Product Decisions

In making product decisions for a marketing plan, what must we make decisions about? Decisions include those about: Product features Brand name Packaging Related services (delivery, installation, financing, training and support, etc.) Warranty Fit within the firm’s overall product line and marketing strategy What should be the goal of these decisions? Differentiate the product from competitors and substitutes, by delivering to the target market the benefits promised in the product's positioning Do any of these decisions apply to services, vs. goods? Yes, all of them Decisions include those about: Product features Brand name Packaging Related services (delivery, installation, financing, training and support, etc.) Warranty Fit within the firm’s overall product line and marketing strategy What should be the goal of these decisions? Differentiate the product from competitors and substitutes, by delivering to the target market the benefits promised in the product's positioning Do any of these decisions apply to services, vs. goods? Yes, all of them

How does the marketer know what features the product, whether a good or service, should have? How? By understanding the target customer’s wants and needs By understanding what competing products offer and do not offer Based on the desired and agreed-upon positioning for the product How does this understanding and the resulting positioning arise? Marketing research, often qualitative marketing research How? By understanding the target customer’s wants and needs By understanding what competing products offer and do not offer Based on the desired and agreed-upon positioning for the product How does this understanding and the resulting positioning arise? Marketing research, often qualitative marketing research Discuss research and product development tools in exhibits 11.7 and 11.8 If a class project (a marketing plan) is assigned, ask a team or two how their product's features link to positioning and to customer wants and needs, and what research supports those features decisions.

Exhibit 11.2 The Augmented Product Concept Other services -- delivery, installation, repair, training Warranty Packaging Product features Core benefit Thus, product decisions encompass all elements of the augmented product 2

What about branding decisions? Two key questions to ask: Should the brand name... Clearly describe the product (e.g., Burger King, Pizza Hut, Healthy Choice cookies)? Or provide a neutral image (e.g., McDonald’s, Domino’s, Keebler)? Should we use family branding or individual brands for the various products in our product line? See next slide

A descriptive or neutral brand name: what are the pros and cons for each? Descriptive brand name Arguments for Easier and less costly to build market awareness, brand image, and gain customer trial at the outset Brand name clearly positions the product Drawbacks Limits the flexibility to adapt to changing market conditions Neutral brand name Allows adaptation to a changing market May accommodate a more diverse product offering If generic and boring, may make it harder to build an image for and differentiate one’s brand More costly to build market awareness and brand image

Descriptive brand name Arguments for Easier and less costly to build market awareness, brand image, and gain customer trial at the outset Brand name clearly positions the product Drawbacks Limits the flexibility to adapt to changing market conditions Neutral brand name Allows adaptation to a changing market May accommodate a more diverse product offering If generic and boring, may make it harder to build an image for and differentiate one’s brand More costly to build market awareness and brand image

Family or individual branding: What are the pros and cons for each? Family branding Arguments for Reduced costs and transfer of customer satisfaction from one product to another bearing the same name (halo effect). Can increase the impact of shelf facings in stores and make feasible the promotion of a product line comprising many low-volume items. Drawbacks When the family brand covers products that vary in quality, consumers become confused about what quality to expect. Extending a brand name to an inadequate product may tarnish the quality reputation of the entire line. New products with the family brand are more likely to cannibalize one’s own products rather than take share from competitors Individual branding Reduce a company’s risk in that a failure is not readily associated with the firm’s other products. Helps to clearly position and differentiate multiple entries within the same product class. Less cannibalization. Harder and more costly to build market awareness and gain customer trial at the outset.

Family branding Arguments for Reduced costs and transfer of customer satisfaction from one product to another bearing the same name (halo effect). Can increase the impact of shelf facings in stores and make feasible the promotion of a product line comprising many low-volume items. Drawbacks When the family brand covers products that vary in quality, consumers become confused about what quality to expect. Extending a brand name to an inadequate product may tarnish the quality reputation of the entire line. New products with the family brand are more likely to cannibalize one’s own products rather than take share from competitors Individual branding Reduce a company’s risk in that a failure is not readily associated with the firm’s other products. Helps to clearly position and differentiate multiple entries within the same product class. Less cannibalization. Harder and more costly to build market awareness and gain customer trial at the outset.

