Ch. 120

Marketing Management:
An Asian Perspective,
6th Edition
Instructor Supplements
Created by Geoffrey da Silva
Setting Product Strategy
3 © Pearson Education South Asia Pte Ltd 2013. All rights reserved
Learning Issues for Chapter Twelve
1. What are the characteristics of products, and how do marketers classify

products?
2. How can companies differentiate products?
3. Why is product design important and what factors affect a good design?
4. How can a company build and manage its product mix and product lines?
5. How can companies combine products to create strong co-brands or

ingredient brands?
6. How can companies use packaging, labeling, warranties, and guarantees

as marketing tools?
Chapter Outline
• At the heart of a great brand is a great product.
• Product is a key element in the market offering.
• To achieve market leadership, firms must offer products and services of

superior quality that provide unsurpassed customer value.
• Marketing planning begins with formulation of an offering to meet target

customers’ needs or wants.
• The customer will judge the offering by three basic elements: product
features and quality, services mix and quality, and price. See Figure 12.1.
Figure 12.1: Components of the Market Offering
Product Characteristics and Classifications
• Many people think that a product is a tangible offering, but a

product can be more than that.
• A product is anything that can be offered to a market to

satisfy a want or need.
• Products that are marketed include physical goods,

services, experiences, events, persons, places,
properties, organizations, information, and ideas.
Product Levels: The Customer Value Hierarchy
• In planning its market offering, the marketer needs to

address five product levels.
• Each level adds more customer value, and the five constitute
a customer value hierarchy.
• See Figure 12.2.
Figure 12.2: Five Product Levels
• The fundamental level is the core benefit: The service or

benefit the customer is really buying. Marketers must see
themselves as benefit providers.
• At the second level, the marketer has to turn the core benefit
into a basic product.
• At the third level, the marketer prepares an expected

product, a set of attributes and conditions buyers normally
expect when they purchase this product.
• At the fourth level, the marketer prepares an augmented

product that exceeds customer expectations.
• At the fifth level stands the potential product that

encompasses all the possible augmentations and
transformations the product or offering might undergo in the
future.
Core Benefit
What is the core benefit of Web sites such as Alibaba? A place for businesses to source and showcase
their supplies.
Differentiation
• Differentiation arises on the basis of product augmentation.
• Product augmentation also leads the marketer to look at the

total consumption system: the way the user performs the
tasks of getting and using products and related services.
a. First, each augmentation adds costs.
b. Second, augmented benefits soon become expected benefits
and necessary points-of-parity.
c. Third, as companies raise the price of their augmented product,
some competitors offer a “stripped-down” version at a much
lower price.
Augmentation
• Today’s hotel guests expect

cable or satellite television
with a remote control and
high-speed Internet access or
two phone lines.
• This means competitors will

have to search for still other
features and benefits to
differentiate themselves.
Getting “Back-to-Basics”
• Some competitors offer a “stripped-down” version at a much

lower price.
• Thus, alongside the growth of fine hotels like Bangkok’s The

Oriental or Singapore’s Shangri-La, we see the emergence of
budget hotels and lower-cost hotels catering to clients who
simply want the basic product.
• Example: Tune Hotel in Malaysia.
Product Classifications
• Marketers have traditionally classified products on the basis

of characteristics: durability, tangibility, and use.
• Each product type has an appropriate marketing-mix

strategy.
Durability and Tangibility
Products can be classified into three groups, according to

durability and tangibility:
a. Nondurable goods: tangible consumed in one or a few uses.
b. Durable goods: tangible that normally survives many uses. Durable

goods require more personal selling and service, command a
higher margin, and require more seller guarantees.
c. Services: intangible, inseparable, variable, and perishable products

that require more quality control, supplier credibility, and
adaptability.
Product Classification
Book stores such as Kinokuniya

sells books but also offers
services such as sourcing for
books that they do not carry.
Consumer-Goods Classification
The vast array of goods consumers buy can be classified on the

basis of shopping habits.
A. Convenience goods are purchased frequently, immediately,

and with a minimum of effort. These include the following
types of convenience goods:
• Staples
• Impulse goods
• Emergency goods
B. Shopping goods are goods that the consumer, in the

