Chapter 5: Setting Product Strategy

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?
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?
5.1 Product Characteristics and Classifications

What is a Product?
A product is anything that can be offered to a
market to satisfy a want or need, including
physical goods, services, experiences, events,
persons, places, properties, organizations,
information, and ideas.
Figure 5.1 Components of the Market Offering

Value-based prices

Attractiveness
of the market
offering

Product Services
features mix and
and quality quality
Product Levels: The Customer-Value Hierarchy
In planning its market offering, the marketer needs to
address five product levels each level adds more
customer value, and the five constitute a customer-
value hierarchy.
• The fundamental level is the core benefit: the service
or benefit the customer is really buying.
• The marketer must turn the core benefit into a basic
product.
• The marketer prepares an expected product, a set of
attributes and conditions buyers normally expect
when they purchase this product.
Cont..
• The marketer prepares an augmented product
that exceeds customer expectations. In
developed countries, brand positioning and
competition take place at this level.
• At the fifth level stands the potential product,
which encompasses all the possible
augmentations and transformations the
product or offering might undergo in the
future.
Figure 5.2 Five Product Levels
Product Classification Schemes

Durability

Tangibility

Use
Durability and Tangibility

Nondurable
goods

Durable
Services
goods
Consumer Goods Classification
Convenience Shopping
• Staples • Homogeneous
• Impulse • Heterogeneous
• Emergency

Specialty Unsought
Industrial Goods Classification

Materials and parts

Supplies/
Capital items
business services
5.2.Product and Service Differentiation
5.2.1 Product Differentiation
• Product form
• Features
• Customization
• Performance Quality (level)
• Conformance Quality
• Durability
• Reliability
• Repairability
• Style
5.2.2 Service Differentiation
• Ordering ease
• Delivery
• Installation
• Customer training
• Customer consulting
• Maintenance and repair
• Returns (controllable and uncontrollable)
Maintenance and Repair
5.3 Design
• As competition intensifies, design offers a
potent way to differentiate and position a
company’s products and services.
• Design is the totality of features that affect
how a product looks, feels, and functions to a
consumer.
• Design offers functional and aesthetic benefits
and appeals to both our rational and
emotional sides.
5.4 Product and Brand Relationships
The Product Hierarchy

Item

Product type

Product line
Product class
Product family
Need family
Product Systems and Mixes
• Product system
• Product mix
• Width
• Length
• Depth
• Consistency
Cont...
 Product line Analysis
• In offering a product line, companies normally
develop a basic platform and modules that can be
added to meet different customer requirements
and lower production costs.
• Car manufacturers build cars around a basic platform.
• Homebuilders show a model home to which buyers can
add additional features.
• Product line managers need to know the sales and
profits of each item in their line.
• They also need to understand each product line’s
market profile.
Figure 5.3 Product Item Contributions to a
Product Line’s Total Sales and Profits
Figure 5.4 Product Map-Market Profile
Product Line Length
Company objectives influence product line length.
• One objective is to create a product line to
induce up-selling
• To create a product line that facilitates cross-
selling
• To create a product line that protects against
economic ups and downs
A company lengthens its product line in two ways:
line stretching and line filling.
 Line Stretching

Down-Market Stretch

Up-Market Stretch

Two-Way Stretch
Line Filling: adding more items within the
present range.
 Pruning
Pruning weak brands
can strengthen the
remaining brands in
the line
 Product-Mix Pricing
• Product-line pricing
• Optional-feature pricing
• Captive-product pricing
• Two-part pricing
• By-product pricing
• Product-bundling pricing
Co-Branding and Ingredient Branding
CO-BRANDING
• same-company co-branding
• Joint-venture co-branding
• multiple-sponsor co-branding
• retail co-branding
INGREDIENT BRANDING
• It creates brand equity for materials,
components, or parts that are necessarily
contained within other branded products.
5.4 Packaging, Labeling, Warranties,
and Guarantees
Packaging, sometimes called the fifth P, is all the
activities of designing and producing the
container for a product.
• Packages might have up to three layers:
• primary package
• secondary package
• shipping package
Factors Contributing to the
Emphasis on Packaging

Self-service

Consumer affluence

Company/brand image

Innovation opportunity
 Packaging Objectives
• Identify the brand
• Convey descriptive and persuasive information
• Facilitate product transportation and protection
• Assist at-home storage
• Aid product consumption
Functions of Labels

Identifies

Grades

Describes

Promotes
Warranties and Guarantees
• Warranties are formal statements of expected
product performance by the manufacturer.
• Products under warranty can be returned to
the manufacturer or designated repair center
for repair, replacement, or refund.
• Whether expressed or implied, warranties are
legally enforceable.
 Marketing Debate
With products, is it form or function?
Take a position:
1. Product functionality is the key to brand
success.
or
2. Product design is the key to brand
success.