CHAPTER 10.

PRODUCT DECISION
Product anything that that can be offered to
a market to satisfy a want or need.
Includes: 3PSEIO
Physical goods, Persons, Places, Services,
Events, Ideas, Organizations
Five Product Levels: CB BEAP
1. Core benefit fundamental service or
benefit that the customer is really buying.
Ex: hotel guest is buying rest and sleep
2. Basic Product - Turn the benefit into a basic
product
Ex: Hotel room includes a bed, bathroom,
towels, desk dresser and closet
3. Expected Product set of attributes and
conditions buyers normally expect when they
purchase this product
Ex: Hotel guests expect a clean bed, fresh
towels, working lamps and a relative degree of
quiet
4. Augmented Product this exceeds
customer expectations
Ex: hotel can include fresh flowers, rapid check
in, express check out, fine dining and room
service
5. Potential Product encompasses all the
possible augmentations and transformations
the product might undergo in the future.
Companies search for new ways to satisfy
customers and distinguish their offer.
Todays competition essentially takes
place at the product augmentation level.
However, in LDCs, competition takes place at
the expected product level.
Augmented product
Leads to look at the users total
consumption system, the way the user
performs the tasks of getting, using,
fixing and disposing of the product.
Augmentations can be: packaging
services, advertising, customer advice,
financing, delivery arrangement,
warehousing and other things that
people value. ACAF DAW O
Possible Issues: CEC
1. Each augmentation adds costs. Are
customers willing to pay enough to cover the
extra cost?
2. Augmented benefits soon become
expected benefits.
3. As companies raise the price of their
augmented products, some competitors can
offer a stripped-down version at a much
lower price.
Product Classifications
1. Durability and Tangibility
a. Durable goods tangible goods that normally
survive many uses,

Requirement: more personal selling and

service, command a higher margin and require
more seller guarantees
Ex. Refrigerators, clothing
b. Nondurable goods tangible goods that
normally consumed in one or few uses,
consumed quickly and purchased more
frequently
Requirement: make them available in many
locations, charge small markup and advertise
heavily to induce trial and build preference
Ex: bees, soaps
c. Services intangible, inseparable, variable
and perishable products (massage, haircut)
Requirement: more quality control, supplier
credibility and adaptability
2. Use
Consumer
Industrial
Consumer-Goods Classification: CSSU
Convenience
Shopping Products
Products
Buy less frequently
Buy frequently
Gather product info
Buy immediately
Fewer purchase
Many purchased
locations
locations
Compare for:
Low priced
1. Suitability and
Includes: staple goods,
quality
impulse & emergency
2. Price and style
goods
Specialty Products
Unsought Products
Special purchase
New innovations
efforts
Consumers dont want
Unique characteristics
to think about it
Brand identification
Require much
Few purchase locations
advertising and
personal selling
Product Line
1. Width number of different product lines
2. Length total number of items within the
line
3. Depth number of versions of each product
4. Product mix all the product lines are
offered
Product-line Length
1. Line stretching- downmarket, upmarket,
two-way
Ex: Marriott Hotel quality and price different
market
2. Line filling - Adding more items within the
present range for the following objectives:
a. reaching for incremental profits
b. satisfy dealers complaining about lost sales
due to missing items in the line
c. Utilizing excess capacity
d. Trying to lead as a full-line company
e. plugging holes to keep out competitors
3. Line modernization the issue is whether
to overhaul the line piecemeal or all at once

Piecemeal approach allows the firm to see

how customers and dealers take to the new
style. Pro: Less draining to the companys cash
flow. Con: allows competitors to see changes
and to start redesigning their own lines.
4. Line featuring and line pruning
Line featuring selecting one or few items to
feature. Pro: Boost demand for slow sellers
Line pruning - can be done when the company
is short of production capacity, companies can
shorten their product lines in periods of light
demand and lengthen product lines in periods
of slow demand.
Deadwoods are products that do not sell and
have depressing profits.

