Framework for Marketing Management

Global 6th Edition Kotler Solutions

Manual
Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/framework-for-marketing-management-global-6th-edition-kotler-solutions-manu
al/
CHAPTER
9 PRODUCT MIX AND
NEW OFFERINGS

LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What are the characteristics of products, and how do marketers classify products?
2. How can companies differentiate products?
3. How can a company build and manage its product mix and product lines?
4. How can companies use packaging, labeling, warranties, and guarantees as
marketing tools?
5. What strategies are appropriate for introducing new offerings and influencing
adoption?
6. What strategies are appropriate in different stages of the product life cycle?

EXECUTIVE SUMMARY
A product is anything that can be offered to a market to satisfy a want or need.
The marketer needs to think through the five levels of the product: the core benefit, the
basic product, the expected product, the augmented product, and the potential product.
Marketers classify products on the basis of durability, tangibility, and use (consumer or
industrial). Products may be differentiated by form, features, performance, conformance
quality, durability, reliability, repairability, style, customization, and design. Service
differentiators include ordering ease, delivery, installation, customer training, customer
consulting, and maintenance and repair.
A product mix can be classified according to width, length, depth, and
consistency, four dimensions for developing the company’s marketing strategy and
deciding which product lines to grow, maintain, harvest, and divest. Physical products
must be packaged and labelled, may have well-designed packages, and may come with
warranties and guarantees. The new-product development process consists of: idea
generation, screening, concept development and testing, marketing strategy development,
business analysis, product development, market testing, and commercialization. The
adoption process - by which customers learn about new products, try them, and adopt or
reject them – is influenced by multiple factors. Each product life-cycle stage
(introduction, growth, maturing, and decline) calls for different marketing strategies.

Copyright © 2016 Pearson Education Limited

OPENING THOUGHT
Students will be familiar with the “idea” of a tangible product—the physical
manifestation—a cell phone or a pair of favorite jeans or shoes. However, students may
have trouble understanding the “totality” of the product physically demonstrated—the
core benefit, the basic product, expected product, augmented, and potential product. The
instructor is encouraged to use the class period to allow the students to try to uncover or
explore these additional components of the “product” concept so that the students will
begin to understand these dimensions better.

Students should have no problems understanding the concepts of durability and

reliability, nor should they have problems with brands differentiation or product line
depth and breadth. Perhaps, the most challenging concept of the chapter is the concept of
line stretching, and/or line filling. Be sure to differentiate between up market and down
market stretching. Again, the instructor is encouraged to use examples from
manufacturers’ and/or personal experience to communicate these concepts successfully.

ASSIGNMENTS
In planning its market offering, the marketer needs to address five product levels: core
benefit, basic product, expected product, augmented product, and potential product.
Students should select a firm within an industry and through research (Internet and other
formats) outline the firm’s five product levels for its products. In their research, students
should be challenged to discover the firm’s perception of the customer’s value hierarchy
and total consumption system.

Convenience items and capital good items can be seen as two ends of the “product
continuum.” Convenience items are purchased frequently, immediately, and with
minimum effort. Capital goods are those items that last a long period of time and are
purchased infrequently by consumers. Students should select a convenience good and a
capital good of their choice and compare and contrast the consumers’ value hierarchy and
users total consumption system for each item using the concepts presented in this chapter.

When the physical product cannot easily be differentiated, the key to competitive success
may lie in adding valued services and improving their quality. Examples of adding value
in the service component of a product include computers, education, and pizzas. Each
student is to select a product in which they think that the additional value present lies in
the service and quality components. Students should be prepared to defend their
selections using the material presented in this chapter.

DETAILED CHAPTER OUTLINE

Opening vignette: At the heart of a great brand is a great product. To achieve market
leadership, firms must offer products and services of superior quality that provide
unsurpassed customer value. Lexus formulated an offering to meet target customers’
needs or wants. The customer will judge the offering on three basic elements: product
features and quality, service mix and quality, and price, which must be meshed into a

Copyright © 2016 Pearson Education Limited

competitively attractive market offering.

