Setting Product Strategy Chapter 12 Setting Product Strategy

Objectives  Identify the various characteristics of products.  Learn how companies build and manage product lines and mixes.  Understand how companies make better brand decisions.  Comprehend how packaging and labeling can be used as marketing tools.  Warranties & guarantees can offer further assurance to consumers.

The Product Product is a key element in the market offering. Is the first and the most important element of the marketing mix. Product strategy calls for making coordinated decisions on product mixes, product lines, product brands, packaging and labeling. Who should ultimately design the product? The customer of course. The customer will Judge the offering by three basic elements: Product features and quality. Services mix and quality. Price.

What is a Product ? The product is any thing that can be offered to market to satisfy a want or a need.

What is a Product? A Product can be Information Places Goods Organizations A Product can be Properties Services Experiences Events Persons Ideas

According to Kotler there are 5 levels The Product Levels Potential Product Augmented product Expected product Basic Product Core benefit According to Kotler there are 5 levels

The Product and Product Mix The customer value hierarchy:  Core benefit The service or benefit the customer is really buying.  Basic product The marketer has to turn the core benefit into basic product.  Expected product A set of attributes and conditions buyers normally expect when they purchase the products.  Augmented product The product exceeds customer expectation.  Potential product All possible augmentations and transformations the product or offering might undergo in the future.

According to Armestrock There are 3 levels The Product Levels Augmented product Installation Quality Packing Actual product After sale services Delivery And Credit Core Benefit Brand Name Feature Style Core benefit Warranty According to Armestrock There are 3 levels

Product Classification 1. Durability and Tangibility. 2. Consumer Goods. 3. Industrial Goods.

Product Classification 1. Durability and tangibility Nondurable goods Tangible Rapidly consumed in one or a few uses. Example: Milk - Soap Durable goods Lasts a long time Example: Oven – electronics Services Intangible Example: Appliance repairs, Transportation Services

2. Consumer Goods Classifications Classified by shopping habits  Convenience goods  Shopping goods  Specialty goods  Unsought goods

2. Consumer Goods Classifications

2. Consumer Goods Classification 2.1 Convenience goods :  Staples Goods: Goods consumers purchase on a regular basis (Toothpast).  Impulse Goods: Purchased without any planning or search efforts (Magazines).  Emergency Goods: Are purchased when a need is urgent (umbrellas during a rainstorm).

2. Consumer Goods Classification 2.2 Shopping goods : The bases are the suitability quality, price and style  Homogeneous shopping goods: Are similar quality but different enough in price to justify shopping comparisons.  Heterogeneous shopping goods: Offer in product features & services that maybe more important than price.

Shopping Goods Convenience Goods Comparative Between Convenience & Shopping Goods Shopping Goods Convenience Goods Limit Distribution Convenience Distribution High Price Reasonable Price Low life cycle High life cycle Needs planning or search efforts Purchased without planning or search efforts Selective distribution policy Intensive distribution policy

3. Industrial goods Classifications Are goods that enter the manufactures product completely 3.1 Materials and parts  Farm products ( Wheat, Cotton, Fruits …)  Natural products (Fish, Crude petroleum …)  Component materials (Iron, cement, wires…)  Component parts ( Small motors, tires …) 3.2 Capital items  Installations (Factories, offices)  Equipment (drill presses, personal computer, elevators). 3.3 Supplies and business services  Maintenance and repair (paint, window cleaning, copier repair…)  Advisory services (Legal, management consulting, advertising)

Industrial goods classification

Product Differentiation Many products can be differentiated in form (Size, shape, physical structure of a product. Form The company should consider how many people want each feature, how much it would take to introduce each feature, and think of feature bundles or packages. Feature Performance quality Most products are established at one of four performance levels: Low, average, high or superior. A measure of the product's expected operating life under natural or stressful conditions, is a valued attribute for certain products. Durability

Product Differentiation Measure of the probability that a product will not fail within a specified time period. Reliability Style Describe the product's look and feel to the buyer. Conformance Quality Is the degree to which all the produced units are identical and meet the promised specifications Is a measure of the ease of fixing a product when it malfunction or fails. Repairability

Services Differentiation: Ordering ease: refers to how easy it is for the customer to place an order with the company. Delivery: to how well the product or service is delivered to the customer. Installation: refers to the work done to make a product operational in its planned location.

Services Differentiation: Customer training: refers to training the customer’s employees to use the vendor’s equipment properly and efficiently. Customer consulting: refers to data, information systems, and advice services that the seller offers to buyers. Maintenance & repair: describes the service program for helping customers keep purchased products in good working order.

The Product Hierarchy: Need family The core need that underlies the existence of a product family (Security). Product family All the product classes that can satisfy a core need with reasonable effectiveness (Saving, income) Product class A group of products within the product family recognized as having a certain functional coherence (financial instruments) Product line A group of products within a product class that are closely related because they perform a similar function. Product type A group of items within a product line that share one of several possible forms of the product. Item. A distinct unit within a brand or product line distinguishable by size, price, appearance or some other attribute.