process of selection and purchase, characteristically
compares on such basis as suitability, quality, price, and
style.
• Homogeneous shopping goods are similar in quality but

different enough on price to adjust shopping comparisons.
• Heterogeneous shopping goods differ in product features

and services that may be more important than price.
C. Specialty goods have unique characteristics or brand

identification for which a sufficient number of buyers are
willing to make a special purchasing effort. Specialty goods
do not involve making comparisons; buyers invest time only
to reach dealers carrying the wanted products. Dealers do
not need convenient locations, although they must let
prospective buyers know their locations.
D. Unsought goods are those that the consumer does not

know about or does not normally think of buying. The
classic examples of known but unsought goods are life
insurance and cemetery plots.
Industrial-Goods Classification
We classify industrial goods in terms of their relative cost

and how they enter the production process: materials and
parts, capital items, and supplies and business services.
•Raw materials include:

- Farm products—commodity characteristics.
- Natural products—are in limited supply.
o great bulk
o low unit value
o must be moved from producers to user
• Manufactured materials and parts fall into two

categories:
– Component materials.
– Component parts.
• Capital items are long-lasting goods that facilitate

developing or managing the finished product. They
include:
– Installations.
– Equipment.
• Supplies and business services are short-term goods

and services that facilitate developing or managing the
finished product. There are two kinds of supplies:
– Maintenance and repair items (including business

advisory services such as legal, consulting, and
advertising).
– Operating supplies.
• Business services include maintenance and repair

services and business advisory services are usually
purchased on the basis of the supplier’s reputation
and staff.
Product and Services Differentiation
• To be branded, products must be differentiated.
• Physical products vary in potential for differentiation.
• Here the seller faces an abundance of differentiation

possibilities, including form, features, customization,
performance quality, conformance quality, durability,
reliability, repairability, and style.
Product Differentiation: Form
• Many products can be differentiated in form—the size, shape, or

physical structure of a product.
• Consider the many possible forms taken by products such as

aspirin. Although aspirin is essentially a commodity, it can be
differentiated by dosage, size, shape, color, coating, or action time.
Product Differentiation: Features
• Most products can be offered with varying features that supplement

its basic function.
• A company can identify and select appropriate features by

surveying buyers and then calculating customer value versus
company cost for each feature.
• To avoid “feature fatigue,” the company must prioritize features and

tell consumers how to use and benefit from them.
• Each company must decide whether to offer feature customization

at a higher cost or a few standard packages at a lower cost.
Differentiation through Features
Nissan developed this electric

car with special features such
as sideways driving for easier
parking to appeal to
environmentally-conscious
urban Japanese women who
find city driving stressful.
Product Differentiation: Customization
• Marketers can differentiate products by making them

customized to an individual.
• Mass customization is the ability of a company to meet each

customer’s requirements.
• To prepare on a mass basis individually designed products,

services, programs, and communications.
Product Differentiation: Performance Quality
• Most products are established at one of four performance levels: low,

average, high, or superior.
• Performance quality is the level at which the product’s primary

characteristics operate.
• The manufacturer must design a performance level appropriate to the

target market and competitors’ performance levels.
• A company must manage performance quality through time.
• Quality is becoming an increasingly important parameter for differentiation

as companies adopt a value model and provide higher quality for less
money.
Performance Quality
When Mercedes-Benz’s quality

ratings took a dive, the
automaker instituted a number
of significant changes to bring
them back up.
Product Differentiation: Conformance Quality
Buyers expect products to have a high conformance quality—

the degree to which all the product units are identical and meet
the promised specifications.
Product Differentiation: Durability
• A measure of the product’s expected operating life under natural or

stressful conditions.
• Durability is a valued attribute for certain products.
• Buyers will generally pay more for products that have a reputation
for being long lasting.
• The extra price for durability must not be excessive.
• Further, the product must not be subject to rapid technological

obsolescence, as is the case with personal computers and mobile
phones.
Product Differentiation: Reliability
• Buyers normally will pay a premium for more reliable

products.
• Reliability is a measure of the probability that a product will

not malfunction or fail within a specified time period.
• Panasonic, which manufactures major home appliances, has

