Setting Product Strategy

Setting Product Setting Product StrategyStrategy

Learning ObjectivesLearning Objectives

What are the characteristics of products and What are the characteristics of products and how can they be classified?how can they be classified?

How can companies differentiate products?How can companies differentiate products? How can a company build and manage its How can a company build and manage its

product mix and product lines?product mix and product lines? How can companies combine products to How can companies combine products to

create strong co-brands or ingredient brands?create strong co-brands or ingredient brands? How can companies use packaging, labeling, How can companies use packaging, labeling,

warranties, and guarantees as marketing warranties, and guarantees as marketing tools?tools?

Product functionality is the Product functionality is the key to brand success key to brand success

versus versus

Product design is the key to Product design is the key to brand successbrand success

ProductProduct

Anything that can be offered to a market to satisfy a want or need.

Components of the Market Components of the Market OfferingOffering

Product Levels: The Customer Product Levels: The Customer Value HierarchyValue Hierarchy

In planning its market offering, In planning its market offering, marketers needs to address 5 marketers needs to address 5 product levels. Each level adds more product levels. Each level adds more customer value, and the five customer value, and the five constitute a customer value constitute a customer value hierarchy. hierarchy.

Five Product LevelsFive Product Levels

Five Product LevelsFive Product Levels

1. Core Benefit-the fundamental need or want that 1. Core Benefit-the fundamental need or want that consumers satisfy by consuming the product or consumers satisfy by consuming the product or service.service.

2. Generic Product-a version of the product containing 2. Generic Product-a version of the product containing only those attributes or characteristics absolutely only those attributes or characteristics absolutely necessary for it to function.necessary for it to function.

3. Expected Product-the set of attributes or 3. Expected Product-the set of attributes or characteristics that buyers normally expect and agree characteristics that buyers normally expect and agree to when they purchase a product.to when they purchase a product.

4. Augmented Product-inclusion of additional features, 4. Augmented Product-inclusion of additional features, benefits, attributes or related services that serve to benefits, attributes or related services that serve to differentiate the product from its competitors.differentiate the product from its competitors.

5. Potential Product-all the augmentations and 5. Potential Product-all the augmentations and transformations a product might undergo in the future.transformations a product might undergo in the future.

Kotler noted that much competition Kotler noted that much competition takes place at the Augmented takes place at the Augmented Product level rather than at the Core Product level rather than at the Core Benefit level or, as Levitt put it: 'New Benefit level or, as Levitt put it: 'New competition is not between what competition is not between what companies produce in their factories, companies produce in their factories, but between what they add to their but between what they add to their factory output in the form of factory output in the form of packaging, services, advertising, packaging, services, advertising, customer advice, financing, delivery customer advice, financing, delivery arrangements, warehousing, and arrangements, warehousing, and other things that people value.'other things that people value.'

Product Classification Product Classification SchemesSchemes

Durability

Use

Tangibility

Durability and TangibilityDurability and Tangibility

Nondurable

goods

ServicesDurable

goods

Consumer Goods Consumer Goods ClassificationClassification

Convenience

Unsought

Shopping

Specialty

Consumer Goods Consumer Goods ClassificationClassification

convenienceconvenience productsproducts: low price, low risk, : low price, low risk, consumer is not prepared to shop around, consumer is not prepared to shop around, widely available in a variety of retail stores widely available in a variety of retail stores

shoppingshopping productsproducts: consumer will want to : consumer will want to compare quality and price, risk and price are compare quality and price, risk and price are higher, available in selected retail outlets higher, available in selected retail outlets

specialtyspecialty productsproducts: consumer has strong : consumer has strong brand preferences, risk is high, prepared to brand preferences, risk is high, prepared to seek out exclusive retail outlets seek out exclusive retail outlets

Industrial Goods Industrial Goods ClassificationClassification

Materials and parts

Supplies/

business servicesCapital items

Classifying Business Classifying Business ProductsProducts  

raw materialsraw materials: unprocessed, become part of : unprocessed, become part of other manufactured other manufactured productsproducts

manufactured parts and materialsmanufactured parts and materials: : processed processed productsproducts that become part of that become part of other other productsproducts

installationsinstallations: major buildings and equipment : major buildings and equipment accessory equipmentaccessory equipment: used in operations, : used in operations,

include computers, desks, tools include computers, desks, tools operating suppliesoperating supplies: low value, used by most : low value, used by most

firms, convenience firms, convenience productsproducts for businesses for businesses

