Chapter 6: Product Strategy

1/2/2023 704024/701022 - Chapter 6 1

 Learning Objectives

• Understand the concept of product / service and

other concepts related to the product.

• Analyze product lifecycle and marketing

strategies in each product life cycle.

• Brand strategy

1/2/2023 704024/701022 - Chapter 6 2

 Content

Concepts and product levels

Product classification

Decisions about products and services

New product development strategy

Life cycle strategies of the product

1/2/2023 704024/701022 - Chapter 6 3

Part 1: Product definition and
product level

1/2/2023 704024/701022 - Chapter 6 4

 What is product?
Product is anything that can be offered in a
market for attention, acquisition, use, or
consumption that might satisfy a need or
want.
Service is a product that consists of activities,
benefits, or satisfactions and that is
essentially intangible and does not result in
the ownership of anything.

1/2/2023 704024/701022 - Chapter 6 5

 What Is a Product?

• Products, Services, and Experiences

Products and services are becoming more

commoditized.

Companies are now creating and managing

customer experiences with their brands or
company.

1/2/2023 704024/701022 - Chapter 6 6

 What Is a Product?
• Levels of Product and Services

FIGURE | 8.1
Three Levels of Product
1/2/2023 704024/701022 - Chapter 6 7
Part 2: Product Classification

1/2/2023 704024/701022 - Chapter 6 8

 What Is a Product?

• Product and Service Classifications

Consumer products

Industrial products

1/2/2023 704024/701022 - Chapter 6 9

 What Is a Product?

Product and Service Classifications

Consumer products are products and services
bought by final consumers for personal
consumption.

• Convenience products

• Shopping products

• Specialty products

• Unsought products
1/2/2023 704024/701022 - Chapter 6 10
 Product Classification

Convenience products Shopping products

1/2/2023 704024/701022 - Chapter 6 11

 Product Classification

Specialty products Unsought products

1/2/2023 704024/701022 - Chapter 6 12

 What Is a Product?

Product and Service Classifications

Convenience products are consumer products

and services that the customer usually buys
frequently, immediately, and with a minimum
comparison and buying effort.

• Newspapers

• Candy

1/2/2023
• Fast food 704024/701022 - Chapter 6 13
 What Is a Product?

Product and Service Classifications

Shopping products are less frequently

purchased consumer products and services
that the customer compares carefully on
suitability, quality, price, and style.

• Furniture

• Cars

1/2/2023 • Appliances 704024/701022 - Chapter 6 14

 What Is a Product?

Product and Service Classifications

Specialty products are consumer products and
services with unique characteristics or brand
identification for which a significant group of
buyers is willing to make a special purchase effort.

• Medical services

• Designer clothes

1/2/2023
• High-end electronics
704024/701022 - Chapter 6 15
 What Is a Product?

Product and Service Classifications

Unsought products are consumer products that

the consumer does not know about or knows
about but does not normally think of buying.

• Life insurance

• Funeral services

• Blood donations
1/2/2023 704024/701022 - Chapter 6 16
 What Is a Product?

Product and Service Classifications

Industrial products are those products

purchased for further processing or for use in
conducting a business.

–Materials and parts

–Capital items

–Supplies and services

1/2/2023 704024/701022 - Chapter 6 17
 What Is a Product?

Product and Service Classifications

Materials and parts include raw materials

and manufactured materials and parts.

Capital items are industrial products that aid

in the buyer’s production or operations.

Supplies and services include operating

supplies, repair and maintenance items,
and business services.
1/2/2023 704024/701022 - Chapter 6 18
 What Is a Product?

Product and Service Classifications

• Organizations, Persons, Places, and Ideas

• Organization marketing

• Person marketing

• Place marketing

• Social marketing
1/2/2023 704024/701022 - Chapter 6 19
 What Is a Product?

Product and Service Classifications

Organization marketing consists of

activities undertaken to create, maintain, or
change the attitudes and behavior of target
consumers toward an organization.

1/2/2023 704024/701022 - Chapter 6 20

 What Is a Product?

Product and Service Classifications

Person marketing consists of

activities undertaken to create,
maintain, or change the attitudes or
behavior of target consumers toward
particular people.
1/2/2023 704024/701022 - Chapter 6 21
 What Is a Product?

Product and Service Classifications

Place marketing consists of activities

undertaken to create, maintain, or change

attitudes and behavior toward particular

places.

Social marketing uses commercial marketing

concepts to influence individuals’ behavior to

improve their well-being and that of society.

1/2/2023 704024/701022 - Chapter 6 22
Part 3: Product and service decision

1/2/2023 704024/701022 - Chapter 6 23

 Product and Service Decisions
• Individual Product and Service Decisions

FIGURE | 8.2 Individual Product Decisions

1/2/2023 704024/701022 - Chapter 6 24

 Product and Service Decisions
• Individual Product and Service Decisions

Communicate and deliver benefits by

product and service attributes.