2. Product sales pass through distinct stages,

each posing different challenges, opportunities
and problems to the seller.
3. Profits rise and fall at different stages of the
PLC.
4. Products require different marketing,
financial, manufacturing, purchasing & human
resource strategies in each PLC stage.
Charac
teristi
cs
Sales

Intro

Growth

Maturit
y

Decline

Low

Peak

Brand identifies the source or maker of a

product, simplifiers product handling or tracing,
helps organize inventory and accounting
records, offers firm legal protection for unique
features or aspects of the product

Costs

High
cost/
custom
er
Negativ
e or low

Rapidly
rising
Ave
cost/
custom
er
Rising

declinin
g
Low
cost/
custome
r
Declinin
g

Branding Decisions
1. Individual names
Ex: General Mills use individual names like
Bisquick, Gold Medal flour
2. Blanket family names
Ex: Heinz and GE use their corporate brand
across their range of products
3. Separate family names for all products
Ex: Sears uses separate family names like
Kenmore for appliances, Craftsman for tools
4. Corporate name combined with individual
product names
Ex: Kellogs Rice Crispies, Kellogs Raisin Bran
Good Brand Names
1. Distinctive
2. Lack poor foreign language meaning
3. Suggest product qualities
4. Suggest product benefits
5. easy to pronounce, recognize, remember
Package crucial as a marketing tool
1. Self-service attracts attention, describes
products features, creates consumer
confidence and makes a favorable overall
impression
2. Consumer affluence consumers are willing
to pay for the convenience, appearance,
dependability and prestige of better packages
3. Company & brand image - contribute to
instant recognition of the company or brand
(visible billboard effect)
4. Opportunity for innovation innovative
packaging brings large benefits to consumers
and profits to producers (resealable spouts &
openings).

Profits

Marketi
ng
objecti
ves

Create
product
awarene
ss and
trial

Maximiz
e
market
share

Product

Offer a
basic
product

Price

High,
costplus
formula

Offer
new
product
features
,
extensio
ns,
service
&
warrant
y
Price to
penetra
te
market

Distribu
tion

High
distribut
ion
expense

Increase
# of
distribut
ion
outlet

Adverti

Build

Build

Labels PDI
1. Promote
2. Describe
3. Identify
Product Life Cycle
1. Products have limited life.

Low
cost/cus
tomer
High
profits,
then
lower
profits
Maximiz
e profits
while
defendi
ng
market
share

Diversif
y brand
and
models

Price to
match
or best
competi
tors
Build
more
intensiv
e
distribut
ion
Stress

Reduce
expendi
ture and
maintai
n,
repositi
on,
harvest
or drop
the
product
Phase
out
weak
items

Cut
price

Go
selectiv
e: phase
out
unprofit
able
outlets
Reduce

sing

product
awarene brand
to level
awarene ss &
differen
needed
ss
interest
ce and
to retain
among
in the
benefits hardearly
mass
core
adopter market
loyal
s and
custome
sellers
rs
Issues in Managing PLC
1. PLCS should be related to specific markets,
hence each market should be carefully defined.
a. A particular PLC describes industry sales and
profits for a certain product
2. PLCs vary in length
a. The length of each stage of the PLC varies
enormously between products.
3. Some new product ideas will move faster
through the early stages of the PLC due to
several factors:
a. The greater the comparative advantage of a
new product over those existing in the market,
the faster its sales will increase.
b. Sales will be more rapid when the product is
simple and its advantages are easy to
communicate.
c. A product which can be tried on a limited
basis without much risk to the customer can be
introduced more quickly.
d. If the product is compatible with the values
and experiences of target customers, these
customers will more likely buy the product more
quickly.
4. PLCs are getting shorter.
a. As a result of rapidly-changing technology,
many old products are replaced so easily by
new ones..
b. Imitations shorten the life of certain products.
c. Patents may not offer protection in slowing
down competitors. The early bird usually makes
the profits.
Four Introductory Marketing Strategies
Promotions
Pric
High
Low
High
RapidSlowe
skimming
skimming
strategy
strategy
Low
RapidSlowpenetration
penetration
strategy
strategy
Rapid-Skimming Strategy
1. Launching a new product at a high price and
a high promotion level.
2. Firm spends heavily on promotion to convince
the market of the products merits.
Will work whe:
1. A large part of the market is unaware of the
product.
2. Those who become aware of the product are
eager to have it and are capable of paying the
high price.
3. Firm faces potential competition and wants to
build up brand preference.

