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11 Setting Product Strategy

11 Setting Product Strategy

Chapter Questions

What are the characteristics of products and how do marketers classify products? How can companies differentiate products? Why is product design important and what factors affect a good design?

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Chapter Questions

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?

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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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.

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Figure 11.1 Components of the Market Offering

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Figure 11.2 Five Product Levels

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Product Classification Schemes


Durability
Tangibility Use

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Product Classification Schemes


1. Nondurable goods are tangible goods normally consumed in one or a few uses, such as soft drinks and shampoo.

Because these goods are purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference.
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Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

Product Classification Schemes


2. Durable goods are tangible goods that normally survive many uses: refrigerators, machine tools, and clothing.

Durable products normally require more personal selling and service, command a higher margin, and require more seller guarantees.

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Product Classification Schemes


3. Services are intangible, inseparable, variable, and perishable products that normally require more quality control, supplier credibility, and adaptability. Examples include haircuts, legal advice, and appliance repairs

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Durability and Tangibility


Nondurable goods

Durable goods

Services

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Consumer Goods Classification


Convenience
Shopping Specialty

Unsought

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Consumer Goods Classification


1. Consumers purchase convenience goods frequently, immediately, and with minimal effort

E.g. soft drinks, newspapers, soaps, toothpaste


STAPLES Purchased on regular basis e.g. milk, vegetables, toothpaste, soap, biscuits IMPULSE Purchased without any planning or search effort e.g. chocolate, candy, potato chips EMERGENCY Purchased when a need is urgent e.g. umbrella, raincoats, sweaters, shawls
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Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

Consumer Goods Classification


2. Shopping goods that consumer characteristically compares on such basis as suitability, quality, price and style

E.g. furniture, clothing, used cars, major appliances


HOMOGENEOUS Similar in quality but different enough in price to justify shopping comparisons HETEROGENEOUS Differ in product features & services that may be more important than price
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Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

Consumer Goods Classification


3. Specialty goods have unique characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort E.g. Mercedes, TGB, Somus pakora, kalus tea

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Consumer Goods Classification


4.

Unsought goods consumers does not know or does not normally think about E.g. Life insurance, investments, mediclaim, baby products

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Industrial Goods Classification


1. Materials and parts 2. Capital items 3. Supplies/business services

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Industrial Goods Classification


1. Materials and parts Materials and parts are goods that enter the manufacturers product completely. They fall into two classes: raw materials, and manufactured materials and parts.

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Industrial Goods Classification


1. Materials and parts
Raw materials fall into two major groups: farm products (wheat, cotton, livestock, fruits, and vegetables) and natural products (fish, lumber, crude petroleum, iron ore). Farm products are supplied by many producers, who turn them over to marketing intermediaries, who provide assembly, grading, storage, transportation, and selling services. Their perishable and seasonal nature gives rise to special marketing practices, whereas their commodity character results in relatively little advertising and promotional activity.
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Industrial Goods Classification


1. Materials and parts
Raw materials fall into two major groups: farm products (wheat, cotton, livestock, fruits, and vegetables) and natural products (fish, lumber, crude petroleum, iron ore). Natural products limited in supply. Fewer suppliers. Supplier reliability and credibility, bargaining power. Long term supply contracts

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Industrial Goods Classification


1. Materials and parts
Manufactured materials and parts fall into two categories: component materials (iron, yarn, cement, wires) and component parts (small motors, tires, castings).
Component materials are usually fabricated furtherpig iron is made into steel, and yarn is woven into cloth. The standardized nature of component materials usually makes price and supplier reliability key purchase factors. Component parts enter the finished product with no further change in form, as when small motors are put into vacuum cleaners, and tires are put on automobiles. Most manufactured materials and parts are sold directly to industrial users. Price & service major marketing consideration; branding & advertising less important
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.
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Industrial Goods Classification


2. Capital Items

Capital items are long-lasting goods that facilitate developing or managing the finished product. They include two groups: installations and equipment.
Installations consist of buildings ( factories, offices) and heavy equipment (generators, drill presses, mainframe computers, elevators). Installations are major purchases. They are usually bought directly from the producer, whose sales force includes technical personnel, and a long negotiation precedes the typical sale. Equipment includes portable factory equipment and tools (hand tools, lift trucks) and office equipment (personal computers, desks).
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.
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Industrial Goods Classification


3. Supplies & business services

Supplies and business services are short-term goods and services that facilitate developing or managing the finished product. Supplies are of two kinds: maintenance and repair items (paint, nails, brooms) and operating supplies (lubricants, coal, writing paper, pencils). Also known as MRO

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Industrial Goods Classification


3. Supplies & business services

Business services include maintenance and repair services (maintenance of air conditioners, machine etc.), and business advisory services (legal, management consultants, advertising etc.)

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Product Differentiation

Product form Features Customization Performance Conformance

Durability Reliability Repairability Style

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Product Differentiation

Formthe size, shape, or physical structure of a product.

Features that supplement their basic function.


Customizing them. Performance levels: low, average, high, or superior. Performance quality is the level at which the products primary characteristics operate.

Buyers expect a high conformance quality, the degree to which all produced units are identical and meet promised specifications. 11-26 . 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from Copyright
the United States edition of Marketing Management, 14e.

Product Differentiation

Durability, a measure of the products expected operating life under natural or stressful conditions, is a valued attribute for vehicles, kitchen appliances, and other durable goods. Reliability is a measure of the probability that a product will not malfunction or fail within a specified time period. Repairability measures the ease of fixing a product when it malfunctions or fails. Ideal repairability would exist if users could fix the product themselves with little cost in money or time. Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from
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Product Differentiation

Style describes the products look and feel to the buyer. It creates distinctiveness that is hard to copy.