an outstanding reputation for creating reliable appliance.
Product Differentiation: Repairability
• Repairability is a measure of the ease of fixing a product when it

malfunctions or fails.
• Ideal repairability would exist if users could fix the product

themselves with little cost in money or time.
• Some products include a diagnostic feature that allows service

people to correct a problem over the telephone or advise the user
how to correct it.
• Many computer hardware and software companies offer technical

support over the phone, by fax or email, or by real-time “chat”
online.
Product Differentiation: Style
• Style describes the product’s look and feel to the buyer.
• Style creates distinctiveness that is hard to copy.
• Aesthetics play a key role in such brands as Apple computers,

Montblanc pens, Samsung mobile phones, and Harley-
Davidson motorcycles.
• Strong style does not always mean high performance. A car

may look sensational but spend a lot of time in the repair
shop.
Style Decisions in Asia
Three aesthetic principles may be useful in guiding style

decisions in Asia:
1.Complexity and decoration—Asians love the display of

multiple forms, shapes, and colors. This feature is most
pronounced in Chinese, Thai, Malay, and Indonesian aesthetics.
2.Balancing various aesthetic elements—Harmony in

aesthetic expression is viewed as a particularly important goal.
Style Decisions in Asia
3. Naturalism—In China, symbols and displays of natural

objects such as mountains, rivers, dragons, and phoenixes
are frequently found in packaging, advertising, and on logos
(e.g., Dragonair and Tiger Beer). In Japan, gardens, trees,
and flowers are objects of aesthetic symbolism.
Complexity of Design
• Asians like complex designs.
• The Beijing Olympics Torch

was designed to be
aesthetically pleasing to the
Chinese.
Services Differentiation
• When the physical product cannot easily be differentiated, the

key to competitive success may lie in adding valued services
and improving quality.
• The main service differentiators are ordering ease, delivery,

installation, customer training, customer consulting, and
maintenance and repair.
A. Ordering Ease: Ordering ease refers to how easy it is for

the customer to place an order with the company.
B. Delivery: Refers to how well the product or service is

brought to the customer.
C. Installation: Refers to the work done to make the product

operational.
D. Customer Training: Refers to the training the customer’s

employees undergo to use the vendor’s equipment properly
and efficiently.
E. Customer consulting: Refers to data, information systems,

and advice services that the seller offers to the buyers.
Customer Training—McDonald’s
• McDonald’s requires its new

franchisees to attend Hamburger
University for two weeks to
learn how to manage the
franchise properly.
• In 2010, it launched a
Hamburger University in China,
its seventh worldwide, to
educate local talent before
promoting them to management
level.
F. Maintenance and Repair: Describes the service program

for helping customers keep purchased products in good
working order.
G. Returns: An unavoidable reality of doing business. Two

kinds to consider:
– Controllable returns
– Uncontrollable returns
– Note: One basic returns strategy is to eliminate the root causes
of controllable returns while developing processes for handling
uncontrollable product returns. The goal is to have fewer
products returned.
Design
• As competition intensifies, design offers a potent way to

differentiate and position a company’s products and services.
• Design is the totality of features that affect how a product looks

and functions in terms of customer requirements.
• To the company, a well-designed product is one that is easy to

manufacture and distribute.
• As holistic marketers recognize the emotional power of design

and the importance to consumers of how things look and feel as
well as work, design is exerting a stronger influence in categories
where it once played a smaller role.
Design
• In an increasingly visually oriented culture, transmitting brand meaning

and positioning through design is critical.
• Design can shift consumer perceptions to make brand experiences more

rewarding.
• Design should penetrate all aspects of the marketing program so that

all design aspects work together.
• Given the creative nature of design, it’s no surprise that there isn’t one
widely adopted approach. Some firms employ formal, structured processes.
• Design thinking is a very data-driven approach with three phases:

observation, ideation, and implementation.
Design
To the customer, a well-designed product is one that is pleasant

to look at and easy to open, install, use, repair, and dispose of.
Marketing Insight: Marketing Luxury Brands
Product and Brand Relationships
Each product can be related to other products to ensure that a