Slow-Skimming Strategy
1. Launching a new product at a high price and
low promotion.
2. The high price helps in recovering as much
profit per unit as possible.
3. The low level of promotion keeps marketing
expenses down.
4. Such combination is expected to skim a lot of
profits from the market.
Will work when:
1. The market is limited in size.
2. Most of the market is aware of the product.
3. Buyers are willing to pay a high price.
4. Potential competition is not imminent.
Rapid-Penetration Strategy
1. Launching a new product at a low price and
spending heavily on promotion.
2. This is expected to bring about the fastest
market penetration and the largest market
share.
Will work when:
1. Market is large.
2. Market is unaware of the product.
3. Most buyers are price sensitive.
4. There is strong potential competition.
5. The firms unit manufacturing cost falls with
the companys scale of production and
accumulated manufacturing experience.
Slow-Penetration Strategy
1. Launching a new product at a low price and
low level of promotion.
2. Low price will encourage rapid product
acceptance while the low promotion costs will
bring profits up.
3. Firm believes that the market demand is
highly sensitive to price but minimally sensitive
to promotion.
Will work when:
1. Market is highly aware of the product.
2. Market is price sensitive.
3. There is some potential competition.
Marketing Strategies in the Growth Stage
1. Firm faces a trade-off between high market
share and high current profit.
2. Firm may capture a dominant position by
spending on product improvement, promotion,
distribution.
3. Firm forgoes maximum current profit in the
hope of making even greater profits in the next
stage.
To sustain rapid market growth as long as
possible, the firm should:
1. Improve product quality and add new product
features and improve styling.
2. Add new models and flanker products
(different sizes, flavors).
3. Enter new market segments.
4. Increase distribution coverage and enter new
distribution channels.

5. Lower prices to attract the next layer of price

sensitive buyers.
Maturity Stage of the PLC
1. Market Modification
a. Expand the market for the mature brand by
working with the two factors that make up sales
volume:
Volume = number of brand users X usage rate
per user
b. The number of brand users can be expanded
in three ways:
i. Convert nonusers: attract nonusers to the
product.
ii. Enter new market segments: firm can enter
new market segments that use the product but
not the brand. Johnsons Baby shampoo for
adults
iii. Win competitors customers: Pepsi Cola is
constantly tempting Coke users to switch to
Pepsi by throwing one challenge after another.
c. Volume can be increased by:
i. More frequent use: encourage customers to
use the product more frequently. Shampoo so
mild, you can use it everyday.
ii. More usage per occasion: encourage users to
use more of the product on each occasion. For
better results, rinse twice.
iii. New and more varied uses: discover new
product uses and convince people to use the
product in more varied ways. Campbells soup
recipes
Product Modification
a. Sales can be stimulated by modifying the
products characteristics. This can take several
forms:
i. Quality improvement: aims to increase the
functional performance of the product
(durability, taste, reliability, speed). Ex. The
new, improved Tide.
ii. Grocery manufacturers call this a plus launch
and promote a new additive or advertise
something as stronger, bigger or better.
b. Sales can be stimulated by modifying the
products characteristics. This can take several
forms:
i. Feature improvement: aims at adding new
features (size, weight, materials, additives,
accessories) that expand the products
versatility, safety or convenience.
c. Sales can be stimulated by modifying the
products characteristics. This can take several
forms:
i. The advantages of feature improvement are:
ii. They win the loyalty of certain market
segments who value these features.
iii. They can be adopted or easily dropped and
made optional to the buyer.
Sales can be stimulated by modifying the
products characteristics. This can take several
forms:
c. A major disadvantage is:

i. Feature improvements are highly imitable that

unless there is a permanent gain from being
first, the improvement may not pay.
d. Sales can be stimulated by modifying the
products characteristics. This can take several
forms:
i. Style improvement: aims at increasing the
aesthetic appeal of the product. Ex. new car
models.
ii. An advantage is this strategy might confer a
unique market identity and win a loyal
following.
e. Sales can be stimulated by modifying the
products characteristics. This can take several
forms:
i. Style improvement: aims at increasing the
aesthetic appeal of the product. Ex. new car
models.
ii. A disadvantage is it is difficult to predict
whether people and which people will like the
new style.
f. Sales can be stimulated by modifying the
products characteristics. This can take several
forms:
i. Style improvement: aims at increasing the
aesthetic appeal of the product. Ex. new car
models.
ii. Another disadvantage is a style change
usually requires discontinuing the old style
hence, the company risks losing customers who
like the old style.
g. Modifying one or more elements of the
marketing mix.
i. Questions about non-product elements:
ii. Price: Would a price cut attract new triers and
users? Should the list price be lowered, or
should prices be lowered through price specials,
volume or early purchase discounts, freight
absorption, or easier credit terms?
Questions about non-product elements:
a. Distribution: Can the company obtain more
product support and display in the existing
outlets? Can more outlets be penetrated? Can
the company introduce the product into new
types of distribution channels?
b. Advertising: Should advertising
expenditures be increased? Should the
advertising message or copy be changed?
Should the media-vehicle mix be changed?
Should the timing, frequency, or size of ads be
changed?
c. Personal Selling: Should the number or
quality of salespeople be increased? Should the
basis for salesforce specialization be changed?
Should sales territories be revised? Should
sales force incentives be revised.
d. Services: Can the company speed up
delivery? Can it extend more technical
assistance to customers? Can it extend more
credit?

e. Problems: Highly imitable especially price

reductions and additional services
Decline Stage
1. Increase investment
2. Resolve uncertainties - stable investment
3. Selective niches
4. Harvesting
5. Divesting
6. Increase investment to dominate or
strengthen its competitive position
7. Maintaining the firms investment level until
the uncertainties about the industry are
resolved.
8. Decreasing the firms investment level
selectively, by sloughing off unprofitable
customer groups, while simultaneously
strengthening the firms investment in lucrative
niches.
9. Harvesting or milking the firms investment
to recover cash quickly
10. Divesting the business quickly by disposing
of its assets as advantageously as possible
Uses of PLC
1. As a planning tool
The PLC concept characterizes the main
marketing challenges in each stage and poses
major alternative marketing strategies.
2. As a control tool
PLC allows the company to measure product
performance against similar products launched
in the past.
3. As a forecasting tool
It is less useful in this context because sales
histories exhibit diverse patterns and the stages
vary in duration
Criticisms of PLC
1. Life cycle patterns are variable in their shape
and duration.
2. Marketers can seldom tell what stage the
product is in.
3. It is believed that the PLC pattern is the result
of marketing strategies rather than the
inevitable course that sales must follow.
Six Categories of New Products
1. New-to-the-world products new products
that create an entirely new market
2. New product lines new products that allow a
company to enter an established market for the
first time
3. Additions to existing product lines new
products that supplement a companys

established product lines (package sizes,

flavors, etc.)
4. Improvements and revisions of existing
products new products that provide improved
performance or greater perceived value and
replace existing products
5. Repositioning existing products that are
targeted to new markets or market segments
6. Cost reductions new products that provide
similar performance at lower cost
Why New Products Fail
1. Over Championing a high-level executive
pushes a favorite idea through in spite of
negative market research findings
2. Overestimated Demand idea is good but
market size is overestimated
3. Poor Design
4. Poor Marketing Execution product is
incorrectly positioned in the market, not
advertised effectively or overpriced
5. High Development Costs costs are higher
than expected
6. Strong Competitive Reaction competitors
fight back harder than expected
Challenges in NPD
1. Idea Shortage there may be a few ways
left to improve some basic products like steel or
detergents
2. Fragmented Markets keen competition
leads to market fragmentation. Companies
have to aim their new products at smaller
market segments which can mean lower sales
and profits for each product.
3. Social & Governmental Constraints new
products have to satisfy consumer safety and
environmental concerns. Government
regulations slow down innovation in drugs, toys
4. Cost high R & D, manufacturing and
marketing costs
5. Capital Shortage some firms with good
ideas cannot raise the funds needed to research
and launch them
6. Need for Speed firms that cannot develop
new products quickly are at a disadvantage
7. Shorter Product Life Cycles when a new
product is successful, rivals are quick to copy it.
Sony used to enjoy a 3-year lead on its new
products. Now Matshushita will copy the
product in 6 months, leaving hardly enough
time for Sony to recoup its investment.