12

Setting Product Strategy

Marketing Management, 13th ed

 Chapter Questions
• What are the characteristics of products
and how do marketers classify
products?
• How can companies differentiate
products?
• How can a company build and manage
its product mix and product lines?

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 Chapter Questions (cont.)

• 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?

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 At the heart of a great brand is
a great product

12-4
 What is a Product?

market to satisfy a want or need, including

physical goods, services, experiences,
events, persons, places, properties,
organizations, information, and ideas.

12-5
 Components of the Market
Offering

12-6
 Five Product Levels
• Core benefit —service or benefit (e.g., hotel guest is
buying “rest and sleep”)
• Basic product —turn core benefit into basic product
(e.g., hotel room includes a bed, bathroom, towels,
desk, dresser, and closet)
• Expected product – set of attributes and conditions
buyers normally expect (e.g., clean bed, fresh towels,
working lamps)
• Augmented product—exceeds customer
expectations (e.g., free health spar)
• Potential product—all the possible augmentations
and transformations (e.g., free internet connections
and use)
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Product Classes

 Two broad classes

• consumer products
• business products
 Classes help in planning marketing mix
needed
 Based on how the customer views the
product
• how consumers think about and shop for products
• how business/organizational buyers think about
products and how they'll be used
Product Classes Help Plan Marketing Strategy

Consumer Products Business Products

Goods and/or Services Are the Product (Exhibit 9-2)
Differences in Goods and Services

Devoted to
erasing
stereotypes
Differences in Goods and Services

Tangibility
Tangibility

Whenproduced
When produced
Whereproduced
Where produced
relativeto
relative towhen
when
transporting))
consumed
consumed Differences
Differences (storingand
(storing andtransporting

Contactwith
Contact withcustomer
customer
Balancingsupply
Balancing supplyand
and
byproducer
by producerofof
demand
demand product
product
 Product Classification
Schemes

Durability
Tangibility

Use

12-13
 Durability and Tangibility

Nondurable
goods

Durable
Services
goods

12-14
Consumer Goods Classification
Staples
Staples

Convenience
Convenience
Convenience Products
ConvenienceProducts
Products
Products Impulse
ImpulseProducts
Products

Emergency
EmergencyProducts
Products

Homogeneous
Homogeneous
Shopping
ShoppingProducts
Products
Shopping
ShoppingProducts
Products
Heterogeneous
Heterogeneous
Shopping
ShoppingProducts
Products
Specialty
Specialty Products
Products
New
New Unsought
Unsought
Products
Products
Unsought
UnsoughtProducts
Products
Regular
RegularUnsought
Unsought
Products
Products
 Industrial Goods Classification

Accessories
Accessories
short-lived capital items
Accessories
—tools & production
equipment
Raw
Raw
Installations
Installations Materials
Materials
Raw
Installations
Installations
important
important
unprocessed
unprocessedexpense
expense

capital
Materials
items
items that becomeaa
that become
capital items
items physical
physicalpart
partof
ofaa
Business
Business
physical
physicalgood
good

Product
Product
Classes Component
Professional
Professional Classes Component
Component
Parts &
Services
Services Parts
Parts &&
Materials
specialized
specializedservices
servicesto
to
support a firm’s
support a firm’s
Materials
processed
Materialsexpense
items that become part
operations--consulting
operations--consulting
services
MRO
MRO Supplies
Supplies of a finished product
services
MRO Supplies for
Supplies
Supplies for
Maintenance, Repair,
Maintenance, Repair,
and
andOperating
Operating
 Product Differentiation

• Product form—size, shape, or physical structure

• Features—supplement basic functions
• Customization–individual versus mass
• Performance—level at which the product’s primary
characteristics operate
• Conformance—degree to which all the produced units
are identical and meet the promised specifications
• Durability—product’s operating life
• Reliability—probability that a product will not malfunction
or fail
• Repairability—the ease of fixing a product when it
malfunction or fails
• Style—product’s look and feel to the buyer.
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 Service Differentiation
• Ordering ease—how easy to place an order
• Delivery—how well product or service is brought to the
customer
• Installation—work done to make a product operational
• Customer training—training the customer’s employees to
operate the vendor’s equipment properly and efficiently
• Customer consulting—data, information, systems, and
advice that the seller offers to buyers
• Maintenance and repair—service programs for helping
customers keep purchased products in good working order
• Returns

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 Dunkin’ Donuts’ Differentiation

12-19
 Design Differentiation

12-20
 Maintenance and Repair

12-21
 The Product Hierarchy

Item
Product type (term life
insurance)

Product line—group of products within

product class (life insurance)
Product class—group of products with
product family (financial instruments)

Product family —all product classes (savings

and income)

Need family—core (security)

12-22
 Product Systems and Mixes
• Product system—group of
diverse but related items
(PalmOne)
• Product mix or assortment
—various product lines
• Depth—variants of each
product
• Length—total number of
items in the mix
• Width—number of different
product lines
• Consistency—how closely
related various product lines
are in some way
12-23
 Product Line Analysis

Staples (items with lower sales

Core product (basic products;
volume but not promoted;
e.g., laptop computers)
e.g., CPU, bigger
memories)

Specialties (items with lower

Convenience Items
sales volume but highly
(peripheral items; e.g.,
promoted; e.g., digital
carrying cases and accessories)
moviemaking equipment)

12-24
 Line Stretching

Down-Market
Down-Market Stretch
Stretch

Up-Market
Up-Market Stretch
Stretch

Two-Way
Two-Way Stretch
Stretch

12-25
 Line Filling

12-26
 Product-Mix Pricing
• Product-line pricing (various levels: $200, $400,
and $600)
• Optional-feature pricing (sunroof, theft protection)
• Captive-product pricing (require the use of
ancillary products: razors, films)
• Two-part pricing (fixed fee plus variable usage fee:
telephone service)
• By-product pricing (production of certain goods
often result in by-products; meat and fat in sausage)
• Product-bundling pricing—offer products only in a
bundle: product plus service

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 Product Line Pricing

12-28
 Two-Part Pricing

12-29
 Co-branding

12-30
Ingredient Branding

12-31
 What is the Fifth P?

5th P, is all the activities of

designing and producing
the container for a product.

12-32
 Factors Contributing to the
Emphasis on Packaging
Self-service

Consumer affluence

Company/brand image

Innovation opportunity

12-33
 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

Identifies
Grades
Describes
Promotes
12-35
 Innovations in Packaging

12-36
 Warranties and Guarantees

12-37
 Study Question 1
Marketers have traditionally classified
products on the basis of three characteristics:
________, tangibility, and use.

A.customer value hierarchy

B.Expected
C.Augmented
D.durability
E.none of the above
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 Study Question 2
The consumer usually purchases ________
frequently, immediately, and with a minimum
of effort.

A.specialty goods
B.shopping goods
C.“must haves” goods
D.personal goods
E.convenience goods
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 Study Question 3
________ are similar in quality but different
enough in price to justify shopping
comparisons.

A.Emergency goods
B.Homogeneous shopping goods
C.Heterogeneous shopping goods
D.Specialty goods
E.Impulse goods

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 Study Question 4
Industrial goods can be classified as ________,
capital items, or suppliers and business services
based on their costliness and how they enter the
production process.

A.service components
B.Subassemblies
C.pieces and parts
D.specialty goods
E.materials and parts
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 Study Question 5
Capital items are long-lasting goods that facilitate
developing or managing the finished product.
They include two groups: installations and
________.

A.natural products
B.component materials
C.operating supplies
D.Equipment
E.none ofPearson
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above Inc.  Publishing as Prentice Hall 12-42