Setting Product Strategy 12 Setting Product Strategy Marketing Management, 13th ed

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? Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-2

Chapter Questions (cont.) 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? Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-3

Figure 12.1 Components of the Market Offering Value-based prices Attractiveness of the market offering Product features and quality Services mix and quality Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-4

Figure 12.2 Five Product Levels Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-5

Product Classification Schemes Durability (Long lasting) Tangibility (Touchable) Use (Consumer / Industrial) Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-6

Durability and Tangibility Nondurable Goods (soft drinks & soaps) Durable Goods (refrigerators & clothing) Services (intangible, inseparable, variable & perishable) Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-7

Consumer Goods Classification Shopping Convenience Specialty Unsought Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-8

Convenience Goods Frequently, immediately, minimum effort (soft drinks & soaps) Staples-goods consumer purchase on regular basis like Colgate toothpaste & Lux soap Impulse-without any planning or search like chocolates, candies & batteries Emergency-when a need is urgent umbrellas, sweaters in Muree Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-9

Shopping Goods suitability, quality, price & style furniture, clothing, used cars, appliances Homogeneous shopping goods-similar in quality but different enough in price to justify shopping comparison (tiers, stereo & TV) Heterogeneous shopping goods-differ in product features and services that may be more important than price. Seller caries wide assortment to satisfy individual taste & well trained sales people to guide customers (major appliances, designer furniture, high tech equip.)

Specialty Goods Have unique characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. Examples include cars, photographic equipment. A Mercedes is a specialty good because interested buyer will travel far to buy one. Specialty goods don’t require comparison Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-11

Unsought Goods Those the consumers does not know about or does not normally think of buying, such as smoke detectors. Classic examples are life insurance, encyclopedias and reference books. They require advertising and personal selling support Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-12

Industrial Goods Classification Materials and parts Raw materials & manufactured parts Supplies/ business services Maintenance/repair items & Operating supplies Capital items Building, machinery & tools like fork lifters Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-13

Product Differentiation Product form (Disprin) Features (Cars) Customization (Vitz, Nippon) Performance (BMW) Conformance (does what it says) Durability (Duracell, Nokia) Reliability (Toyota) Repairability (ease of fixing) Style (looks, Jaguar) Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-14

Service Differentiation Ordering ease (Medicine companies provide computers to hospital for ordering purposes) Delivery (Pizza delivery in 30 min. by Dominos) Installation (Washing machines & AC installations) Customer training (X-Ray machines with training) Customer consulting (1-800 numbers for customers) Maintenance and repair (On line help by HP) Returns (How happily you accept the returns) Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-15

The Product Hierarchy Item (efu renewable life ins.) Product type (Term life Ins.) Product line (Life Ins.) Product class (Financial) Product family (Saving) Need family (Security) Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-16

Product Systems and Mixes Product system (Smart phones & PalmOne compatible in all aspects) Product mix (Product assortment) Product assortment (Total # of products offered like Wal-Mart offers 100,000 + items in one store ) Depth (Variants like Colgate) Length (Total # of items like 28 by UL in Table 12.1) Width (How many lines a company caries like UL) Consistency (How closely related the products are?) Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-17

Carrying case, Accessories, Product Line Analysis Core product Laptops Staples Faster CPU or Bigger memory Specialties Digital movie Making equipment Convenience Carrying case, Accessories, Memory cards Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-18

Figure 12.3 Product-Item Contributions to a Product Line’s Total Sales and Profits Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-19

Line Stretching / Line Filling Down-Market Stretch Mercedes C class Up-Market Stretch Toyota Lexus Two-Way Stretch Down Market or Up Market (Omroc-Toyo Nasic-Nova) Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-20

Product-Mix Pricing Product-line pricing (Shirts 800, 1200, 2000) Optional-feature pricing (Xli, Gli, Saloon) Captive-product pricing (Razors, Cameras) Two-part pricing (PTCL Line rent + Features) By-product pricing (Oil by product is soap) Product-bundling pricing (Travel packages, Jahaiz packages) Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-21

Branding Co-Branding: Two or more well known brands are combined into joint product or marketed in some fashion. Like UBL Credit Card & PSO, RBS AirBLue Master Card Integrated Branding: Special case of co-branding. It creates brand equity for material, components or parts. Like IBM, Dell, HP, Compaq all buy chip from Intel Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-22

Factors Contributing to the Emphasis on Packaging Self-service Consumer affluence Company/brand image Innovation opportunity Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-23

Packaging Objectives Identify the brand Convey descriptive and persuasive information Facilitate product transportation and protection Assist at-home storage Aid product consumption Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 12-24