firm is offering and marketing the optimal set of products.
The Product Hierarchy
• The product hierarchy stretches from basic needs to

particular items that satisfy those needs.
• We can identify six levels of the product hierarchy.
The Six Levels in a Product Hierarchy
(using insurance as an example)
1. Need family—The core need that underlies the existence of a
product family. For example, security.
2. Product family—All the product classes that can satisfy a

core need with reasonable effectiveness. For example,
savings and income.
3. Product class—A group of products within the product family

recognized as having a certain functional coherence. Also
known as product category. For example, financial
instruments.
4. 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. A product line may be composed of different
brands or a single family brand or individual brand that has
been line extended. For example, life insurance.
5. Product type—A group of items within a product line that

share one of several possible forms of the product. For
example, term life.
6. 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. For
example: Prudential renewable term life insurance.
Product Systems and Mixes
• A product system is a group of diverse but related items that

function in a compatible manner.
• A product mix consists of various product lines.
• A company’s product mix has a certain width, length, depth,

and consistency.
Table 12.2: Product-Mix Width and Product-Line
Length for Lion Products
The Product Mix Dimensions
1. The width of a product mix refers to how many different product lines the
company carries.
2. The length of a product mix refers to the total number of items in the
mix.
• We can also talk about the average length of a line. This is obtained by
dividing the total length by the number of lines.
3. The depth of a product mix refers to how many variants are offered of
each product in the line.
4. 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.
Product Mix Strategies
These four product-mix dimensions permit the company to

expand its business in four ways.
1. It can add new product lines, thus widening its product mix.
2. It can lengthen each product line.
3. It can add more product variants to each product and deepen its
product mix.
4. Finally, a company can pursue more product-line consistency.
Product-Line Analysis
• In offering a product line, companies normally develop a

basic platform and modules that can be added to meet
different customer requirements.
• Product-line managers need to know the sales and profits of

each item in their line in order to determine which items to
build, maintain, harvest, or divest.
Sales and Profits
• Every company’s product portfolio contains products with different margins.
• A company can classify its products into four types that yield different
gross margins, depending on sales volume and promotion.
– Core products
– Staples
– Specialties
– Convenience items
• Companies should recognize that items can differ in their potential for
being priced higher or advertised more as ways to increase their sales,
their margins, or both.
Figure 12.3: Product-Item Contributions to a
Product Line’s Total Sales and Profits
Market Profile
• The product-line manager must review how the line is positioned

against competitors’ lines.
• The product map shows which competitors’ items are competing

against company X’s items.
• The map also reveals possible locations for new items.
• Another benefit of product mapping is that it identifies market

segments.
• Product-line analysis provides information for two key decision

areas—product-line length and product-mix pricing.
Figure 12.4: Product Map for a Paper-Product Line
Product-Line Length
• Company objectives influence product-line length.
• One objective is to create a product line to induce upselling.
• A different objective is to create a product line that facilitates cross selling.
• Still another objective is to create a product line that protects against

economic ups and downs.
• Product lines tend to lengthen over time.
• A company lengthens its product line in two ways: by line stretching and
line filling.
Line Stretching
• Every company’s product line covers a certain part of the

total possible range.
• For example, Mercedes-Benz automobiles are located in the

upper price range of the automobile market.
• Line stretching occurs when a company lengthens its product

line beyond its current range.
• The company can stretch its line down-market, up-market, or

both ways.
Down-market Stretch
• Is when a company positioned in the middle market may

want to introduce a lower-priced line for any of three
reasons:
1. Shoppers want value-priced goods
2. Wish to tie up lower-end competitors
3. Find that the middle market is stagnating or declining
Down-market Stretch: Choices
• A company faces a number of choices in deciding to move a

brand down-market:
a. Use the parent name on all offerings
b. Use a sub-brand name
c. Introduce lower-price goods under a different brand name
• Moving down-market carries risk. It can cannibalize its core

brand.
Down-market Stretch Example: Airlines
In addition to its full-service carrier, Singapore Airlines also has a regional carrier in SilkAir and a
medium- and long-haul budget airline in Scoot.
Up-market Stretch
Companies may wish to enter the high end of the market for:
a. More growth
b. Higher margins
c. Simply to position themselves as a full-line manufacturer
Examples of Up-market Stretch
• Many markets have spawned surprising upscale segments:

Starbucks in coffee, Häagen-Dazs in ice cream, and Evian in bottled
water.
• The leading Japanese auto companies have each introduced an

upscale automobile: Toyota’s Lexus, Nissan’s Infiniti, and Honda’s
Acura.
• Note that these companies invented entirely new names rather

than using or including their own names, because consumers may
not have given the brand “permission” to stretch upward at the
time when those different lines where introduced.
Two-way Stretch
• Is where companies serving the middle market might decide

to stretch the line in both directions.
• Research has shown that a high-end model of a low-end

brand is favored over a low-end model of a high-end brand.
Two-way Stretch: Toyota
Toyota adopts a two-way stretching strategy where the Lexus and the Camry serve the upper end,
the Corona and the Corolla the midrange, and the Vios the lower end.
Line Filling
• A product line can also be lengthened by adding more items

within the present range.
• There are several motives for line filling:

– Reaching for incremental profits.
– Trying to satisfy dealers who complain about lost sales because
of missing items in the line.
– Trying to utilize excess capacity.
– Trying to be the leading full-line company.
– Trying to plug holes to keep out competition.
Line Filling: Point of Caution
• Line filling is overdone if it results in self-cannibalization

and customer confusion.
• The company needs to differentiate each item in the

consumer’s mind with a just-noticeable difference.
• The company should also check that the proposed item meets
a market need and is not being added simply to satisfy an
internal need.
Line Modernization, Featuring, and Pruning
• Product lines need to be modernized.
• The issue is whether to overhaul the line piecemeal or all at

once.
• A piecemeal approach allows the company to see how

customers and dealers take to the new style. It is also less
draining on the company’s cash flow, but it allows
competitors to see changes and to start redesigning their own
lines.
• In rapidly changing product markets, modernization is

continuous. Companies plan improvements to encourage
customer migration to higher-valued, higher-priced items.
• A major issue is timing improvements so they do not appear

too early (damaging sales of the current line) or too late
(giving the competition time to establish a strong reputation).
Product Line Modernization–Nike
Nike’s classic Air Force 1

sneaker has been refreshed
time and time again over the
years, as these 25th-
anniversary models show.
• The product-line manager typically selects one or a few items

in the line to feature.
• At other times, managers will feature a high-end item to lend

prestige to the product line.
• Sometimes a company finds one end of its line selling well

and the other end selling poorly.
• The company may try to boost demand for the slower sellers.
• Using sales and cost-analysis, product-line managers must

periodically review the line for deadwood that is depressing profits.
• The weak items can be identified through sales and cost analysis.
• Pruning is also done when the company is short of production

capacity.
• Companies typically shorten their product lines in periods of tight

demand and lengthen their lines in periods of slow demand.
Product Line Pruning
Haier has a wide range of diversified products that may add more to product costs and complexity
than sales. Some line pruning may be needed
Brand Portfolio and Core Brands
• Multi-brand companies all over the world are attempting to

optimize their brand portfolios.
• In many cases, this has led to a greater focus on core brand

growth and to concentrating energy and resources on the
biggest and most established brands.
• Every product in a product line must play a role, as must any

brand in the brand portfolio.
Product-mix Pricing
• Marketers must modify their price-setting logic when the

product is part of a product mix.
• Product-mix pricing is when the firm searches for a set of

prices that maximizes profits on the total mix.
• Pricing is difficult because the various products have demand,

