SETTING PRODUCT

STRATEGY
MEANING
 Many people think a product is a tangible offering, but it
can be more than that. Broadly, 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, organisations, information
and ideas.
 Buyer buys mixture of expected physical & psychological
satisfaction.
 So, product does not mean only the physical product but
the total product including brand, package, label, service
offered to the customers.
MEANING
 The product may be tangible, non-tangible, durables,
non-durable, manufactured, semi-manufactured,
consumers, industrial, necessities, luxuries,
agricultural, mineral, persons, places, organisation, idea
etc.
 Example: physical good/product. E.g., bread, Tv, shoes,
stationery, garments, cosmetics etc.
DEFINITION
 Acc to Philip Kotler
A product is anything that can be offered to a market for
attention, acquisition & consumption that might satisfy a
want or need. It includes physical objects, service,
persons, places, organizations & ideas.

 Acc to W.Alderson
A product is a bundle of utilities consisting of various
features & accompanying services.
PRODUCT LEVELS
 The Five Product Levels model was developed by Philip
Kotler in the 1960s.
 Every product has five different product levels
associated with it. Each level adds more customer value,
and together the five constitute Customer Value
Hierarchy.
 The Five Product Levels model provides a way to show
the different levels of need customers have for a product.
These needs range from core needs to psychological
needs. At each product level, more customer value is
added.
PRODUCT LEVELS
 (1) Core Benefit – Its the most fundamental level wherein it
encompasses the service or the benefit that the customer is
really buying. (a) For example, the core benefit of a hotel is to
provide somewhere to rest or sleep when away from home. (b)
In this case, the core benefit for the Happy Meal is food for
the stomach in order to satiate hunger.
 (2) Basic Product – At this level the marketer must convert
the core benefit into a basic product. (a) In our hotel example,
this could mean a bed, towels, a bathroom, a mirror, and a
wardrobe. (b) Thus a Happy Meal is in a way a combo-meal
containing individual product offering of McDonald’s. Its a
burger & coke combo, with the intent to satisfy hunger and
quench thirst.
PRODUCT LEVELS
 (3) Expected Product – At this level, the product has
a set of attributes and conditions that customers will
normally expect while purchasing the product. (a) In our
hotel example, this would include clean sheets, some
clean towels, Wi-fi, and a clean bathroom. (b)
McDonald’s has a reputation of standardization and
high quality assurance and thus customers expect that
their Happy Meal doesn’t taste different at different
outlets and that their food is handled with the highest
degree of cleanliness and hygiene.
PRODUCT LEVELS
 (4) Augmented Product – The level in which the
product exceeds customer expectations. (a) In our
hotel example, this could be the inclusion of a
caretaker service or a free map of the town in every
room. (b) For a Happy Meal the free toy contributes at
this level. Toys are changed on a periodic basis and
are often creative and interactive.
McDonald’s ensures their quality, safety and
suitability for children.
PRODUCT LEVELS
 (5) Potential Product – This encompasses all the possible
augmentations and transformations that the product might
undergo in the future. (a) In our hotel, this could mean a
different gift placed in the room each time a customer stays.
For example, it could be some chocolates on one occasion, and
some luxury water on another. By continuing to augment its
product in this way the hotel will continue to delight and
surprise the customer. (b) For the Happy Meal, healthier
alternatives can be introduced to replace the aerated
beverage. The toys could get more creative, interactive and
also impart knowledge to the children instead of just
remaining as a play thing.
FIVE PRODUCT LEVELS ADVANTAGES

 The real advantage of the model is that it enables an

organization to identify the needs and wants of
customers. The organization can then:
 match the features they create to what the customer
wants.
 match operational processes to what customers want. In
our hotel example, this would mean strict processes
around cleaning each room.
 match marketing efforts to appeal to customers wants.

 The model ultimately helps organizations differentiate

themselves from their competitors in a way that aligns
with the wants and needs of their customers.
 CLASSIFICATIONS OF PRODUCTS

 Marketers have traditionally classified products

based on varying product characteristics.
 Each product type has an appropriate
marketing mix strategy marketing concepts and
tools present the major classifications
for Consumer and Industrial Products and
their marketing strategy implications.
DURABLE GOODS, NONDURABLE GOODS, AND SERVICES
You can classify products into three groups according to their durability or
tangibility.
 Nondurable Goods: Nondurable goods in one or a few uses. Examples
include coffee, soap, and salt. Since these goods are consumed fast and
purchased frequently. Therefore, 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.

 Durable Goods: Durable goods are tangible goods that survive many
uses. Examples include machines clothing, and machinery. Durable
products require more personal selling and service demand a higher
margin and require more sellers guarantees.

 Services: Services are activities, benefits, or satisfaction that are

offered for sale. Examples include oil changes for your car and home
repairs. Services are intangible, inseparable, variable, and as a result,
they require more quality control, supplier credibility, and adaptability.
CONSUMER GOODS CLASSIFICATIONS

 Consumers buy a vast number of goods and services. A useful

way to classify these goods is based on consumer shopping habits,
because those habits have implications for marketing strategies.
 We can distinguish between convenience, shopping,
specialty, and unsought goods.
 Classifications of products
 Goods that the customer frequently purchases with a minimal
amount of effort in comparison shopping. Examples include soda,
candy, and newspapers.
 Convenience goods can be further divided into impulse
goods, emergencies goods, and staples. Staples are products
that consumers purchase regularly. For example, one buyer
might routinely purchase Heinz Ketchup, Colgate toothpaste, and
Ritz crackers.
CONSUMER GOODS CLASSIFICATIONS