– Quality

– Features

– Style and design

1/2/2023 704024/701022 - Chapter 6 25

 Product and Service Decisions
Individual Product and Service Decisions

Product quality refers to the characteristics of a

product or service that bear on its ability to satisfy
stated or implied customer needs.
– Total quality management
– Return-on-quality
– Quality level
– Performance quality
– Conformance quality

1/2/2023 704024/701022 - Chapter 6 26

 Product and Service Decisions
Individual Product and Service Decisions

Product Features

• Competitive tool for differentiating a product

from competitors’ products

• Assessed based on the value to the customer

versus its cost to the company

1/2/2023 704024/701022 - Chapter 6 27

 Product and Service Decisions
Individual Product and Service Decisions

Style describes the

appearance of the
product.
Design contributes
to a product’s
usefulness as well
as to its looks.

1/2/2023 704024/701022 - Chapter 6 28

 Product and Service Decisions
Individual Product and Service Decisions

Brand is the name, term, sign, or

design or a combination of these, that
identifies the maker or seller of a
product or service.

1/2/2023 704024/701022 - Chapter 6 29

 Brand Equity and Brand Value

• Brand equity is the differential effect that

knowing the brand name has on customer
response to the product or its marketing.

• Brand value is the total financial value of

a brand.

1/2/2023 704024/701022 - Chapter 6 30

 Building Strong Brands

FIGURE | 8.5 Major Brand Strategy Decisions

1/2/2023 704024/701022 - Chapter 6 31

 Building Strong Brands

Brand Positioning
Marketers can position brands at any of
three levels.
– Attributes
– Benefits
– Beliefs and values

1/2/2023 704024/701022 - Chapter 6 32

 Building Strong Brands

Brand Name Selection

1. Suggests benefits and qualities
2. Easy to pronounce, recognize, and
remember
3. Distinctive
4. Extendable
5. Translatable for the global economy
6. Capable of registration and legal protection

1/2/2023 704024/701022 - Chapter 6 33

 Building Strong Brands

Brand Sponsorship
– Manufacturer’s brand
– Private brand
– Licensed brand
– Co-brand

1/2/2023 704024/701022 - Chapter 6 34

 Building Strong Brands
• FIGURE | 8.6 Brand Development
Strategies

1/2/2023 704024/701022 - Chapter 6 35

 Product and Service Decisions
Individual Product and Service Decisions

Packaging involves
designing and
producing the
container or wrapper
for a product.
Labels identify the
product or brand,
describe attributes,
and provide
promotion.
1/2/2023 704024/701022 - Chapter 6 36
 Product and Service Decisions
Individual Product and Service Decisions

Product support
services
augment actual
products.

1/2/2023 704024/701022 - Chapter 6 37

 Product and Service Decisions

• Product Line Decisions

Product line is a group of products that are

closely related because they function in a
similar manner, are sold to the same
customer groups, are marketed through the
same types of outlets, or fall within given price
ranges.
1/2/2023 704024/701022 - Chapter 6 38
 Product and Service Decisions

Product Line Decisions

Product line
length is the
number of items
in the product
line.
– Line stretching
– Line filling

1/2/2023 704024/701022 - Chapter 6 39

 Product and Service Decisions

Product Mix Decisions

Product mix consists

of all the product
lines and items that
a particular seller
offers for sale.
• Width
• Length
• Depth
• Consistency
1/2/2023 704024/701022 - Chapter 6 40
Part 4: New Product Development

1/2/2023 704024/701022 - Chapter 6 41

 New Product Development Strategy

• Ways to Obtain New Products

Acquisition refers to the buying of a whole

company, a patent, or a license to produce
someone else’s product.

New product development refers to original

products, product improvements, product
modifications, and new brands developed from
the firm’s own research and development.

1/2/2023 704024/701022 - Chapter 6 42

 New Product Development Process
Major Stages in New Product Development

1/2/2023 704024/701022 - Chapter 6 43

 New Product Development Process
Idea Generation

Idea generation is
the systematic
search for new
product ideas.

Sources of new
product ideas
– Internal
– External
1/2/2023 704024/701022 - Chapter 6 44
 New Product Development Process
• Idea Generation

Internal sources refer to the company’s own

formal research and development, management
and staff, and intrapreneurial programs.

External sources refer to sources outside the

company such as customers, competitors,
distributors, suppliers, and outside design firms.45
1/2/2023 704024/701022 - Chapter 6
 New Product Development Process
Idea Generation

Crowdsourcing involves inviting broad

communities of people—customers, employees,
independent scientists and researchers, and
even the public at large—into the new product
innovation process.

1/2/2023 704024/701022 - Chapter 6 46

 New Product Development Process

• Idea Screening

• Identify good ideas and drop poor

ideas
• R-W-W screening framework:
– Is it real?
– Can we win?
– Is it worth doing?

1/2/2023 704024/701022 - Chapter 6 47

 New Product Development Process

• Concept Development and Testing

Product idea is an idea for a possible product that

the company can see itself offering to the
market.

Product concept is a detailed version of the idea

stated in meaningful consumer terms.

Product image is the way consumers perceive an

actual or potential product.
1/2/2023 704024/701022 - Chapter 6 48
 New Product Development Process

Concept Development and Testing

Concept testing
refers to testing new
product concepts
with groups of target
consumers.