cost interrelationships, and are subject to different degrees of
competition.
Six Situations Involving Product-mix Pricing:
1. Product-line pricing
• Companies normally develop product lines rather than single products
and introduce price steps.
• In many lines of trade, sellers use well-established price points for the
products in its personal line.
• The seller’s task is to establish perceived-quality differences that justify
the price differences.
2. Optional-feature pricing
• Many companies offer optional products, features, and services along
with their main product.
• Pricing is a sticky problem, because companies must decide which items
to include in the standard price and which to offer as options.
3. Captive-product pricing
• Some products require the use of ancillary or captive products.
• There is a danger in pricing the captive product too high in the
aftermarket.
4. Two-part pricing
• Service firms often engage in two-part pricing, consisting of a
fixed fee plus a variable usage fee.
5. By-product pricing
• The production of certain goods often results in by-products. If the by-
products have value to a customer group, they should be priced on their
value.
6. Product-bundling pricing
• Sellers often bundle product and features.
• Pure bundling occurs when a firm only offers its products as a bundle
(tied-in sales).
• In mixed bundling, the seller offers goods both individually and in
bundles.
• When offering a mixed bundle, the seller normally charges less for the
bundle than if the items were purchased separately.
• Some customers will want less than the whole bundle.
Marketing Memo
Co-branding
• Products are often combined with products from other

companies in various ways.
• Co-branding is also called dual branding or brand bundling.
• This is where two or more well-known existing brands are

combined into a joint product and/or marketed together in
some fashion.
Co-branding
• One form of co-branding is same-company co-branding.
• Still another form is joint-venture co-branding.
• Another form of co-branding is called multi-sponsor co-

branding.
• Finally there is retail co-branding where two retail

establishments use the same location to maximize sales.
Advantages of Co-branding
1. The main advantage to co-branding is that a product may be

convincingly positioned by virtue of the multiple brands
involved.
2. Co-branding can generate greater sales from the existing

target market as well as open additional opportunities with
new consumers and channels.
3. Co-branding can also reduce the cost of product introduction

because two well-known images are combined, accelerating
potential adoption.
Disadvantages of Co-branding
1. The risks and lack of control from becoming aligned with

another brand in the minds of consumers.
2. Consumer expectations about the level of involvement and

commitment with co-brands are likely to be high, so
unsatisfactory performance could have negative
repercussions for the brands involved.
3. Risk of overexposure if the other brand has entered into a

number of co-branding arrangements.
4. It may also result in a lack of focus on existing brands.
Requirements for Successful Co-branding
• For co-branding to succeed, the two brands separately must

have brand equity—adequate brand awareness and a
sufficiently positive brand image.
a. The most important requirement is that there is a logical fit

between the two brands to maximize the advantages of each
while minimizing disadvantages.
b. Managers must enter co-branding ventures carefully, looking for

the right fit in values, capabilities, and goals and an appropriate
balance of brand equity.
Requirements for Successful Co-branding
c. Research studies show that consumers are more apt to perceive

co-brands favorably if the two brands are complementary rather
than similar.
d. Co-branding ventures must be entered into and executed

carefully.
Ingredient Branding
1. Ingredient branding is a special case of co-branding. It

creates brand equity for materials, components, or parts
that are necessarily contained within other branded
products.
2. An interesting approach to ingredient branding is “self-

branding” in which companies advertise and even trademark
their own branded ingredients.
3. Ingredient brands attempt to create sufficient awareness and

preference for their product such that consumers will not buy
a “host” product that does not contain the ingredient.
The Requirements for Successful Ingredient
Branding
1. Consumers must believe the ingredient matters to the
performance and success of the end product. Ideally, this
intrinsic value is easily seen or experienced.
2. Consumers must be convinced that not all ingredient brands

are the same and that the ingredient is superior.
The Requirements for Successful Ingredient
Branding
3. A distinctive symbol or logo must clearly signal that the host
product contains the ingredient. Ideally, this symbol or logo
functions like a “seal” and is simple and versatile, credibly
communicating quality and confidence.
4. A coordinated “pull” and “push” program must help

consumers understand the advantages of the branded
ingredient. Channel members must offer full support such as
consumer advertising and promotions and—sometimes in
collaboration with manufacturers—retail merchandising and
promotion programs.
Packaging, Labeling, and Warranties and Guarantees
• Most physical products have to be packaged and labeled.
• Many marketers have called packaging a fifth P.
• Most marketers, however, treat packaging and labeling as an

element of product strategy.
Packaging
• Packaging includes all the activities of designing and

producing the container for a product.
• Packages might include up to three levels of material.
• For example for a perfume, a bottle (primary package) that is