Product mix The set of all products and items that a particular seller offers for sale.  A Product mix consists of various product lines. Product mix dimensions:: The Width: Number of product lines. The Length: Total number of items in mix. The Depth: How many variants are offered of each product in the line. Consistency: Degree to which product lines are related. (Production requirements, distribution channels)

Product mix Product Line 4 Line 3 Line 2 Line 1 Sweets Snakes Soft Drinks Coffee Mars Pizza In Tang Nescafe kinder Burger Coca Cola Bream Twix Kentucky Meranda Sanca Width = 4 Depth L1 = 3 Length = 12 The Depth The Width

Product-Line Decisions Product-Line Analysis Product line managers need to know the sales and profit items in their lines in order to determine which items to built, maintain, harvest and divest.

Product-Line Analysis

Market Profile  Product line managers need to look at market profile.  The manager must review how the line is positioned against competitor’s lines.  The product map is useful for designing product line marketing strategy & identifies market segments.

Market Profile Product Map for a Paper-product Line

Product Line Length A company lengthen its product line in two ways: 1. Line stretching: involves the question of whether a particular line should be extended:  Down market: it introduces a lower priced line for any three reasons: 1- The company may notice strong growth opportunities in the down market. 2- To tie up lower end competitors who might other wise try to move up market. 3- The middle market is declining.

- Upward stretch: Enter the high end of market for more growth , higher margins. - The two way stretch: The line in both direction 2- Line filling: A product line can be lengthened by adding more items within the present rang like reaching for incremental profits, trying to satisfy dealers,

- Line modernizations: whether the line needs a new look . In rapidly changing product markets , modernization is continuous. A major issue is timing improvements , so they do not appear too early ( damaging sales of the current line ) or too late ( after the competition has established a strong reputation for more advanced equipment).

- Line pruning : How to delete and remove weaker items from the line,

Product mix pricing  There are six situation involving product mix pricing: 1) Product line pricing: Companies normally develop product lines rather than single products and introduce price steps. 2) Optional feature pricing: Many companies offer optional products, features and service a long with their main product. 3) Captive product pricing: Some products require the use of ancillary or captive products.

4) Two part pricing product: Service firms often engage in two-part pricing consisting of affixed fee plus variable usage fee. 5) By-product pricing: The production of certain goods-meats, petroleum products often results in by-products. 6) Product bundling: Sellers often bundle products and features.

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.

Brand Decision The AMA definition of a brand: “A name, term, sign, symbol, or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from the competition.”

Brand Decisions Brands can convey six levels of meaning: Attributes A brand bring to mind certain attributes. Benefits Attributes must be translated in to functional & emotional benefits Values The brand say something about the product (Mercedes-Safety) Culture It may represent a certain culture (Mercedes- German) Personality It project a certain personality User It suggests the kind of consumer who buys or use the product.

Brand Decision Companies need to develop brand policies for the individual product items in their lines. - They must decide whether to brand at all , whether to use family or individual brand names, whether to extend the brand name to new products , and whether to create multiple brands.

Brand Decision In developing marketing strategy for individual product, the seller has to confront the branding decision. Branding is a major issue in product strategy. Developing branded product requires a great deal of long term investment spending especially for advertising, promotion, and packaging. Companies need to develop brand polices for individual product items in their lines.

Co-Branding & Ingredient Branding It called dual branding or brand bundling, in which two or more well known existing brands are combined into a joint product or marketed together in some fashion.

Integrated Branding: Is a special case of co-branding. It involves creating brand equity for materials, components or parts that are necessarily contained within other branded products.

Packaging and Labeling Is all the activities of designing and producing the container for a product.

Packaging includes: The primary package The secondary package The shipping package Packaging has become as marketing tool, well designed packages can create convenience & promotional value.

The factors that help in increasing using packaging as a marketing tool: 1- Self service: The package must perform many of the sales tasks: attract attention, describe the product features, create consumer confidence and make a favorable impression. 2- Consumer affluence: Consumers are willing to pay a little more per the convenience appearance, dependability and prestige of better packages.

3- company and brand Image: Packages contribute to instant recognition of the company or brand. 4- Innovation opportunity: Innovative packaging can bring large benefits to consumes and profits to producers.( easy to carry , easy to open , easy to pour and close).

Developing an effective package: Determine the packaging concept Determine key package elements Testing: Engineering tests Visual tests Dealer tests Consumer tests

After Packaging is designed it must be tested Engineering Tests: Conducted to ensure that the package stand up under normal conditions. Visual Tests: To ensure that the scrip is legible & the colors harmonious. Dealer tests: To ensure that dealers find the packages attractive & easy to handle. Customer tests: To ensure favorable consumer response.

Labeling The label may be a simple tag attached to the product or an elaborately designed graphic that is part of the package.

Legal restrictions impact packaging for many products. Labeling functions:  Identifies the product or brand  May identify product grade  May describe the product  May promote the product Legal restrictions impact packaging for many products.

Warranties & guarantees are formal statements of expected product performance by the manufacturer. Guarantees are most effective in two situations: The company or the product is not well know. The product's quality is superior to the competition.

Warranties and guarantiees Guarantees 1- Reduce the buyer perceived risk. 2- Suggest that the product is of high quality. 3- Company and its service performance are dependable. 4- Enables the company to charge a higher price than a competitor who is not offering an equivalent guarantee.