What about packaging decisions: What’s the role of packaging What about packaging decisions: What’s the role of packaging? Roles of packaging Protect the product: egg carton Facilitate its use: liquid laundry detergent with pour spout that catches drips Promoting the product: L’eggs pantyhose Providing information about the product and its use: food packages that list ingredient and nutritional information All these roles can be sources of differentiation. Roles of packaging Protect the product: egg carton Facilitate its use: liquid laundry detergent with pour spout that catches drips Promoting the product: L’eggs pantyhose Providing information about the product and its use: food packages that list ingredient and nutritional information All these roles can be sources of differentiation.

What about additional services and warranties: What roles do they play What about additional services and warranties: What roles do they play? Examples/roles of additional services Installation and delivery: ease of purchase Warranty: customer confidence Repair and maintenance: customer loyalty and satisfaction Credit availability: ease of purchase Prompt handling of pre-sale inquiries or after-sale questions or complaints: ease of purchase, customer loyalty and satisfaction Buyer personnel training: customer satisfaction Fast order processing: ease of purchase Roles of warranties Reducing the customer’s risk of purchase and enhancing quality perceptions, thereby enhancing sales. Additional sales may offset the cost of warranty returns. Examples/roles of additional services Installation and delivery: ease of purchase Warranty: customer confidence Repair and maintenance: customer loyalty and satisfaction Credit availability: ease of purchase Prompt handling of pre-sale inquiries or after-sale questions or complaints: ease of purchase, customer loyalty and satisfaction Buyer personnel training: customer satisfaction Fast order processing: ease of purchase Roles of warranties Reducing the customer’s risk of purchase and enhancing quality perceptions, thereby enhancing sales. Additional sales may offset the cost of warranty returns.

What about product line decisions: How broad should a product line be What about product line decisions: How broad should a product line be? Early in product life cycle: introductory stage Short product line to serve target niche Growth stage Product line expansion to serve different market segments Maturity stage Trim product line for efficiency. Selectively add new items to product line to serve new Early in product life cycle: introductory stage Short product line to serve target niche Growth stage Product line expansion to serve different market segments Maturity stage Trim product line for efficiency. Selectively add new items to product line to serve new users or new uses.

What are their advantages? What are the drawbacks? For mature product lines, why do we see so many line extensions, especially for consumer packaged goods? What are their advantages? What are the drawbacks? Advantages of line extensions Customer segmentation: a cheap, easy way to reach varied segments Capture more shelf space to gain impulse purchases Pricing breadth: trade up to premium segments Fill excess production capacity Raise entry barriers to 3rd and 4th tier brands Tailor products for different channel member strategies Problems of excessive line proliferation Weak line logic: if there’s no rationale for each product in the line, retailers will simply buy what sells best Consumer may be confused, driven to simpler products (e.g., all-temperature Cheer laundry detergent) May reopen consumer’s purchase decisions, lead to lower brand loyalty Too easy: may deter management from pursuing real innovation having greater potential Increased costs of managing and producing broader line The bottom line Line logic: each item needs a reason for being Lines need to be periodically pruned This discussion is based on Quelch and Kenny, Harvard Business Review, Sept-Oct 1994; Perspectives, HBR, Nov-Dec 1994)

Advantages of line extensions Customer segmentation: a cheap, easy way to reach varied segments Capture more shelf space to gain impulse purchases Fill excess production capacity Raise entry barriers to 3rd and 4th tier brands Tailor products for different channel member strategies Problems of excessive line proliferation Weak line logic: if there’s no rationale for each product in the line, retailers will simply buy what sells best Consumer may be confused, driven to simpler products (e.g., all-temperature Cheer laundry detergent) May reopen consumer’s purchase decisions, lead to lower brand loyalty Too easy: may deter management from pursuing real innovation having greater potential Increased costs of managing and producing broader line

Most new products fail. So, do new products matter. Why or why not Most new products fail. So, do new products matter? Why or why not? New products do matter, for most companies: Constitute the lifeblood of long-term firm success Provide a central mechanism for firms’ adaptation to today’s rapidly changing markets and the opportunities they offer New products do matter, for most companies: Constitute the lifeblood of long-term firm success Provide a central mechanism for firms’ adaptation to today’s rapidly changing markets and the opportunities they offer