 Impulse goods are purchased with no planning or search

effort. These goods are usually available in many retail
outlets because customer typically doesn’t look for them.
 You will find candy bars and magazines place next to the
checkout counters because shoppers may not have thought
of buying them until they spot them in a convenient
location.
 Emergency goods are purchased when it is urgent. For
example, umbrellas during a rainstorm, salt for icy
driveways, and aspirin if you have a headache.
Manufacturers of emergency products will place them in
many outlets to capture the sale when the customer needs
the products.
CONSUMER GOODS CLASSIFICATIONS
 Shopping Goods
 Goods that the customer, in the process of selection and purchase,
characteristically compares on the basis as suitability, quality,
price, and style. Examples include clothing, appliances, and
automobile.
 Shopping goods can be divided into homogeneous and
heterogeneous goods. The Buyer sees homogeneous shopping Goods
as similar in quality but different enough and price to justify
shopping comparisons. The seller has to talk price to the buyer.
 However, when shopping for clothes, furniture, and more
heterogeneous goods, product features are often more important to
the consumer then the price if the buyer wants a plain suit the cut,
fit, and look are likely to be more important then small price
differences.
 The seller of heterogeneous shopping Goods must there for carrying
a wide assortment to satisfy the individual taste and must have
well-trained sales Personnel to provide information and advice to
customers.
CONSUMER GOODS CLASSIFICATIONS

 Specialty Goods:
 Goods with unique characteristics and our brand
identification for which a significant group of buyers is
habitually willing to make a special purchasing effort.
examples include specific brands and types of fancy
goods, cars, audio components, and men suits.
 An Audi, for example, is a specialty good because buyers
will travel far to buy one. Specialty goods do not involve
the buyer and making comparisons. Buyers invest time
only to reach dealers carrying the desired products. The
dealers do not need convenient locations, however, they
must let prospective buyers know about their locations.
CONSUMER GOODS CLASSIFICATIONS
Unsought Goods:
 Goods that the customer does not know about or knows
about but does not normally think of buying. New
products, such as carbon monoxide detectors and paper
shredders, are unsought Goods until the customer is made
aware of them through advertising.
 The classic examples known but unsought goods are life
insurance, and encyclopedias.
 Unsought Goods require substantial marketing efforts in
the form of advertising and personal selling. Some most
sophisticated personal selling techniques have developed
from The Challenge to sell unsought goods.
INDUSTRIAL GOODS CLASSIFICATIONS
 Companies buy a vast variety of goods and services. The
useful industrial good classification would suggest
appropriate marketing strategies in the industrial market.
 Industrial goods can be classified into how they enter the
production process and their relative costliness.
 We can distinguish three groups: materials and parts,
capital items, and supplies and services.
INDUSTRIAL GOODS CLASSIFICATIONS
 Materials and Parts: Goods that enter the manufacturer’s
product completely. They fall into two classes: Raw
materials and manufactured materials and parts.
 Raw materials fall into classes: farm products (e.g., fruits,
cotton, livestock, corn, and wheat) and natural product (e.g.,
crude petroleum, fish, and lumber). Each is marketed
somewhat differently. Farm products are supplied by many
producers.
 They turn over their products to marketing intermediaries,
who provide assembly, grading, storage, distribution, and
selling services. Farm products are somewhat expendable
in the long run but not in the short run. Farm products
perishable and seasonal nature gives rise to special
marketing practices.
INDUSTRIAL GOODS CLASSIFICATIONS
 Their commodity characteristics result in little advertising
and promotional activities, which some expectations. From
time to time, commodity groups will launch campaigns to
promote the consumption of their products–potatoes, milk,
and peaches. And some producers brand their products, for
example, Chiquita bananas and Sunkist oranges.
 Natural products are limited in supply. They usually have
great bulk and low unit value and require transportation
to move them from producer to the customer. They are
fewer and larger producers, who often market them
directly to industrial customers.
 Because the users depend on these materials, long-term
contracts are common. The homogeneous materials limit
the amount of demand creation activity. Price and delivery
reliability are the major factors influencing the selection of
suppliers.
INDUSTRIAL GOODS CLASSIFICATIONS
 Capital Product Items
 Goods that enter the finished product partly. They include
two groups installations and accessory equipment.
 Installations consist of buildings (e.g., manufacturing
plants and offices) and fix equipment (e.g., drill presses,
computers, elevators, and generators).
 Installations are major purchases. They are usually bought
directly from the producer, with a typical sale preceded by
long negotiations.
 The producers use a skilled sales force, which often
includes sales engineers. The producers have to be willing
to design to specification and supply post-sale service.
Advertising is used, but it’s much less important than
direct selling.
INDUSTRIAL GOODS CLASSIFICATIONS
 The accessory equipment comprises portable factory
equipment and tools (e.g., Forklift trucks, and hand tools)
and office equipment (e.g., Desks and computers). These
types of equipment do not become part of the finished
product. They help in the production process.
 They have a shorter life than installations but longer life
than operating supplies. Although some accessory
equipment manufacturers sell direct, more often they use
middlemen because the market is geographically dispersed,
the buyers are many, orders are small.
 Quality, features, price, and service are major
considerations in vendor selection. The sales force is more
important than advertising, can be used effectively.
INDUSTRIAL GOODS CLASSIFICATIONS
Supplies and Services:
 Items that do not enter finished products at all.

 There are two kinds of supplier and

services: Operating supplies (e.g., pens and paper, coal,
and lubricants) and maintenance and repair items (cleaning
supplies, nails, and paint). Supplies are the equivalent of
convenience goods in the industrial field.
 They are usually purchased with a minimum effort on a
straight re-buy basis in the purchasing department. It’s
commonly called an open purchase order or open PO.
 These products are normally marketed through
intermediaries because of the large number of customers,
the geographic dispersion, and the low unit value. Price and
service are important considerations, since suppliers are
quite standardized, and brand preferences are not high.
INDUSTRIAL GOODS CLASSIFICATIONS
Supplies and Services:
 Business services include maintenance and repair services (e.g.,
computer repair and office cleaning) and business advisory
services (e.g., advertising, management consulting, and legal
services). Maintenance and repair services are usually supplied
under a contract.
 Maintenance services are often provided by small producers, and
repair services are often available from the manufacturers of the
original equipment. Business advisory services are normally new
buying situations, and the industrial buyer will choose the
supplier based on the supplier’s reputation and people.
 Therefore we see that product characteristics will have a major
influence on marketing strategy. The marketing strategy will also
depend on other factors, such as a product’s lifecycle stage,
competitors strategies, and economic situation.
INDUSTRIAL GOODS CLASSIFICATIONS
 Wrapping Up for Classifications of product
 The classifications of products and their marketing
strategy implications are essential to marketing
managers. Market structure definition and analysis
establish an important foundation for market segment
identification and analysis of competitive advantage.