I. Product Characteristics and Classifications

A. 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.
B. Product Levels: The Customer-Value Hierarchy
i. The fundamental level is the core benefit: the service or benefit the
customer is really buying. Marketers must see themselves as benefit
providers.
ii. At the second level, the marketer must turn the core benefit into a
basic product.
iii. At the third level, the marketer prepares an expected product, a set of
attributes and conditions buyers normally expect when they purchase
this product.
iv. At the fourth level, the marketer prepares an augmented product that
exceeds customer expectations. In developed countries, brand
positioning and competition take place at this level.
v. 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.
vi. Differentiation arises and competition increasingly occurs on the basis
of product augmentation.
vii. Each augmentation adds cost and augmented benefits soon become
expected benefits and necessary points-of-parity in the category
C. Product Classifications
i. Durability and tangibility: Products fall into three groups according to
durability and tangibility:
1. Nondurable goods are tangible goods normally consumed in
one or a few uses, such as beer and shampoo (purchased
frequently: make them available in many locations, charge only
a small markup, and advertise heavily to induce trial and build
preference)
2. Durable goods are tangible goods that normally survive many
uses (require more personal selling and service, command a
higher margin, and require more seller guarantees)
3. Services are intangible, inseparable, variable, and perishable
products that normally require more quality control, supplier
credibility, and adaptability.
ii. Consumer-goods classification
1. Convenience goods are purchased frequently, immediately, and
with minimal effort.
2. Shopping goods are those the consumer characteristically
compares on such bases as suitability, quality, price, and style.
3. Specialty goods have unique characteristics or brand
identification for which enough buyers are willing to make a

Copyright © 2016 Pearson Education Limited

 special purchasing effort.
4. Unsought goods are those the consumer does not know about
or normally think of buying. Unsought goods require
advertising and personal-selling support.
iii. Industrial-goods classification
1. Materials and parts are goods that enter the manufacturer’s
product completely.
a. Raw materials in turn fall into two major groups: farm
products and natural products
b. Manufactured materials and parts fall into two
categories: component materials and component parts.
2. Capital items are long-lasting goods that facilitate developing
or managing the finished product.
a. They fall into two groups: installations and equipment.
b. Installations consist of buildings and heavy equipment.
c. Equipment includes portable factory equipment and
tools and office equipment.
3. Supplies and business services are short-term goods and
services that facilitate developing or managing the finished
product.
II. Differentiation
A. To be branded, products must be differentiated.
B. Product Differentiation
i. Form: the size, shape, or physical structure of a product.
ii. Features: a company can identify and select appropriate new features
by surveying recent buyers and then calculating customer value versus
company cost for each potential feature and should avoid feature
fatigue.
iii. Performance quality: the level at which the product’s primary
characteristics operate
iv. Conformance quality: the degree to which all produced units are
identical and meet promised specifications.
v. Durability: a measure of the product’s expected operating life under
natural or stressful conditions, is a valued attribute for vehicles,
kitchen appliances, and other durable goods.
vi. Reliability: a measure of the probability that a product will not
malfunction or fail within a specified time period, and high reliability
can garner a price premium.
vii. Repairability: ease of fixing a product when it malfunctions or fails.
viii. Style: the product’s look and feel to the buyer and creates
distinctiveness that is hard to copy.
ix. Customization: customized products and marketing allow firms to be
highly relevant and differentiating by finding out exactly what a
person wants—and doesn’t want—and delivering on that.
C. Services Differentiation
i. Main service differentiators are ordering ease, delivery,

Copyright © 2016 Pearson Education Limited

 installation, customer training, customer consulting, maintenance
and repair, and returns.
a. Ordering ease: describes how easy it is for the customer
to place an order with the company.
b. Delivery: refers to how well the product or service is
brought to the customer, including speed, accuracy, and
care throughout the process.
c. Installation: refers to the work done to make a product
operational in its planned location.
d. Customer training: helps the customer’s employees use
the vendor’s equipment properly and efficiently.
e. Customer consulting: includes data, information
systems, and advice services the seller offers to buyers.
f. Maintenance and repair: programs help customers keep
purchased products in good working order; critical in
business-to-business settings
D. Design Differentiation
i. Design is the totality of features that affect the way the product looks,
feels, and functions.
ii. Design offers a potent way to differentiate and position a company’s
products and services.
iii. A well-designed product is easy to manufacture and distribute. To the
customer, it is pleasant to look at and easy to open, install, use, repair,
and dispose of. The designer must take all these goals into account.
III. Product and Brand Relationships
A. Each product can be related to other products to ensure that a firm is offering
and marketing the optimal set of products.
B. The Product Hierarchy
i. Stretches from basic needs to particular items that satisfy those needs
ii. Product system is a group of diverse but related items that function in
a compatible manner.
iii. Product mix (aka product assortment) is the set of all products and
items a particular seller offers for sale.
iv. The width of a product mix refers to how many different product lines
the company carries.
v. The length of a product mix refers to the total number of items in the
mix
vi. The depth of a product mix refers to how many variants are offered of
each product in the line.
vii. The consistency of the product mix describes how closely related the
various product lines are in end use, production requirements,
distribution channels, or some other way.
viii. These product mix dimensions permit the company to expand its
business in four ways.
1. It can add new product lines, thus widening its product mix.
2. It can lengthen each product line.