Design

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Product Differentiation

Design

Fast pace market price & technology not enough

Design is the factor that will often give a company its competitive edge Design is the totality of features how a product looks, feels and functions in terms of customer requirements
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.
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Product Differentiation

Design

Design especially important in making & marketing:

Retail services Apparels Packaged goods Durable equipment


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Marketers recognize the emotional power of design


Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

Product Differentiation

Design

The designer must figure out how much to invest in form, feature, development, performance, durability, repairability and style
To company a well designed product is one that is easy to manufacture & distribute To customer a well designed product is one that has pleasant look and easy to install, open, use, repair and dispose off
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.
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Design: Case of HIDESIGN

In both domestic & international markets, design, styling and manufacturing methods played significant roles in developing the brand image for this leather bags and accessory brand from India.

The company follows the traditional methods for leather processing.


It selects leather that does not conceals blemishes or variations in grain pattern to reflect naturalness.

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Design: Case of HIDESIGN

For tanning, the leather is soaked in vegetable extracts or bark and seeds, and subsequently vegetable oil is applied to make the leather supple. The brass fittings that are used in the product are made in the factory using the traditional sand-casting process. The company follows elaborate processes to capture the customer preferences in style, patterns, color, and aesthetic appearance to design their product. Each product passes through several stages of stringent quality checks
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.
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Design: Case of HIDESIGN

The spirit of brand is captured in its advertisement tag lines that proclaim years behind its time and leather crafted the forgotten way

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Product Differentiation: Design

Certain countries and companies are winning on design E.g. German cars high quality and technological designs E.g. Italian design in apparel, accessories and furniture E.g. Scandinavian design for functionality, aesthetics and environmental consciousness E.g. Finlands Nokia the first to introduce user-changeable body covers for cell phones, first to elliptical shapes, oft and friendly forms, and first with big screens
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.
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Product Differentiation: Design

A bad product design can ruin products prospects E.g. Sonys e-Villa Interne appliance was intended to allow consumers to have Internet access from their kitchens. But at nearly 32 pounds and 16 inches, the mammoth product was so awkward and heavy that the owners manual recommended customers bend their legs, not their back to pick it up. The product was withdrawn after 3 months
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.
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Service Differentiation

Ordering ease Delivery Installation Customer training Customer consulting Maintenance and repair Returns

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Design

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The Product Hierarchy

Item Product type Product line Product class

Product family
Need family
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Need family the core need that lies the existence of a product family Product family all the product classes that can satisfy a core need with reasonable effectiveness

Product class A group of products within a product family recognized as having certain functional coherence (Product category)
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Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

Product line - A group of products within a product category (class) that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels or fall within given price ranges

Product type A group of items within a product line that share one of several possible forms of the product Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from

the United States edition of Marketing Management, 14e.

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Item = Stock keeping unit or product variant A distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute

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Personal care (Need family core need) Cosmetics, skin creams, shampoos, conditioners, soaps, body lotion etc. (Product family) Hair cleaning agents (Product class/category) Shampoos (Product line)

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Dandruff control shampoo (Product type) Clinic All Cclear is a brand A sachet of Clinic All Clear is an (Item)

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Guidelines for Marketing Luxury Brands

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Product Systems and Mixes

Product system = Group of diverse but related items that function in a compatible manner

Product mix = set of all products and items a particular seller offers for sale

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Product Systems and Mixes

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Figure 11.3 Product-Item Contributions to a Product Lines Total Sales and Profits

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Figure 11.4 Product Map for a Paper-Product Line

Source: Benson P. Shapiro, Industrial Product Policy: Managing the Existing Product Line (Cambridge, MA: Marketing Science Institute Report No. 77110). Copyright 2003. Reprinted by permission of Marketing Science Institute and Benson P. Shapiro.

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Product Line Length

Line stretching Line filing Line modernization, featuring and pruning

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Line Stretching
Down-Market Stretch

Up-Market Stretch

Two-Way Stretch

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Product-Mix Pricing

Product-line pricing Optional-feature pricing Captive-product pricing Two-part pricing By-product pricing Product-bundling pricing

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What Is Co-branding?
In co-brandingalso called dual branding or brand bundlingtwo or more well-known brands are combined into a joint product or marketed together in some fashion.

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Types of Co-branding

Same company co-branding Joint-venture co-branding Multiple-sponsor co-branding Retail co-branding

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Ingredient Branding

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Requirements for successful ingredient branding


1. Consumers must believe the ingredient matters to the performance and success of the end product. 2. Consumers must be convinced that not all ingredient brands are the same and that the ingredient is superior. 3. A distinctive symbol or logo must clearly signal that the host product contains the ingredient. 4. A coordinated pull and push program must help consumers understand the advantages of the branded ingredient.
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What is the Fifth P?


Packaging, sometimes called the 5th P, is all the activities of designing and producing the container for a product.

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Factors Contributing to the Emphasis on Packaging

Self-service Consumer affluence customers can pay a little more for appearance, dependability and prestige of better packages Company/brand image Innovation opportunity

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Packaging Objectives

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Packaging objectives

Identify the brand

Convey descriptive and persuasive information


Facilitate product transportation and protection Assist at-home storage

Aid product consumption

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Functions of Labels
Identify the product or brand Grade it Promote it

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Warranties and Guarantees

Warranties = formal statements of expected product performance by the manufacturer Guarantee = suggest that the product is of high quality and that the company and its service performance are dependable

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For Review

What are the characteristics of products and how do marketers classify products? How can companies differentiate products? Why is product design important and what factors affect a good design?

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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Also for Review

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?

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

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