 So whether you are launching or marketing a mature

product, the classification for durable goods, nondurable
goods, and services is critical and will impact your
marketing strategies and budgets.
DIFFERENTIATION
 Differentiation in marketing is the process of
distinguishing a company’s product/service from those
of its competitors and from its own products in order
to make it more attractive to a particular target
audience.

 Atone extreme are products that allow little variation:

chicken, aspirin, and steel. Yet even here, some
differentiation is possible: K&Ns chicken, Bayer
aspirin, and India’s Tata Steel each have distinct
identities in their categories.
DIFFERENTIATION
 At the other extreme are products capable of high
differentiation, such as automobiles, commercial
buildings, and furniture. Here the seller faces an
abundance of differentiation possibilities, including
form, features, customization, performance quality,
conformance quality, durability, reliability,
repairability, and style.

 Design is another important means of differentiation

PRODUCT DIFFERENTIATION

Products are differentiated on the basis of:

 Form

 Features

 Customization

 Performance quality

 Conformance quality

 Durability

 Reliability

 Repairability

 Style
 PRODUCT DIFFERENTIATION
Form
 Many products can be differentiated in form—the size, shape,
or physical structure of a product.
Features
 Any additional features being offered on top of the product
becomes a plus point for the customer. The best example for
differentiation based on features is Mobile phones, handsets or
any technology product. They are differentiated mainly by the
number of customizations or the additional features that they
offer. Thus features can be a form of Product differentiation.

Customization
 Marketers can differentiate products by customizing them
.Mass customization is the ability of a company to meet each
customer’s requirements—to prepare on a mass basis
individually designed products, services, programs, and
communications.
 PRODUCT DIFFERENTIATION
Performance Quality
 Most products occupy one of four performance levels: low, average,
high, or superior. Performance quality is the level at which the
product’s primary characteristics operate. Quality is increasingly
important for differentiation as companies adopt a value model and
provide higher quality for less money.
 Why is a BMW costlier than other cars? Because it has
superior performance. Why is a formula 1 racing car costlier than a
BMW? Because an F1 car has an even higher performance as
compared to a BMW. Thus performance increases price. Similarly, your
competition can present a product which does not perform as well but
is available at half the price. Naturally, some of your customers might
shift to the competition. This is not true for all customers. Some
customers will be looking out for the superior quality products only.
Thus you can do product differentiation on the basis of the
performance of your product.
Conformance Quality
Buyers expect a high conformance quality, the degree to which all
produced units are identical and meet promised specifications. Suppose a
Porsche 911 is designed to accelerate to 60 miles per hour within 10
seconds. if every Porsche 911 coming off the assembly line does this, the
model is said to have high conformance quality. The problem with low
conformance quality is that the product will disappoint some buyers
 PRODUCT DIFFERENTIATION
Durability
Durability is a measure of the product’s expected operating life
under natural or stressful conditions and is a valued attribute
for vehicles, kitchen appliances, and other durable goods. Nokia
phones are also known for their durability.
Reliability
Buyers normally will pay a premium for more reliable products. Reliability is a
measure of the probability that a product will not malfunction or fail within a
specified time period.
 Do you know why a Volvo sells in the market? The name of Volvo is
almost synonymous with safety. Volvo manufactures the most safe and
reliable vehicles in the world. That is why their buses are so famous.
Therefore it is not surprising that Volvo also sells at a premium. This
is because, here the product differentiation is on the basis of
Reliability, one of the most valued assets a brand can have.
 PRODUCT DIFFERENTIATION
Repairability
Repairability measures the ease of fixing a product when it
malfunctions or fails. Many computer hardware and software
companies offer technical support over the phone, by fax or
email, or via real-time chat online. •
Style
Style describes the product’s look and feel to the buyer. It
creates distinctiveness that is hard to copy. Car buyers pay a
premium for Jaguars because of their extraordinary looks.
 Harley Davidson. Gucci. Lamborghini. Ferrari. Longines.
Omega. when i take these names, you know what quality i
am talking of. Each brand has a style of its own and that is
why each brand has a differentiation of its own.
 SERVICES DIFFERENTIATION
Services Differentiation
 Ordering ease

 Delivery

 Installation

 Customer training

 Customer consulting

 Maintenance and repair

 Returns
SERVICES DIFFERENTIATION
Ordering ease
Ordering ease refers to how easy it is for the customer to place an order
with the company. Many companies offer secure online sites to help
customers get information and complete transactions more efficiently.
 This is a differentiator on which many internet businesses
are based nowadays. Have you noticed an increase in
overall purchases because of the penetration of E-
commerce? People used to do window shopping when they
had time.
 Now they just have to browse their smartphones whenever
they are free. No doubt, this has resulted in more impulse
purchases then the history of mankind. That is why E-
commerce services are on the rise. And this is also the
reason that most businesses are preferring online
marketing as the mode of selling their products.

 SERVICES DIFFERENTIATION
Delivery
Delivery refers to how well the product or service is brought to the customer. It
includes speed, accuracy, and care throughout the process. Today’s customers have
grown to expect speed:
 so delivery is a major marketing tactic to differentiate your services.
Just look at the popularity of Pizza Hut or Dominos and the only
reason these 2 brands are popular because of their claim of “30
minutes delivery or free”.
 In terms of E-commerce, look at Amazon Prime. Where normal E-
commerce companies commit 4-6 days delivery, Amazon prime
commits the delivery in 24 to 48 hours max. Moreover, if you are an
Amazon prime customer, you get free delivery too. This immediately
attracts the customer towards Amazon.
 Be it a restaurant, a travel operator, an E-commerce company,
whatever products or services you have to deliver, should be delivered
fast and accurate. And this delivery time should be incorporated in
your marketing communications. It will help you a lot to differentiate
your services.