Copyright © 2016 Pearson Education Limited

 3. It can add more product variants to each product and deepen its
product mix.
4. It can pursue more product line consistency.
C. Product Line Analysis
i. Product line managers need to know the sales and profits of each item
in their line to determine which items to build, maintain, harvest, or
divest and they need to understand each product line’s market profile
and image
ii. The product line manager must review how the line is positioned
against competitors’ lines.
iii. A product map shows which competitors’ items are competing against
company X’s items, reveals possible locations for new items, and
identifies market segments
D. Product Line Length
i. Companies seeking high market share and market growth will
generally carry longer product lines
ii. Those emphasizing high profitability will carry shorter lines consisting
of carefully chosen items.
iii. A company lengthens its product line in two ways: line stretching and
line filling.
1. Line stretching occurs when a company lengthens its product
line beyond its current range, whether down-market (introduce
lower-priced line), up-market (to gain higher margins), or both
ways.
2. Line filling: lengthening the product line by adding more items
within the present range; overdone if it results in
cannibalization and confusion
E. Line Modernization, Featuring, and Pruning
i. Product lines regularly need to be modernized.
ii. Multi-brand companies all over the world try to optimize their brand
portfolios.
F. Product Mix Pricing
i. The firm searches for a set of prices that maximizes profits on the total
mix.
ii. There are six situations calling for product mix pricing:
1. Product Line Pricing
2. Optional-Feature Pricing
3. Captive-Product Pricing
4. Two-Part Pricing (fixed fee plus a variable usage fee)
5. By-Product Pricing
6. Product-Bundling Pricing
a. Pure bundling
b. Mixed bundling
G. Co-Branding and Ingredient Branding
i. Co-branding: also called dual branding or brand bundling—two or
more well-known brands are combined into a joint product or

Copyright © 2016 Pearson Education Limited

 marketed together in some fashion.
1. Same-company co-branding
2. Joint-venture co-branding
3. Multiple-sponsor co-branding
4. Retail co-branding
ii. For co-branding to succeed, the two brands must separately have brand
equity—adequate brand awareness and a sufficiently positive brand
image.
iii. The most important requirement is a logical fit between the two
brands, to maximize the advantages of each while minimizing
disadvantages.
iv. Ingredient branding: special case of co-branding that creates brand
equity for materials, components, or parts that are necessarily
contained within other branded products.
1. For host products whose brands are not that strong, ingredient
brands can provide differentiation and important signals of
quality.
2. An interesting take on ingredient branding is self-branded
ingredients that companies advertise and even trademark.
3. Consumers must believe the ingredient matters to the
performance and success of the end product. Ideally, this
intrinsic value is easily seen or experienced.
4. Consumers must be convinced that not all ingredient brands are
the same and that the ingredient is superior.
5. A distinctive symbol or logo must clearly signal that the host
product contains the ingredient. Ideally, this symbol or logo
functions like a “seal” and is simple and versatile, credibly
communicating quality and confidence.
6. A coordinated “pull” and “push” program must help consumers
understand the advantages of the branded ingredient. Channel
members must offer full support such as consumer advertising
and promotions and—sometimes in collaboration with
manufacturers—retail merchandising and promotion programs.
IV. Packaging, Labeling, Warranties, and Guarantees
A. Packaging
i. A fifth P; part of product strategy, it includes all the activities of
designing and producing the container for a product.
ii. Packaging is important because it is the buyer’s first encounter with
the product.
iii. It draws the consumer in and encourages product choice.
iv. Packaging may be an important part of a brand’s equity.
v. Packaging must achieve a number of objectives:
1. Identify the brand.
2. Convey descriptive and persuasive information.
3. Facilitate product transportation and protection.
4. Assist at-home storage.