in a cardboard box (secondary package) that is in a
corrugated box (shipping package) containing six dozen
boxes of the perfume bottles.
Impact of Packaging on Consumer Behavior
• The package is the buyer’s first encounter with the product.
• A good package draws the consumer in and encourages

product choice. In effect, they can act as “five-second
commercials” for the product.
• Packaging also affects consumers’ later product experiences

when they go to open the package and use the product at
home.
Example: Packaging for Chinese Herbal Medicines
Health Food Enterprises—Most packaging for herbal medicines in China use traditional designs with
very earthy colors such as brown or yellow. Health Food Enterprises wanted a rich-looking package
that reflected its costly contents.
Factors that have Contributed to the Growing Use of
Packaging as a Marketing Tool
• Self-service—More products are being sold on a self-service
basis.
– In a supermarket which may stock 15,000 items, a typical

shopper passes by some 300 items per minute.
– Given that as much as half of all purchases are made on impulse,

the effective package must perform many of the sales tasks:
attract attention, describe the product’s features, create consumer
confidence, and make a favorable overall impression.
Factors that have Contributed to the Growing Use of
• Consumer affluence—Rising consumer affluence means
consumers are willing to pay a little more for the
convenience, appearance, dependability, and prestige of
better packages.
• Company and brand image—Packages contribute to instant

recognition of the company or brand.
Factors that have Contributed to the Growing Use Of
• Innovation opportunity—Innovative packaging can bring
large benefits to consumers and profits to producers.
Companies are incorporating unique materials and features
such as resealable spouts and openings.
• Protecting intellectual property rights—In some Asian

countries like China, many MNCs and some well-known local
companies want packaging that is difficult to copy. Unusual
package shapes and complicated printing techniques such as
embossing can help deter counterfeiters.
Packaging Objectives
Packaging must achieve a number of objectives:
1. Identify the brand.

2. Convey descriptive and persuasive information.
3. Facilitate product transportation and protection.
4. Assist at-home storage.
5. Aid product consumption.
Table 12.3 summarizes the beliefs of some visual marketing experts about its role.
Balancing Different Objectives in Packaging
• Marketers must balance

competing demands in their
packaging.
• Coca-Cola Japan’s
environmentally friendly
packaging for the drink
ILOHAS appeals to those who
want to leave little carbon
footprint.
Aesthetic Aspects of Packaging
• To achieve the marketing objectives and satisfy consumers’ desires,

the aesthetic and functional components of packaging must be
chosen correctly.
• Aesthetic considerations relate to a package’s size and shape,

material, color, text and graphics.
• Color is a particularly important aspect of packaging and carries

different meanings in different cultures and market segments.
• See Table 12.3 that summarizes the beliefs of some visual

marketing experts about its role.
Functional Aspects of Packaging
• Functionally, structural design is crucial. The packaging elements must

harmonize with each other and with pricing, advertising, and other parts of
the marketing program.
• After packaging is designed, it must be tested.
• Engineering tests are conducted to ensure that the package stands up
under normal conditions.
• Visual tests are used to ensure that the script is legible and the colors
harmonious.
• Dealer tests are performed to ensure that dealers find the packages
attractive and easy to handle.
• Consumer tests ensure favorable consumer response.
Labeling
• The label can be a simple attached tag or an elaborately

designed graphic that is part of the package.
• It might carry a great deal of information, or only the brand

name.
• Even if the seller prefers a simple label, the law may require
more.
Labeling Functions
Labels perform several functions:
1. The label identifies the product or brand
2. The label might also grade the product
3. The label might describe the product
4. Finally, the label might promote the product through

attractive graphics
Refreshing Labels
• Labels eventually need freshening up.
Example, the Two Girls cosmetic brand, popular in Hong Kong

decades ago, was revamped with a fashionable yet nostalgic look
reminiscent of old Shanghai to compete with the likes of Revlon
and Chanel for the attention of young, affluent Chinese females.
• Companies with labels that have become icons need to tread

very carefully when initiating a redesign.
Labeling Laws
• In Asia, instances of imitative packaging exist.
• For example, the popular U.S. cookie brand, Oreo, had a