Installation
Installation refers to the work done to make a product operational in its planned
location. Ease of installation is a true selling point for buyers of complex products like
heavy equipment etc.
 SERVICES DIFFERENTIATION
Installation
Installation refers to the work done to make a product operational in its
planned location. Ease of installation is a true selling point for buyers of
complex products like heavy equipment etc.
 Companies which sell Air conditioners or technical equipment
like Cold rooms, Ducting equipment etc, have to differentiate
themselves through their services. Are you likely to install a cold
room when you know that the brand provides poor service?
 At any time, a restaurant’s cold room has very high priced
material and food items stored within the cold room. If timely
installation and services are not given on site, all food items will
get spoilt and the customer will suffer a huge loss. It is not only
monetary affect. Due to the breakdown of the cold room, the
restaurant will not be able to serve customers on that day and
might have to ask customers to leave. This affects the reputation
of the restaurant, and severely affects your brand image.
 Besides the above heavy equipment example, even normal
products require installation and it should be simple. A fridge
delivered at home has an easy installation and so does a
television.
 SERVICES DIFFERENTIATION
Customer training
Customer training helps the customer’s employees use the vendor’s equipment
properly and efficiently. General Electric not only sells and installs expensive X-
ray equipment in hospitals, it also gives extensive training to users.
 Customer training is necessary and an important aspect of differentiating your
services. When you are selling products which are new in the market, you have
to impart proper customer training so that the customer does not misuse the
product. Remember – the customer is more likely to blame your company than
he is to blame himself. If he does not understand the handling of the product,
that is your fault too.
 Many companies understand that customer training is necessary and hence
they have imparted the training as a norm in their installation procedures.
When you order a stove at home, the mechanic explains you the process of
using it personally. When you order a washing machine, you can have a demo
call along with the delivery of the washing machine. These are ways to instruct
the customer on using the machine properly so that he is happy with your
service.
 McDonalds, Pizza hut and Dominos, all these fast expanding franchises always
have training centers to train the employees of their customers. Remember, in
these cases, the distributor or the person who has taken a franchise is also the
internal customer of the fast food chains. These fast food chains then train the
 SERVICES DIFFERENTIATION
Customer consulting
Customer consulting includes data, information systems, and advice
services the seller offers to buyers.
 Firms like IBM and Accenture have made big bucks
through their consultation offers. Customer consulting
includes numerous infrastructure or operation related
consulting which can be offered in the form of data
management, information systems and service advisory.
 Snapdeal recently introduced Account managers who will
help you expand your online business. Similarly, FMCG
companies via their product managers consult their
distributors and help them increase their businesses by
installing software and infrastructure which directly
notifies the company when the dealer does not have stock
or about the stocks that he needs.
 SERVICES DIFFERENTIATION
Maintenance and repair
Maintenance and repair programs help customers keep purchased products in good
working order.
 Repair services need to differentiate themselves with the response
time. Many tech products like your Ipod and Printer have online
knowledge bases which users can refer to, so as to solve their problems
immediately. Other times, companies like Hewlett packard and others
offer fast services to their corporate and enterprise customers.
 Companies like Dell and IBM have onsite engineers who take care of
all customers needs. They also ensure that the network is working
properly and they take care of regular infrastructure maintenance and
repair in their hand. These top companies know that breakdown of
network or improper working of servers can affect a lot in the overall
productivity of their employees. Hence maintenance and repairs are
handled with care.
 Look at the service centers of Automobiles. They will remind you
periodically of what services or maintenance is due. And these services
earn a good amount through replacement of spare parts and by
keeping spare parts in stock. There is good revenue generated through
maintenance and repairs as well.
 SERVICES DIFFERENTIATION
Returns
Returns are also an unavoidable reality of doing business, especially with
online purchases. Return and exchange policies are estimated to serve as
a deterrent for one-third to one-half of online buyers.
 There are majorly two types of returns and two ways to manage them.
How you manage them helps you with service differentiation.
 Controllable returns are the ones where there is a genuine problem in
the product or it got broken in transport or the product quality is not
upto mark. If there is a high percentage of controllable returns, then
you know what you need to improve on.
 Uncontrollable returns are returns which happen because the
customer did not understand the product or his experience was not
good. Changing uncontrollable things is difficult and as long as
uncontrollable returns are a small portion of your returned products,
you are fine. Many brands have opened experience centers
and automobile companies give test rides so as to manage customer
expectations. This way when the customer orders a product online, he
will not disappoint the seller who is selling these products.
 PRODUCT AND BRAND RELATIONSHIP
 One of the things which confuses many beginners in
Marketing is the product hierarchy. There are just too
many types of product classes like Product line, product
mix, product type etc.
 To understand the product hierarchy, we will have to look
not at a single product but the business as a whole. So for
example, we can take Volkswagen as a company and we
will try to understand the Product hierarchy of
Volkswagen.
 PRODUCT AND BRAND RELATIONSHIP
 1) Product need – Product need is the basic reason because
of which the product exists. So the need for cars to exist is
because people want to travel. This is the basic product
need which is fulfilled by Volkswagen cars.
 2) Product family – The Product family defines the core
need which the product satisfies. When we are talking of
the product family, we have to look at the
complete business market and not at
the individual market. So when travel is the basic
requirement, then there is an option of Plane travel, train
travel, roadways travel, travel via passenger cars or
transport vehicles. In this case, the Product family is
passenger travel and the product family of Volkswagen is
Cars.
PRODUCT AND BRAND RELATIONSHIP
 3) Product class – Product class and Product family are very
similar in nature and can also be treated as synonyms. For
example – Volkswagen also manufactures bus which is a multi
passenger transport vehicles and it also manufactures 2 seater
luxury cars. Thus when we categorize different products within
the company (and not outside the company like in Product
family) then it is known as product class. Mercedes, for example,
exists in cars and buses both predominantly. Thus, it has 2
common product classes where it is present.
 4) Product line – The complete line of products within one class
of products is known as the product line. So if we talk about
Volkswagen passenger cars, then we have the Volkswagen Polo
and the Vento as well as different products within the
Volkswagen product line. At the same time, Audi is
another brand owned by Volkswagen and is divided into
multiple product lines including the Q series. So Q series is just
one Product line and there would be multiple such product lines
of Audi.
 PRODUCT AND BRAND RELATIONSHIP
 5. Product type – Within the Product line there are various
product types. For example – If we talk of Hyundai’s I20,
then there is I20 Asta, I20 Magna as well as I20 Sportz. So
I20 becomes a product type and the other models become
product units (explained below)
 Similarly, for any given series, within the series there are
