MARKETING MANAGEMENT 12 th edition 12 Setting Product Strategy KotlerKeller

12-2 Objectives  What are the characteristics of products and how can they be classified?  How can companies differentiate products?  How can a company build and manage its product mix and product lines?  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?

12-3 ■Product = anything in the market that can satisfy a customer need Physical goods Services Experiences Persons Events Components of the Market Offering How customers judge competitive offerings in the market place  Places  Properties  Organizations  Information  Ideas Five levels of providing customer value Customer Value Hierarchy ■Five Product Levels ■Core benefit (basic function / solution needed) ■Basic product (form factor and basic features) ■Expected product (attributes and performance conditions expected by the buyer i.e. reliability)  Augmented product (value enhancements beyond expected product i.e. on-line support, application updates) ■Potential Product (future enhanced value opportunities-new applications, upgrades, etc.)  Product augmentation is essentially where competition take place in the market  Product augmentation and potential product is where competitive differentiation is established  Successful product augmentation requires an accurate understanding of the way users perform their tasks = consumption system CLASSIFICATIONS Durable versus Nondurable versus Services Consumer versus Industrial Product Classifications and Characteristics ■Consumer Goods Classification  Convenience goods  Shopping goods  Specialty goods  Unsought goods AT THE HEAR OF A GREAT BRAND IS A GREAT PRODUCT Industrial Goods  Materials & parts  Capital items  Supplies and business services

12-4 Product Differentiation and Brand Relationships Product form Features Performance Conformance Durability Reliability Reparability Style Design Ordering ease Delivery Installation Customer training Customer consulting Maintenance and repair PRODUCT AND BRAND RELATIONSHIPS PRODUCT SYSTEMS & MIXES Item Product Type Product Line Product Class Product Family Need Family Product system Product mix Product assortment Depth Length Width Consistency DIFFERENTIATION PRODUCT / DESIGN / SERVICES Product-line pricing Optional-feature pricing Captive-product pricing Two-part pricing By-product pricing Product-bundling pricing PRODUCT-MIX PRICING PRODUCT-MIX PRICING NECESSARY WHEN PRODUCT MIX EXISTS

12-5  Business objectives and market strategies. Objective is incremental profitability. Product lines are too short if profits can be increased by adding, and too long if profits can be increased by decreasing. Strategy is up selling, cross selling and down selling.  Market profile: Product opportunity, profitability performance and competitive positioning through sales analysis and product mapping. Results dictate building, maintaining, harvesting or divesting by product line.  Management Options: Line Stretching: –Down Market Stretch – Lower price line, new market expansion if middle/high market player (same brand, sub brand, new brand) –Up Market Stretch – Higher price line, new market expansion if middle / low market player (same brand, sub brand, new brand) –Two Way Stretch – Both lower and higher price line new market expansion if middle market player (same brand decisions above) – Line Filling: –Addition of more items within current product line for existing market participation –Requires appropriate differentiation from other items in satisfying legitimate market need Line Modernization, Featuring and Pruning: –Product styling and feature enhancements to current products in existing market –Removal of sub performers in existing market Example: Five Item Contributions to Product Line’s Total Sales and Profits Example: Product Map of Paper Company Product Line MARKET PROFILE SALES AND PROFITABILITY ANALYSIS PRODUCT LINE ANALYSIS BASED ON: Core Products StaplesSpecialties Convenience Items Product Differentiation and Brand Relationships