Product Product DifferentiationDifferentiation

Product formProduct form FeaturesFeatures PerformancePerformance ConformanceConformance DurabilityDurability ReliabilityReliability ReparabilityReparability StyleStyle DesignDesign

Ordering easeOrdering ease DeliveryDelivery InstallationInstallation Customer trainingCustomer training Customer Customer

consultingconsulting MaintenanceMaintenance

Service Service DifferentiationDifferentiation

Design DifferentiationDesign Differentiation

The Product HierarchyThe Product Hierarchy

Need family

Product family

Product class

Product line

Product type

Item

Product Hierarchy Product Hierarchy need - core need need - core need

product family - all products satisfying a core product family - all products satisfying a core needneed

product class - functional coherence within product class - functional coherence within familyfamily

product line - closely related within a classproduct line - closely related within a class

{same customers, {same customers, outlets, prices}outlets, prices}

product type - different forms of same productproduct type - different forms of same product

brand - one manufacturer’s offeringbrand - one manufacturer’s offering

item - one unit within a branditem - one unit within a brand

1.Need family. Information exchange. Communications.

2. Product family. Devices for electronic information exchange. Wireless information devices.

3. Product category (class). GSM devices.

4. Product line. GSM Smartphones.5. Product type. GSM Smartphones with

Symbian OS.6. Brand. Nokia.7. Item. Nokia N70.

Product Systems and Product Systems and MixesMixes

Product system Product system (group of diverse (group of diverse but related items but related items that function in a that function in a compatible compatible manner)manner)

Product mixProduct mix DepthDepth LengthLength WidthWidth ConsistencyConsistency

Product MixProduct Mix

WidthWidthnumber of product linesnumber of product lines

LengthLengthTotal number of items in a mixTotal number of items in a mix

depthdepthnumber of items in a line (how many variants)number of items in a line (how many variants)

consistencyconsistencysimilarity of product lines in terms of production and similarity of product lines in terms of production and

marketingmarketing

Product Mix – Breadth and Product Mix – Breadth and DepthDepth

Product Line AnalysisProduct Line Analysis

Sales and profitSales and profit Market profile- How the line is Market profile- How the line is

positioned against competitors’ lines.positioned against competitors’ lines.- The product map shows which The product map shows which

competitors’competitors’

items are competing against company’s items are competing against company’s items. items.

- It identifies market segments- It identifies market segments

Product-Item Contributions to a Product-Item Contributions to a Product Line’s Total Sales and Product Line’s Total Sales and

ProfitsProfits

Product-line lengthProduct-line length

Line stretchingLine stretching Line fillingLine filling Line modernisation, featuring and Line modernisation, featuring and

pruningpruning

Line StretchingLine Stretching

Down-Market StretchDown-Market Stretch

Up-Market StretchUp-Market Stretch

Two-Way StretchTwo-Way Stretch

Line FillingLine Filling

Product-Mix PricingProduct-Mix Pricing

Product-line pricingProduct-line pricing Optional-feature pricingOptional-feature pricing Captive-product pricingCaptive-product pricing Two-part pricingTwo-part pricing By-product pricingBy-product pricing Product-bundling pricingProduct-bundling pricing

Packaging: The 5th PPackaging: The 5th P

All the activities of designing and producingthe container for a product.

Packaging has been Packaging has been influenced by…influenced by…

Self-serviceSelf-service

Consumer affluenceConsumer affluence

Company/brand imageCompany/brand image

Innovation opportunityInnovation opportunity

Innovations in PackagingInnovations in Packaging

PACKAGING IS THE EXPRESSION PACKAGING IS THE EXPRESSION OF THE SOUL OF EVERY OF THE SOUL OF EVERY PRODUCT.PRODUCT.

Peter Brabeck Nestlé CEOPeter Brabeck Nestlé CEO

What is innovation?

What is innovation

Anything which creates or improve profitable business

Functions of LabelsFunctions of Labels

Identifies

Grades

Describes

Promotes

Warranties and GuaranteesWarranties and Guarantees

Assurance to consumersAssurance to consumers