multiple models and these are the product types. Audi’s Q6
or Q7 will also have various customized types on offer and
these are known as product types. They are offered to
customers based on the budget of customers and their
requirement of features.
 PRODUCT AND BRAND RELATIONSHIP
 6) Product unit – The final aspect in the Product hierarchy
is the product unit which is also known as the SKU.
Continuing the above example, the Hyundai I20 Asta is
one Product unit and so is the Hyundai I20 Magna. So if
the product is an independent product and there is no
other product type dependent on it, then it is an individual
product unit.
 Whether you take HUL, P&G or any such companies
having multiple products, you can divide the products
based on the above product hierarchy.
 PRODUCT MIX AND PRODUCT LINE
 The complete range of products present within a company
is known as the product mix. In any
multi brand organizations, there are numerous products
present. None of the organizations wants to take the risk of
being present in the market with a single product.
 If a company has only a single product, than it is
understood that the demand of the product is very high or
the company does not have the resources to expand the
number of products it has. Generally, most companies
nowadays realise the importance of product diversification.
 PRODUCT MIX AND PRODUCT LINE
 However, if the business market is any example, than all
the top companies have multiple products. Coca
cola, Apple, Microsoft, Nestle, Hindustan unilever,
Pharmaceutical companies, so on and so forth. These
companies need to have a wide product portfolio to be
present in the market and to have a sustainable
business model. The combination of products that they
have in their product portfolio can be the product mix.
Product mix
 As explained, product mix is a combination of total product
lines within a company. A company like HUL has
numerous product lines like Shampoos, detergents, Soaps
etc. The combination of all these product lines is the
product mix.
 PRODUCT MIX AND PRODUCT LINE
Product line
 The product line is a subset of the product mix. The
product line generally refers to a type of product within an
organization. As the organization can have a number of
different types of products, it will have similar number of
product lines. Thus, in Nestle, there are milk based
products like milkmaid, Food products like Maggi,
chocolate products like Kitkat and other such product
lines. Thus, Nestle’s product mix will be a combination of
the all the product lines within the company.
 PRODUCT MIX AND PRODUCT LINE
Product line length
 If a company has 4 product lines, and 10 products within
the product line, than the length of the product mix is 40.
Thus, the total number of products against the total
number of product lines forms the length of the product
mix. This equation is also known as product line length.
 PRODUCT MIX AND PRODUCT LINE
Product line width
 The width of the product mix is equal to the number of
product lines within a company. Thus, taking the above
example, if there are 4 product lines within the company,
and 10 products within each product line, than the product
line width is 4 only. Thus, product line width is a depiction
of the number of product lines which a company has.
Product line depth
 It is fairly easy to understand what depth of the product
mix will mean. Where length and width were a function of
the number of product lines, the depth of the product mix
is the total number of products within a product line. Thus
if a company has 4 product lines and 10 products in each
product line, than the product mix depth is 10. It can have
any variations within the product for form the product line
depth.
 PRODUCT MIX AND PRODUCT LINE
Product line consistency
 The lesser the variations between the products, the more is
the product line consistency. For example, Amul has
various product lines which are all dairy related. So that
product mix consistency is high. But Samsung as a
company has many product lines which are completely
independent of each other. Like Air conditioners,
televisions, smart phones, home appliances, so on and so
forth. Thus the product mix consistency is low in Samsung.
 PRODUCT MIX AND PRODUCT LINE
Example of Product line and Product mix
 Let us take an example of P&G as a company and
understand product mix. This will not be a precise example
and all products of P&G might not be taken into
consideration. But the example will help you understand
product mix within an organization.
 Detergents – Arial, Arial oxyblue, Ariel bar, Tide, Tide
naturals, Tide bleach, Tide plus.
Shampoos – Head and shoulders, Head and shoulders anti
dandruff, Pantene, Pantene damage repair, Pantene pro-v
 In the above example the following can be learned about
the product mix of P&G
Product mix Length – 12
Product mix Width – 2
Product mix Depth – 7 in detergents and 5 in shampoos
Product mix consistency – High as both are bathroom
products.
 PRODUCT-LINE LENGTH
Product-Line Length:
 Product-line managers are concerned with length of
product line. If adding items to the product line can
increase profits, then we can say that the product line is
too short. On the contrary, the line is too long if dropping
items can increase profits. They have to consider these two
extremes of the product line and have to strike a balance
between them.
 Company objectives influence product-line length.
Companies seeking high market share and market growth
will carry longer lines. Companies that emphasise high
profitability will carry shorter lines consisting of carefully
chosen items.
 A company can lengthen its product line in 2 ways viz. a)
line stretching and b) line filling.
 PRODUCT-LINE LENGTH
Product-Line Length:
 Product-line managers are concerned with length of
product line. If adding items to the product line can
increase profits, then we can say that the product line is
too short. On the contrary, the line is too long if dropping
items can increase profits. They have to consider these two
extremes of the product line and have to strike a balance
between them.
 Company objectives influence product-line length.
Companies seeking high market share and market growth
will carry longer lines. Companies that emphasise high
profitability will carry shorter lines consisting of carefully
chosen items.
 A company can lengthen its product line in 2 ways viz. a)
line stretching and b) line filling.
PRODUCT-LINE LENGTH
 Line Stretching:
 This occurs when a company lengthens its product line beyond
its current range. This is a frequent measure taken by
companies to enter new price slots and to cater to new market
segments. The product may be stretched by the addition of new
models, sizes, variants etc. The company can stretch in 3 ways:
 1. Down-market stretch:
 A company positioned in the upper market may want to
introduce a lower price line. They offer the product in the same
product line for the lower end markets. A company can take this
strategy for 3 reasons:
 i. Strong growth opportunities in the down-market
 ii. Tie-up lower-end competitors who might try to move up-
market
 iii. Stagnating or declining middle market
 The company has 3 choices in naming its down-market products.
 i. Same name Eg: Sony
 ii. Sub-brand name: Eg: Maruti 800
 iii. Different name: Eg: Panasonic and JVG from Matshushita
 PRODUCT-LINE LENGTH
 ii. Up-market stretch:
 Companies may wish to enter the high end of the market
for more growth, higher margins or simply to position
themselves as full-line manufacturers. So they offer the
products in the same product line and cover the upper end
market. For example, most of the car companies in India
have cars in premium segments like GM (Chevrolet
Forester), Ford (Endeavour), Hyundai (Terracan),
Mitusubishi (Pajero), Maruti (Grand Vitara XL-7), Honda
(CR-V) and Mercedes Benz (M-Class)
 iii. Two-way stretch:
 Companies serving the middle market may decide to
stretch their line in both directions. Tata Motors had
Multi-purpose Utility Vehicles (MU V) like Sumo and
Safari targeted for middle segment of the market. It had
launched Indica for lower segment of the market as well as
Indigo Marina and Indigo Estate for up-market consumers.
 PRODUCT-LINE LENGTH
Line filling:
 As the name applies, filling means adding a product to fill
a gap in the existing line. The company wants to portray
itself as full line company and that customers do not go to
competitors for offers or models in particular price slots.
There are several motives of line filling as follows:
 i) Reaching for incremental profits