lookalike made in Indonesia called Rodeo.
• However, packaging and labeling laws, and their

enforcement, vary from country to country in the region.
• As Asian countries develop, they are likely to embrace stricter

labeling standards.
Imitative Packaging
Imitative packaging is rampant

in Asia where proprietary laws
are not enforced.
Labeling Standards and Laws
• As Asian countries develop, they are likely to embrace stricter

labeling standards.
• For example, additional labeling laws may require open

dating (to describe product freshness), unit pricing (to
state the product cost in standard measurement units),
grade labeling (to rate the quality level of certain consumer
goods), and percentage labeling (to show the percentage
of each important ingredient).
Warranties and Guarantees
• All sellers are legally responsible for fulfilling a buyer’s normal

or reasonable expectations.
• Warranties are formal statements of expected product

performance by the manufacturer.
• Warranties, whether expressed or implied are legally

enforceable.
• Extended warranties and service contracts can be extremely

lucrative for manufacturers and retailers.
Warranties and Guarantees
• Many sellers offer either general guarantees or specific

guarantees.
• Guarantees reduce the buyer’s perceived risk.
• Guarantees are most effective in two situations:

i. Where the company or the product is not well-known.
ii. Where the product’s quality is superior to the competition.
Schema for Chapter Twelve
Thank you

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Marketing Management:

1. What are the characteristics of products, and how do marketers classify

2. How can companies differentiate products?

5. How can companies combine products to create strong co-brands or

6. How can companies use packaging, labeling, warranties, and guarantees

• At the heart of a great brand is a great product.

• Product is a key element in the market offering.

• To achieve market leadership, firms must offer products and services of

• Marketing planning begins with formulation of an offering to meet target

• Many people think that a product is a tangible offering, but a

• A product is anything that can be offered to a market to

• Products that are marketed include physical goods,

• In planning its market offering, the marketer needs to

• See Figure 12.2.

• The fundamental level is the core benefit: The service or

• At the third level, the marketer prepares an expected

• At the fourth level, the marketer prepares an augmented

• At the fifth level stands the potential product that

• Differentiation arises on the basis of product augmentation.

• Product augmentation also leads the marketer to look at the

• Today’s hotel guests expect

• This means competitors will

• Some competitors offer a “stripped-down” version at a much

• Thus, alongside the growth of fine hotels like Bangkok’s The

• Example: Tune Hotel in Malaysia.

• Marketers have traditionally classified products on the basis

• Each product type has an appropriate marketing-mix

Products can be classified into three groups, according to

a. Nondurable goods: tangible consumed in one or a few uses.

b. Durable goods: tangible that normally survives many uses. Durable

c. Services: intangible, inseparable, variable, and perishable products

Book stores such as Kinokuniya

The vast array of goods consumers buy can be classified on the

A. Convenience goods are purchased frequently, immediately,

B. Shopping goods are goods that the consumer, in the

• Homogeneous shopping goods are similar in quality but

• Heterogeneous shopping goods differ in product features

C. Specialty goods have unique characteristics or brand

D. Unsought goods are those that the consumer does not

We classify industrial goods in terms of their relative cost

•Raw materials include:

• Manufactured materials and parts fall into two

• Capital items are long-lasting goods that facilitate

• Supplies and business services are short-term goods

– Maintenance and repair items (including business

• Business services include maintenance and repair

• To be branded, products must be differentiated.

• Physical products vary in potential for differentiation.

• Here the seller faces an abundance of differentiation

• Many products can be differentiated in form—the size, shape, or

• Consider the many possible forms taken by products such as

• Most products can be offered with varying features that supplement

• A company can identify and select appropriate features by

• To avoid “feature fatigue,” the company must prioritize features and

• Each company must decide whether to offer feature customization

Nissan developed this electric

• Marketers can differentiate products by making them

• Mass customization is the ability of a company to meet each

• To prepare on a mass basis individually designed products,

• Most products are established at one of four performance levels: low,

• Performance quality is the level at which the product’s primary

• The manufacturer must design a performance level appropriate to the

• A company must manage performance quality through time.

• Quality is becoming an increasingly important parameter for differentiation