STRATEGIC MARKETING

Product Strategy contd. SMK PGDM Batch 28 Retail & HR Tutorial Nine
 PRODUCT MIX PRICING

• In product mix pricing, the firm searches for a set of prices that
maximizes profits on the total mix. Pricing is difficult as
different products have demand and cost interrelationships and
face competitive pressures. There are six different situations
necessitating product mix pricing.
1. Product Line Pricing – A men’s clothing store like Raymond
might carry men’s shirts at three price levels like: Rs.
500,1000,1500 and above. The seller’s task is to establish
perceived quality differences that justify the price range.
2. Optional-Feature Pricing – Firms offer optional products, features, and services
with their main product. Auto cos. offer entry-level models at lower prices to
attract customers to the showrooms. Economy models may not have power
windows, power steering, an auto-lock system, central locking, GPS, etc.
Customers end up spending additional prices for these items. This is a tricky
issue: firms should decide which ones to be brought under standard pricing.
Tour operators charge prices that include travel costs, sightseeing costs, and
food and accommodation charges for a 7-day or 14-day tours to venues in
Europe .
3. Captive-Product Pricing – Products like cameras and razors require
the use of ancillary or captive products. Firms may offer lower prices
for the main products and set high markups on films and razor
blades. If the price of the captive product is set very high, it might
invite counterfeiting and substitutions and lead to erosion in sales.
People often buy cartridge refills for their Canon printers from
discount suppliers and save 20 to 30 percent on the price.
4. Two-Part Pricing – Service firms engage in two-part pricing, consisting of a
fixed fee plus a variable usage fee. Cell phone firms fix a minimum monthly
fee plus charges for calls that exceed their limited allotted minutes.
Amusement parks like Wonderla would charge a minimum park entrance fees
and separate fees for different rides and amusements. The challenge is to
decide upon which items/events should be brought under the standard pricing
and items to be left.
5. By-Product Pricing – Production processes of certain goods like meats,
petroleum, and chemicals generate by-products that should be priced on
their value. Any income earned by firms such by-products might enable
firms to lower the prices of their main products if the competitors do the
same.
6. Product-Bundling Pricing – Sellers often bundle product and features.
Pure bundling occurs only when the firms offer its products only as a
bundle.
In mixed-bundling – the sellers offer products both individually and in
bundles. When bought in a bundle, customers will be required to pay
lower prices than buying them separately. A theatre or cable operator
may offer a package price for a season or number of channels.
 CO-BRANDING AND INGREDIENT
BRANDING

• Co-Branding – companies often combine their own products with

other companies’ products in various ways
• Co-branding known as dual branding or brand bundling involves
combining two well-known brands into a joint product or marketing
them together in some fashion.
• Co-branding by same company - Combining Gillette Mach 3 Turbo
and Gillette Shaving Gel – Eureka Forbes jointly promoting water
purifier, Aquaguard and Euroclean, vacuum cleaner
• Joint-venture co-branding – Citibank and Jet Airways or Indian Oil
and Citibank co-branding credit cards
• Retail co-branding – in which two retail organizations using the same
location to optimize space and profits, such as jointly owned Pizza
Hut and KFC restaurants
• Through co-branding the product can be conveniently positioned by
virtue of the multiple brands. It can generate greater sales from
existing market and open opportunities for new customers and
channels. It can reduce the cost of product introduction as it
combines the images of two reputed brands and speeds up adoption
• Risks are that the alignment with another brand may not be found
easy and customers my nurse very high expectations that may not
be met, etc.
• For co-branding to succeed, the two brands must separately have brand equity –
adequate brand awareness and sufficiently positive brand image. The most important
requirement would be that there should be a logical fit between the brands.
• Ingredient Branding – It creates brand equity for materials, components, or
parts that are necessarily contained with in other branded products

• Dolby noise reduction technology, Carl Zeiss camera lenses in Sony digital
cameras, Intel Inside, Taco Bell tacos and Lay potato chips made with KC
Masterpiece barbecue sauce
• An interesting take on ingredient branding is “self-branded ingredients”
that companies advertise and trademark. Westin Hotels advertises its
own Heavenly Bed” and “Heavenly Shower. Westin now sells the bed,
pillows, sheets, and blankets via online catalog along with other
“Heavenly” gifts like bath products, and even per items.
• Ingredient brands try to create awareness and preference for their product so
consumers will not buy a “host” product that does not contain it.
• DuPont introduced a number of innovative products such as Corian, a solid-
surface material for use in markets ranging from apparel to aerospace.
Many such as Tyvek house wrap, Teflon non-stick coating and Kevlar fiber
have become household names as ingredient brands in consumer products
manufactured by other companies.
• Requirements for successful ingredient branding:
• Consumers must believe the ingredient matters to the
performance and success of the end product
• Consumers must be convinced that not all ingredient
brands are the same and that the ingredient is superior
• A distinctive symbol or logo should signal that the host
product contains the ingredient
 PA C K A G I N G , L A B E L I N G , WA R R A N T I E S , A N D G U A R A N T E E S

• 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.
 PA C K A G I N G

• Packaging includes all the activities of designing and producing the

container for a product. Packages might have up to three layers.
• Cool Water by Davidoff For Men cologne comes in a bottle (primary
package) inside a cardboard box (secondary package), shipped in a
corrugated box (shipping package) containing six dozen bottles in
cardboard boxes.
• Packaging is important because it is the buyer’s first encounter with
the product.
• A good package draws the consumer in and encourages product
choice. In effect, it can act as a “five-second commercial” for the
product.
• It also affects consumers’ later product experiences when they open it
and use what’s inside. Some packages can even be attractively
displayed at home.
• Distinctive packaging like that for Kiwi shoe polish, Altoids mints,
and Absolut vodka is an important part of a brand’s equity.
 PA C K A G I N G A S A M A R K E T I N G T O O L

• Several factors contribute to the growing use of packaging as a marketing

tool.
• Self-service - 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 - consumers are willing to pay a little more for the
convenience, appearance, dependability, and prestige of better packages.
• Company and brand image - In the store, they can create a billboard effect
• Innovation opportunity - Unique or innovative packaging can bring big
benefits to consumers and profits to producers.
 C O L O R I N PA C K A G I N G

• Color is a particularly important aspect of packaging and carries

different meanings in different cultures and market segments.
• Color can define a brand, from Tiffany’s blue box to Cadbury’s
purple wrapping and UPS’s brown trucks.
• Packaging updates and redesigns can occur frequently to
keep the brand contemporary, relevant, or practical.
THE COLOR WHEEL OF BRANDING AND PA CKAGING
 L A B E L I N G & WA R R A N T I E S A N D G U A R A N T E E S

• 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.
• WARRANTIES AND GUARANTEES
• Warranties are formal statements of expected product performance by the
manufacturer. Products under warranty can be returned to the manufacturer or
designated repair center for repair, replacement, or refund.
• Many sellers offer either general or specific guarantees - P & G promises
general or complete satisfaction without being more specific—“ If you are not
satisfied for any reason, return for replacement, exchange, or refund.”