 ii) Trying to satisfy dealers who complain about lost sales

because of missing items in the line
 iii) Trying to utilise the excess capacity

 iv) Trying to be the leading full-line company

 v) Trying to plug holes in the product-line to keep out the

competitors
 PRODUCT-LINE LENGTH
 Line Modernisation:
 Product lines need to be modernised continuously.
Companies plan improvements to encourage customer
migration to higher-valued, higher-priced items. For
instance, Intel upgraded its Celeron microprocessor chips
to Pentium 1, 2, 3 and now 4.
 Line Featuring:

 The product-line manager selects one or few items in the

line to feature. Sometimes, a company finds one end of its
line selling well and the other end selling poorly. Then the
company may try to boost demand for the short sellers
especially if they are produced in a factory that is idled by
lack of demand.
 PRODUCT-LINE LENGTH
Line Pruning:
 At times a company finds that over the years it has introduced
many variants of a product in the product line. This was
required may be because of the changing market situations. In
this process the product lines become unduly complicated and
long with too many variants, shapes or sizes. In the present
situation it may find out that efforts behind all these variants is
leading to non-optimal utilization of resources. In other words it
might be profitable for the company to leave behind some of the
variants.
 So when the products are not satisfactorily performing, the
product managers need to drop them form the product line. This
may lead to increase in profitability. Thus line pruning is
consciously taken decision by the product manager to drop some
product variants from the line. For example Heads and
Shoulders is a well-known brand of shampoo from P&G,
which had 31 versions. They went for line pruning and
now they have around 15 versions.
 PRODUCT MIX PRICING STRATEGIES –
PRICING THE PRODUCT MIX
 Most products are part of a broader product mix.
Consequently, they must be priced accordingly. Product
Mix Pricing Strategies address this issue. We will explain
the basic product mix pricing strategies that change a
product’s pricing when it is part of a product mix.
 Let’s start with an example: You buy a Gillette Fusion
razor. The price is temptingly low, so why not? But once
you bought the razor, you quickly notice that the
replacement cartridges needed are not that cheap. In fact,
when you buy the razor, you are a captive customer for the
products the brand makes the real money with – the
higher-margin replacement cartridges.
PRODUCT MIX PRICING STRATEGIES –
PRICING THE PRODUCT MIX
 And that counts for every product mix. Products being part
of it are all interrelated, their prices being in conjunction
with each other. Therefore, the strategy for setting a
product’s price often has to be changed when the product is
part of a product mix. Then, the company looks for a set of
prices that will maximize profits on the total product mix,
instead of on the individual product. Since the various
products in the mix have related demand and costs, but
face different degrees of competition, pricing is difficult.
Therefore, we will have a close look at the five major
product mix pricing strategies (or situations).
 PRODUCT MIX PRICING STRATEGIES –
PRICING THE PRODUCT MIX
Product Mix Pricing Strategies
 The 5 product mix pricing strategies (or situations) are depicted in the table below. A detailed
explanation of each follows.

Product Line Pricing –

 Since firms usually develop product lines rather than single products, product
line pricing plays a decisive role in product mix pricing strategies. For
example, when you look at a car brand such as Audi, you will see a relation
between the different series and their prices. The entry model, the Audi A1,
does cost you less than the top-range car A8.
 Thus, in product line pricing, the firm must determine the price steps between
various products in a product line based on cost differences between the
products, competitors’ prices, and, most importantly, customer perceptions of
the value of different features.

Optional Product Pricing –

 Optional product pricing is the pricing of optional or accessory products along
with a main product. In many cases, you can buy optional or accessory
products along with the main product. For instance, when you order your new
Audi car, you may choose to order a GPS system and an advanced
Entertainment system. However, for the company, pricing these options is not
easy. They must decide carefully which items to include in the base price and
which to offer as options.
 PRODUCT MIX PRICING STRATEGIES –
PRICING THE PRODUCT MIX
Captive Product Pricing –
We speak of captive product pricing when companies make
product that must be used along with the main product. On the
contrary, in optional product pricing, we should think of products
that can be bought/sold with the main product. Examples for
captive product pricing are razor blade cartridges and printer
cartridges. Captive product pricing is an extremely powerful
strategy in the set of product mix pricing strategies. Producers of
the main products, e.g. printers and razors, often price them very
low and set high mark-ups on the supplies you need in order to
operate the main products.