Copyright © 2016 Pearson Education Limited

 5. Aid product consumption.
vi. Packaging color is important because color carries different meanings
in different cultures and market segments.
B. Labeling
i. A label performs several functions:
1. It identifies the product or brand
2. It might grade the product
3. The label might describe the product: who made it, where and
when, what it contains, how it is to be used, and how to use it
safely.
4. The label might promote the product through attractive
graphics.
C. Warranties and Guarantees
i. Warranties are formal statements of expected product performance by
the manufacturer.
ii. Many sellers offer either general or specific guarantees, which reduce
the buyer’s perceived risk.
V. Managing New Products
A. A company can add new products through acquisition or development.
B. New products range from new-to-the-world items that create an entirely new
market to minor improvements or revisions of existing products.
i. Most new product activity is devoted to improving existing products.
ii. New-to-the-world products incur the greatest cost and risk.
C. The Innovation Imperative and New Product Success
i. Continuous innovation is a necessity.
ii. Companies that fail to develop new products leave themselves vulnerable
to changing customer needs and tastes, shortened product life cycles,
increased domestic and foreign competition, and especially new
technologies.
iii. Most established companies focus on incremental innovation, entering
new markets by tweaking products for new customers, using variations on
a core product to stay one step.
iv. Newer companies create disruptive technologies that are cheaper and more
likely to alter the competitive space.
v. The number-one success factor is a unique, superior product.
vi. Technological and marketing synergy, quality of execution in all
stages, market attractiveness, and products designed with other
countries and a global perspective in mind fared better.
D. New Product Development
i. Idea Generation
1. The new-product development process starts with the search
for ideas.
2. Some marketing experts believe we find the greatest
opportunities and highest leverage for new products by
uncovering the best possible set of unmet customer needs or
technological innovation

Copyright © 2016 Pearson Education Limited

 3. New-product ideas can in fact come from interacting with
various groups and using creativity-generating techniques
4. Companies can crowdsource ideas or find good ideas by
researching the products and services of competitors and other
companies. They can find out what customers like and dislike
about competitors’ products.
ii. Idea Screening
1. Drops poor ideas as early as possible because product-
development costs rise substantially at each successive
development stage.
iii. Concept Development and Testing
1. A product idea is a possible product.
2. A product concept is an elaborated version of the idea
expressed in consumer terms.
3. A product-positioning map is created for the most promising
concepts.
4. A brand-positioning map can be used to compare ideas to
existing products.
5. Rapid prototyping designs products on a computer and
produces rough models to show potential consumers for their
reactions.
iv. Marketing Strategy Development
1. Following a successful concept test, the firm develops a
preliminary three-part strategy plan for introducing the new
product.
2. The first part describes the target market’s size, structure, and
behavior; the planned brand positioning; and the sales, market
share, and profit goals sought in the first few years.
3. The second part outlines the planned price, distribution
strategy, and marketing budget for the first year.
4. The third part of the marketing strategy plan describes the
long-run sales and profit goals and marketing-mix strategy over
time.
v. Business Analysis
1. The firm evaluates the proposal’s business attractiveness.
2. Management needs to prepare sales, cost, and profit projections
to determine whether they satisfy company objectives.
3. If they do, the concept can move to the development stage.
4. As new information comes in, the business analysis will
undergo revision and expansion.
vi. Product Development
1. The job of translating target customer requirements into a
working prototype is helped by a set of methods known as
quality function deployment (QFD).
2. The methodology takes the list of desired customer attributes
(CAs) generated by market research and turns them into a list

Copyright © 2016 Pearson Education Limited

 of engineering attributes (EAs) that engineers can use.
3. The R&D department is to find a prototype that embodies the
key attributes in the product-concept statement, performs safely
under normal use and conditions, and can be produced within
budgeted manufacturing costs.
vii. Market Testing
1. The amount of testing is influenced by the investment cost and
risk on the one hand and time pressure and research cost on the
other.
2. Consumer-products tests seek to estimate four variables: trial,
first repeat, adoption, and purchase frequency.
3. Four major methods of consumer-goods market testing, from
least to most costly.
a. Sales-wave research
b. Simulated test marketing
c. Controlled test marketing
d. Test markets
viii. Commercialization
1. Incurs the company’s highest costs to date
2. First entry—The first firm entering a market usually enjoys the
“first mover advantages” of locking up key distributors and
customers and gaining leadership. But if rushed to market
before it has been thoroughly debugged, the first entry can
backfire.
3. Parallel entry—The firm might time its entry to coincide with
the competitor’s entry. The market may pay more attention
when two companies are advertising the new product.
4. Late entry—The firm might delay its launch until after the
competitor has borne the cost of educating the market, and its
product may reveal flaws the late entrant can avoid. The late
entrant can also learn the size of the market.
VI. The Consumer-Adoption Process
A. Adoption is an individual’s decision to become a regular user of a product and
is followed by the consumer-loyalty process.
B. Stages in the Adoption Process
i. An innovation is any good, service, or idea that someone perceives as
new, no matter how long its history.
ii. The innovation diffusion process is “the spread of a new idea from its
source of invention or creation to its ultimate users or adopters.”
iii. The consumer-adoption process is the mental steps through which an
individual passes from first hearing about an innovation to final
adoption.
1. Awareness—The consumer becomes aware of the innovation
but lacks information about it.
2. Interest—The consumer is stimulated to seek information
about the innovation.