1/2/2023 704024/701022 - Chapter 6 49

 New Product Development Process

• Marketing Strategy Development

Marketing strategy development is designing an
initial marketing strategy for a new product based
on the product concept.

• Marketing strategy statement consists of:

• Target market description

• Value proposition planned

• Sales, market-share, and marketing mix

1/2/2023 704024/701022 - Chapter 6 50
 New Product Development Process

Business Analysis

Business analysis is a review of the sales,

costs, and profit projections for a new product to
find out whether these factors satisfy the
company’s objectives.

1/2/2023 704024/701022 - Chapter 6 51

 New Product Development Process

Product Development
Product development
is developing the
product concept into a
physical product to
ensure that the product
idea can be turned into
a workable market
offering.
1/2/2023 704024/701022 - Chapter 6 52
 New Product Development Process

Product Development

Product development
is developing the
product concept into a
physical product to
ensure that the product
idea can be turned into
a workable market
offering.

1/2/2023 704024/701022 - Chapter 6 53

 New Product Development Process

Test Marketing
• Marketing Strategy Development

When test marketing When test marketing

is likely is unlikely

• New product with • Simple line

large investment extension
• Uncertainty about • Copy of competitor
product or product
marketing program • Low costs
• Management
confidence

1/2/2023 704024/701022 - Chapter 6 54

 New Product Development Process

Commercialization

Commercialization involves introducing a new

product into the market.
– When to launch?
– Where to launch?
– Planned market rollout?

1/2/2023 704024/701022 - Chapter 6 55

 Managing New Product Development

Successful new product development should be:

• Customer centered
• Team based
• Systematic

1/2/2023 704024/701022 - Chapter 6 56

 Managing New Product Development
• Customer-Centered New Product
Development

Customer-centered new

product development

focuses on finding new

ways to solve customer

problems and creating

more customer-satisfying

experiences.
1/2/2023 704024/701022 - Chapter 6 57
 Managing New Product Development

Team-Based New Product Development

Team-based new product development

involves various company departments working
closely together, overlapping the steps in the
product development process to save time and
increase effectiveness.

1/2/2023 704024/701022 - Chapter 6 58

 Managing New Product Development

Systematic New Product Development

• Innovation management system
– Creates an innovation-oriented company
culture
– Yields a large number of new product ideas
New Product Development in Turbulent
Times
• Tempted to reduce spending
• May become less competitive
1/2/2023 704024/701022 - Chapter 6 59
Part 5: Product Life – Cycle Strategies

1/2/2023 704024/701022 - Chapter 6 60

 Product Life-Cycle Strategies

FIGURE | 9.2

1/2/2023 704024/701022 - Chapter 6 61

 Product Life-Cycle Strategies
• Product development
– Zero sales and increasing investment costs
• Introduction
– Slow sales and nonexistent profits
• Growth
– Rapid market acceptance and increasing
profits
• Maturity
– Slow sales growth and profits level off or
decline
• Decline
1/2/2023 62
704024/701022 - Chapter 6
 Product Life-Cycle Strategies

1/2/2023 704024/701022 - Chapter 6 63

 Product Life-Cycle Strategies

• Introduction Stage

• Slow sales growth

• Little or no profit
• High distribution and promotion
expenses

1/2/2023 704024/701022 - Chapter 6 64

 Product Life-Cycle Strategies
Growth Stage

• Sales increase
• New competitors enter the market
• Profits increase
• Economies of scale
• Consumer education
• Lowering prices to attract more
buyers

1/2/2023 704024/701022 - Chapter 6 65

 Product Life-Cycle Strategies
Maturity Stage

• Slowdown in sales
• Many suppliers
• Substitute products
• Overcapacity leads to
competition
• Increased promotion and R&D
to support sales and profits

1/2/2023 704024/701022 - Chapter 6 66

 Product Life-Cycle Strategies
Maturity Stage
• Modification Strategies

• Modify the market

• Modify the product
• Modify the
marketing mix

1/2/2023 704024/701022 - Chapter 6 67

 Product Life-Cycle Strategies
Decline Stage

• Maintain the product

• Harvest the product
• Drop the product

1/2/2023 704024/701022 - Chapter 6 68

 Product Life-Cycle Strategies
Table 9.2 – Part 1

1/2/2023 704024/701022 - Chapter 6 69

 Product Life-Cycle Strategies
Table 9.2 – Part 2

1/2/2023 704024/701022 - Chapter 6 70

 Key terms

• Product

• Service

• Product life cycle

• Levels of product

• Brand

• Package

1/2/2023 704024/701022 - Chapter 6 71

 Key terms

• Convenience product

• Shopping product

• Specialty product

• Unsought Product

1/2/2023 704024/701022 - Chapter 6 72

 Key terms

• Line extension

• Brand extension

• Multibrands

• New brands

• Ansoff matrix

1/2/2023 704024/701022 - Chapter 6 73

 Q&A

1/2/2023 704024/701022 - Chapter 6 74