However, companies that use this type of product mix pricing

must be very careful. The difficulty is in finding the right balance
between the main product and captive product prices. Also,
consumers trapped into buying expensive captive products could
resent the brand that ensnared them.
 PRODUCT MIX PRICING STRATEGIES –
PRICING THE PRODUCT MIX
By-product Pricing –
By-product pricing refers to setting a price for by-products to make the
main product’s price more competitive. It is the result of the fact that
producing products and services often generates by-products. Often,
these by-products (as singly sold products) would not have any value and
getting rid of them is costly. This would then increase the price of the
main product. But by using by-product pricing, the company tries to find
a market for these by-products to help offset the costs of disposing of
them and make the price of the main product more competitive.
In some cases, the by-products themselves can even turn out to be
profitable – that is actually turning trash into cash.
 Some examples of By-Product from various industries are as follows:
 Sugar beet molasses after sugar refining – can be used as a fodder for
animals, while sugarcane molasses is also used as flavoring and
coloring agent in some foods.
 Fruit pulp, seeds, and peels that is left over after being processed for
fruit juice and related beverages – can be an important raw material
for cosmetic industries for their medicinal properties.
 Ethylene – a by-product of petroleum refinery – is an essential
ingredient used in manufacturing polystyrene, polyvinyl chloride
(PVC), and polyethylene based products i.e. Plastic products
 PRODUCT MIX PRICING STRATEGIES –
PRICING THE PRODUCT MIX
Product Bundle Pricing – Product Mix Pricing Strategies
 The last one of the product mix pricing strategies is product
bundle pricing. Using product bundle pricing, companies
combine several products and offer the bundle at a reduced
price. The best example is probably a menu at McDonald’s: you
get a bundle consisting of a burger, fries and a soft drink at a
reduced price. Also, companies such as Sky, Telecom and other
telecommunications companies offer TV, telephone and high-
speed internet connections as a bundle at a low combined price.
For the company, product bundle pricing is a very effective
product mix pricing strategy: it can promote the sales of
products consumers might not otherwise buy. However, the
combined price must be low enough to get consumers to buy the
bundle instead of a selection of single products.
 You see that setting the prices for a product becomes harder
when it is part of a product mix – because all products and their
prices must be interrelated. But with these product mix pricing
strategies, you are on the right track.
CO-BRANDING AND INGREDIENT BRANDING
 Co-branding refers to the utilization of two or more brands
so as to create a new product. This can be of the same
company or from two distinct companies. The underlying
brands of the new brand help each other in achieving the
purpose of the newly created brand. It is important that
the synchronization between the ingredient brand and the
new product is determined carefully.

 Co-branding tends to create an overall marketing synergy

by creating a larger customer base which combines the
existing customer base of the brand pairs, highlighting the
best features of every brand. Businesses operating online
also hold the added visibility of their business website and
other properties so as to further promote the campaign.
 CO-BRANDING AND INGREDIENT BRANDING
Co-branding strategy is basically of two types – ingredient
co-branding and composite co-branding.
Ingredient co-branding
 Ingredient co-branding makes use of a popular brand to
serve as an important element in the production process of
the other popular brand. This basically deals with the
development of brand equity for those parts and materials
that are included in other products. The underlying
constituent brand is a subordinate to that of the primary
brand. For example, Dell computers utilize a co-
branding strategy with Intel processors. Ingredient
brands are normally the biggest buyers or current
suppliers of the company. Through this type of branding,
the company can produce products of better quality gain
more access to distribution channels, implement superior
promotional activities and real greater profits.
CO-BRANDING AND INGREDIENT BRANDING

Composite co-branding

 This type of brand strategy utilizes two renowned brand

names in such a way that they collectively provide a
distinctive product or service which could have been very
difficult to produce individually. Successful composite co-
branding is dependent upon the favorability of the brands
serving as ingredients as well as also upon the extent of
complementarities between the two.
 CO-BRANDING AND INGREDIENT BRANDING
 Examples of Co-Branding
Nike and Apple
 This is a very good example of successful co-branding. Nike
determined that their customers who are runners like to
listen to music when they exercise or want to track their
progress. This led the company to form a partnership with
Apple so that customers can do both. Nike also produced
footwear under the title Nike and Apple manufactured a
chip that is fitted within the shoes for recording the
progress of the user when it is activated on their iPhone or
iPod. This microchip will display user statistics like time,
distance and speed along with the number of calories
burned.
 CO-BRANDING AND INGREDIENT BRANDING
 Examples of Co-Branding

