is hard to copy.

SERVICE DIFFERENTIATION
1. Ordering ease -describes how easy it is for the customer to place an order with the
company.
2. Delivery - refers to how well the product or service is brought to the customer, including
speed, accuracy, and care throughout the process.
3. Installation - refers to the work done to make a product operational in its planned
location.
4. Customer training - helps the customer’s employees use the vendor’s equipment
properly and efficiently.
5. Customer consulting - includes data, information systems, and advice services the seller
offers to buyers
6. Maintenance and repair -programs help customers keep purchased products in good
working order
7. Returns - A nuisance to customers, manufacturers, retailers, and distributors alike,
product returns are also an unavoidable reality of doing business, especially in online
purchases.

DESIGN - is the totality of features that affect the way a product looks, feels, and functions to a
consumer.
POWER OF DESIGN
 Important with long-lasting durable goods such as automobiles.
 Can shift consumer perceptions to make brand experiences more rewarding.

APPROACHES TO DESIGN
 “Design is more than just creativity, or a phase in creating a product, service, or
application. It’s a way of thinking that can transform an entire enterprise.”31 Design
should penetrate all aspects of the marketing program so all design aspects work together.
 Design thinking is a very data-driven approach with three phases: observation, ideation,
and implementation.
 Design thinking requires intensive ethnographic studies of consumers, creative
brainstorming sessions, and collaborative teamwork to decide how to bring the design
idea to reality.
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THE PRODUCT HIERARCHY

1. Item - (also called stock-keeping unit or product variant)—A distinct unit within a brand
or product line distinguishable by size, price, appearance, or some other attribute.
Example: Prudential renewable term life
2. Product type - A group of items within a product line that share one of several possible forms
of the product. Example: term life insurance.
3. Product line - A group of products within a product class that are closely related because
they perform a similar function, are sold to the same customer groups, are marketed
through the same outlets or channels, or fall within given price ranges.
4. Product class - A group of products within the product family recognized as having a
certain functional coherence, also known as a product category. Example: financial
instruments
5. Product family - All the product classes that can satisfy a core need with reasonable
effectiveness. Example: savings and income.
6. Need family - the core need that underlies the existence of a product family. Example:
security

PRODUCT SYSTEMS AND MIXES

 Product system - is a group of diverse but related items that function in a compatible
manner. For example, the extensive iPod product system includes headphones and
headsets, cables and docks, armbands, cases, power and car accessories, and speakers
 Product mix - (also called a product assortment) is the set of all products and items a
particular seller offers for sale.
 Product assortment -
 Depth -refers to how many variants are offered of each product in the line
 Length - refers to the total number of items in the mix
 Width- refers to how many different product lines the company carries.
 Consistency- describes how closely related the various product lines are in end use,
production requirements, distribution channels, or some other way.

PRODUCT LINE ANALYSIS

 Core product -
 Staples
 Specialties
 Convenience items

LINE STRETCHING
 Up-Market Stretch
 Down-Market Stretch
 Two-Way Stretch

PRUNING
 Pruning weak brands can strengthen the remaining brands in the line
PRODUCT-MIX PRICING
 Product-line pricing
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 Optional-feature pricing
 Captive-product pricing
 Two-part pricing
 By-product pricing
 Product-bundling pricing
WHAT IS THE FIFTH P?
 Packaging, sometimes called the fifth P, is all the activities of designing and producing
the container for a product.

FACTORS CONTRIBUTING TO THE EMPHASIS ON PACKAGING

 Self-service
 Consumer affluence
 Company/brand image
 Innovation opportunity

PACKAGING OBJECTIVES
 Identify the brand
 Convey descriptive and persuasive information
 Facilitate product transportation and protection
 Assist at-home storage
 Aid product consumption

MARKETING DEBATE
 With products, is it form or function?
Take a position:
1 Product functionality is the key to brand
Success.
Or
2. Product design is the key to brand
Success.
Marketing Discussion