Copyright © 2016 Pearson Education Limited

 3. Evaluation—The consumer considers whether to try the
innovation.
4. Trial—The consumer tries the innovation to improve his or her
estimate of its value.
5. Adoption—The consumer decides to make full and regular use
of the innovation.
C. Factors Influencing the Adoption Process
i. Differences in individual readiness to try new products, the effect of
personal influence, differing rates of adoption, and differences in
organizations’ readiness to try new products
ii. Some researchers are focusing on use-diffusion processes as a
complement to adoption process models to see how consumers
actually use new products.
iii. Personal influence, the effect one person has on another’s attitude or
purchase probability, has greater significance in some situations and
for some individuals than others.
iv. Characteristics that influence an innovation’s rate of adoption:
1. Relative advantage
2. Compatibility
3. Complexity
4. Divisibility
5. Communicability
VII. Product Life-Cycle Marketing Strategies
A. To say a product has a life cycle is to assert four things:
i. Products have a limited life
ii. Product sales pass through distinct stages, each posing different
challenges, opportunities, and problems to the seller
iii. Profits rise and fall at different stages of the product life cycle
iv. Products require different marketing, financial, manufacturing,
purchasing, and human resource strategies in each life-cycle stage
B. Product Life Cycles
i. Most product life cycles are portrayed as bell-shaped curves, typically
divided into four stages: introduction, growth, maturity, and decline.
1. Introduction - A period of slow sales growth as the product is
introduced in the market. Profits are nonexistent because of the
heavy expenses of product introduction
2. Growth - A period of rapid market acceptance and substantial
profit improvement
3. Maturity - A slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits stabilize
or decline because of increased competition
4. Decline—Sales show a downward drift and profits erode
C. Marketing Strategies: Introduction Stage and the Pioneer Advantage
i. Five factors underpinning long-term market leadership:
1. Vision of a mass market
2. Persistence

Copyright © 2016 Pearson Education Limited

 3. Relentless innovation
4. Financial commitment
5. Asset leverage
D. Marketing Strategies: Growth Stage
i. Market by a rapid climb in sales.
ii. Early adopters like the product, and additional consumers start buying
it.
iii. New competitors enter, attracted by the opportunities. They introduce
new product features and expand distribution.
iv. Prices stabilize or fall slightly, depending on how fast demand
increases.
v. Companies maintain marketing expenditures or raise them slightly to
meet competition and continue to educate the market.
vi. Sales rise much faster than marketing expenditures, causing a welcome
decline in the marketing-to-sales ratio.
vii. Profits increase as marketing costs are spread over a larger volume,
and unit manufacturing costs fall faster than price declines, owing to
the producer-learning effect.
viii. Firms must watch for a change to a decelerating rate of growth in
order to prepare new strategies.
ix. To sustain rapid market share growth now, the firm improves product
quality and adds new features and improved styling; adds new models
and flanker products (of different sizes, flavors, and so forth) to protect
the main product; enters new market segments; increases its
distribution coverage and enters new distribution channels; shifts from
awareness and trial communications to preference and loyalty
communications; lowers prices to attract the next layer of price-
sensitive buyers.
E. Marketing Strategies: Maturity Stage
i. Most products are in this stage of the life cycle, which normally lasts
longer than the preceding ones.
ii. A company might try to expand the market for its mature brand by
working with the two factors that make up sales volume, number of
brand users and usage rate per customer.
iii. Managers also try to stimulate sales by improving quality, features, or
style.
F. Marketing Strategies: Decline Stage
i. Sales decline for a number of reasons, including technological
advances, shifts in consumer tastes, and increased domestic and
foreign competition.
ii. All can lead to overcapacity, increased price cutting, and profit
erosion.
iii. As sales and profits decline, some firms withdraw.
iv. Harvesting calls for gradually reducing a product or business’s costs
while trying to maintain sales.

Copyright © 2016 Pearson Education Limited

 v. If the company can’t find any buyers, it must decide whether to
liquidate or divest the brand quickly or slowly.
G. Critique of the Product Life-Cycle Concept
i. Life-cycle patterns are too variable in shape and duration to be
generalized.
ii. Marketers can seldom tell what stage their product is in.

Copyright © 2016 Pearson Education Limited