MasterCard and Apple Pay

 Both MasterCard and Apple have joined hands in making
transactions cashless. MasterCard became the first credit
card company which supported Apple Pay. This provided
Apple with a generous customer base along with tweaking
its service along with providing MasterCard brand new
feature and function which was exclusive to its customers.
After this Apple has also formed an alliance with other
credit card companies in order to expand the customer
base.
 CO-BRANDING AND INGREDIENT BRANDING
 Ingredient branding is that type of branding where a
component or ingredient of a particular product is branded
in order to communicate the value of the product to the
customer effectively. For example, Intel chipsets and
processors are branded for selling either laptops or CPUs.
 In this way, Ingredient branding allows for trust and faith
in the entire product based on its component. Ingredient
branding has been popular in automobiles where the
engine is branded at first in order to display the power of
the automobile.
 Ingredient branding adds value to the product in the eyes
of the customer and satisfies his conscience to have control
over that product, thereby, leading to the much awaited
“buy” decision. This may not be true in every case as the
ingredients or components need to be popular among the
target group of customers.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
 Some product packages—such as the Coke bottle and Red
Bull can—are world famous. Many marketers have called
packaging a fifth P, along with price, product, place, and
promotion. Most, however, treat packaging and labeling as
an element of product strategy. Warranties and guarantees
can also be an important part of the product strategy and
often appear on the package.
Packaging
 Packaging includes all the activities of designing and
producing the container for a product. Packages might
have up to three layers. Cool Water cologne comes in a
bottle (primary package) in a cardboard box (secondary
package) in a corrugated box (shipping package) containing
six dozen bottles in cardboard boxes.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
 The package is the buyer’s first encounter with the
product. A good package draws the consumer in and
encourages product choice. In effect, they can act as “five-
second commercials” for the product. Packaging also affects
consumers’ later product experiences when they go to open
the package and use the product at home. Some packages
can even be attractively displayed at home. Distinctive
packaging like that for Kiwi shoe polish and Altoids mints
is an important part of a brand’s equity.
 Various factors contribute to the growing use of packaging
as a marketing tool:
PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
 Self-service. An increasing number of products are sold on a
self-serve basis. In an average supermarket, which may stock
15,000 items, the typical shopper passes some 300 products per
minute. Given that 50 percent to 70 percent of all purchases are
made in the store, the effective package must perform many
sales tasks: attract attention, describe the product’s features,
create consumer confidence, and make a favorable overall
impression.
 Consumer affluence. Rising affluence means consumers are
willing to pay a little more for the convenience, appearance,
dependability, and prestige of better packages.
 Company and brand image. Packages contribute to instant
recognition of the company or brand. In the store, they can
create a billboard effect, such as Garnier Fructis with its bright
green packaging in the hair care aisle.
 Innovation opportunity. Unique or innovative packaging
such as resealable spouts can bring big benefits to consumers
and profits to producers.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
 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.
5. Aid product consumption.
 To achieve these objectives and satisfy consumers’ desires,
marketers must choose the aesthetic and functional components
of packaging correctly. Aesthetic considerations relate to a
package’s size and shape, material, color, text, and graphics.
There are a number of factors and criteria in each area. Color is
a particularly important.
 Color is a particularly important aspect of packaging and carries
different meanings in different cultures and market segments.
 Kiwi’s distinctive packaging, name, and logo are all brand
assets.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
 Packaging updates or redesigns can occur frequently to make
the brand more contemporary, relevant, or practical. Although
these can have immediate impact on sales, they also can have a
downside, as PepsiCo learned for its Tropicana brand.
 Tropicana PepsiCo experienced great success with its Tropicana
brand, acquired in 1998. Then in 2009, the company launched a
redesigned package to “refresh and modernize” the brand. The
goal was to create an “emotional attachment by ‘heroing’ the
juice and trumpeting the natural fruit goodness.” Arnell Group
led the extreme makeover that led to an entirely new look,
downplaying the brand name, raising the prominence of the
phrase “100 percent orange pure & natural,” and replacing the
“straw in an orange” graphic on the front of the package with a
close-up of a glass of orange juice. Consumer response was swift
and negative. The package looked “ugly” or “stupid,” and some
even confused it with a store brand. Sales dropped 20 percent.
After only two months, PepsiCo management announced it
would revert to the old packaging.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
 After the company designs its packaging, it must test it.
Engineering tests ensure that the package stands up under
normal conditions; visual tests, that the script is legible
and the colors harmonious; dealer tests, that dealers find
the packages attractive and easy to handle; and consumer
tests, that buyers will respond favorably. Eye tracking by
hidden cameras can assess how much consumers notice
and examine packages. For Comtrex cold medicine,
tracking research was able to confirm that only 50 percent
of consumers considered the old package on the shelf,
versus 62 percent for a newly redesigned package.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
 Although developing effective packaging may require
several months and several hundred thousand dollars,
companies must consider growing environmental and
safety concerns about reducing packaging. Fortunately,
many companies have gone “green” and are finding
creative new ways to develop packaging. Frito-Lay’s Sun
Chips multigrain snacks, containing 30 percent less fat
than potato chips, are positioned as a healthier,“good for
you” snack option. Part of the firm’s effort to also support a
“healthier planet” was to unveil a fully compostable bag
made from plant-based materials (although later
withdrawn for some flavors when consumers complained of
the noise the bags made) and to run its factory in Modesto
on solar power.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
Labeling
The label can be a simple attached tag or an elaborately
designed graphic that is part of the package. It might carry a
great deal of information, or only the brand name. Even if
the seller prefers a simple label, the law may require more. A
label performs several functions. First, it identifies the
product or brand—for instance, the name Sunkist stamped
on oranges. It might also grade the product; canned peaches
are grade-labeled A, B, and C. 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. Finally, the label
might promote the product through attractive graphics.
Advanced technology allows 360-degree shrink-wrapped
labels to surround containers with bright graphics and
accommodate more product information, replacing glued-on
paper labels.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES

Labels eventually need freshening up. The label on Ivory

soap has been redone at least 18 times since the 1890s, with
gradual changes in the size and design of the letters. As
Tropicana found out, companies with labels that have
become icons need to tread very carefully when initiating a
redesign to preserve key branding elements. A long history of
legal concerns surrounds labels, as well as packaging. In
1914, the Federal Trade Commission Act held that false,
misleading, or deceptive labels or packages constitute unfair
competition. The Fair Packaging and Labeling Act, passed by
Congress in 1967, set mandatory labeling requirements,
encouraged voluntary industry packaging standards, and
allowed federal agencies to set packaging regulations in
specific industries.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES

The Food and Drug Administration (FDA) has required

processed-food producers to include nutritional labeling that
clearly states the amounts of protein, fat, carbohydrates, and
calories contained in products, as well as vitamin and
mineral content as a percentage of the recommended daily
allowance. The FDA has also taken action against potentially
misleading uses of such descriptions as “light,”“high fiber,”
and “low fat.”
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
Warranties and Guarantees
 All sellers are legally responsible for fulfilling a buyer’s normal
or reasonable expectations. 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.
 Extended warranties and service contracts can be extremely
lucrative for manufacturers and retailers. Analysts estimate
that warranty sales have accounted for a large percentage of
Best Buy’s operating profits. Despite evidence that extended
warranties do not pay off, some consumers value the peace of
mind. These warranties still generate multibillion dollars in
revenue for electronic goods in the United States, though the
total has declined as consumers have become more comfortable
seeking solutions to technical problems online or from friends.
 PACKAGING, LABELING, WARRANTIES, AND
GUARANTEES
 Many sellers offer either general or specific guarantees. A
company such as Procter & Gamble promises general or
complete satisfaction without being more specific—”If you are
not satisfied for any reason, return for replacement, exchange,
or refund.” A. T. Cross guarantees its Cross pens and pencils for
life. The customer mails the pen to A. T. Cross (mailers are
provided at stores), and the pen is repaired or replaced at no
charge.
 Guarantees reduce the buyer’s perceived risk. They suggest that
the product is of high quality and the company and its service
performance are dependable. They can be especially helpful
when the company or product is not well known or when the
product’s quality is superior to that of competitors. Hyundai’s
and Kia’s highly successful 10-year or 100,000 mile power train
warranty programs were designed in part to assure potential
buyers of the quality of the products and the companies’
stability.